Key Takeaways

  • Income earned during FY 2025-26 is still filed under the Income Tax Act, 1961.
  • The return for FY 2025-26 is called the AY 2026-27 return.
  • The new Income Tax Act, 2025 applies to tax years beginning from 1 April 2026.
  • Taxpayers do not need to file two returns for the transition period.
  • New forms and procedures for the new tax year will be notified by the Income Tax Department.
  • Taxpayers should not confuse the change in tax law with the choice between the old and new tax regimes.

What Is the Income Tax Act 2025?

The Income Tax Act, 2025 is a new law designed to replace the Income Tax Act, 1961.

The change is part of an effort to simplify the structure of income-tax provisions and make the law easier to understand. For ordinary taxpayers, the most important issue is the transition between the old system and the new system.

Many people may see references to FY 2025-26, AY 2026-27 and Tax Year 2026-27. These labels can look confusing, but they refer to different periods and filing situations.

FY 2025-26 and Tax Year 2026-27 Are Different

The income you earn between 1 April 2025 and 31 March 2026 belongs to FY 2025-26.

The return for that income is generally filed for AY 2026-27. This return continues to follow the Income Tax Act, 1961.

From 1 April 2026, the new tax-year system begins. Income earned from 1 April 2026 to 31 March 2027 belongs to Tax Year 2026-27 and will be governed by the Income Tax Act, 2025.

Simple Comparison

Income PeriodReturn LabelApplicable Law
1 April 2025 to 31 March 2026AY 2026-27Income Tax Act, 1961
1 April 2026 to 31 March 2027Tax Year 2026-27Income Tax Act, 2025

This difference is important because taxpayers should select the correct form and follow the correct rules for the relevant income period.

Do You Need to File Two Returns?

No. The transition does not mean that you have to file two returns for the same income.

If your income was earned during FY 2025-26, you file the applicable return for AY 2026-27 under the existing law.

The new tax-year system applies to income earned from 1 April 2026 onwards. You should not file a second return simply because the tax law has changed.

What Salaried Employees Should Do

Salaried employees should start by collecting all income and tax documents for FY 2025-26.

    Important documents may include:
  • Form 16
  • Salary slips
  • Bank interest certificates
  • Capital gains statements
  • Rent receipts, where applicable
  • Home-loan interest certificates
  • Insurance and investment documents
  • Tax-saving investment proofs
  • Previous return details

Check whether your salary income, deductions, tax deducted at source and advance tax details match the information shown in your tax records.

You should also carefully select the correct assessment year when filing. Choosing the wrong year can create errors even if the income details are correct.

What Business Owners and Professionals Should Check

Business owners, freelancers and professionals may have additional responsibilities.

    They should review:
  • Business income
  • Professional receipts
  • Expenses
  • Advance tax payments
  • TDS and TCS credits
  • GST-related records
  • Depreciation details
  • Digital payment records
  • Loans and interest expenses
  • Books of accounts, where applicable

Taxpayers with business or professional income may also have different rules for changing between tax regimes. Always verify the current filing instructions before submitting the return.

Do Not Confuse Tax Law With Tax Regime

The Income Tax Act 2025 transition and the old-versus-new tax regime are two separate matters.

The tax law decides the legal framework applicable to the relevant tax year.

The tax regime decides how your income may be taxed under the available options.

For example, a taxpayer may need to choose between the old and new tax regime while still filing a return under the existing Income Tax Act for AY 2026-27.

Do not assume that the arrival of the new Income Tax Act automatically means that everyone must use a particular tax regime.

Important Filing Timeline for AY 2026-27

For income earned during FY 2025-26, taxpayers should use the applicable AY 2026-27 forms and instructions.

    The Income Tax Department has stated that:
  • The existing law applies to the FY 2025-26 return.
  • Existing ITR forms apply for AY 2026-27.
  • A belated return may be filed within the applicable deadline.
  • Revised-return rules continue to apply according to the relevant provisions.
  • New forms for Tax Year 2026-27 will be notified separately.

Always check the official Income Tax Department portal before filing because due dates and forms may be updated.

Common Mistakes to Avoid

Selecting the Wrong Assessment Year

Do not select Tax Year 2026-27 when filing income earned during FY 2025-26.

Using the Wrong ITR Form

The correct ITR form depends on your income sources, residential status, assets and other details.

Ignoring Bank Interest

Savings-account interest, fixed-deposit interest and recurring-deposit interest should be checked before filing.

Forgetting Capital Gains

Selling shares, mutual funds, property or other investments may create capital gains that must be reported.

Assuming TDS Means No More Tax Is Due

TDS is only a tax credit. You may still have additional tax payable or may be eligible for a refund.

Mixing Old and New Tax Regime Benefits

Some deductions and exemptions may not be available in the same way under both regimes. Compare your options before filing.

Filing Without Checking Form 26AS and AIS

Review your Annual Information Statement and Form 26AS for mismatches in income, TDS, interest or transactions.

Practical Checklist for Taxpayers

    Before filing your return, complete these steps:
  • Identify the correct income period.
  • Confirm whether you are filing for AY 2026-27 or Tax Year 2026-27.
  • Download Form 16 and other income documents.
  • Check Form 26AS and AIS.
  • Calculate income from all sources.
  • Review deductions and exemptions.
  • Compare the available tax regimes.
  • Select the correct ITR form.
  • Verify bank details.
  • Submit and e-verify the return.

Frequently Asked Questions

Q: Which law applies to income earned during FY 2025-26?
Income earned during FY 2025-26 is filed as AY 2026-27 under the Income Tax Act, 1961.
Q: When does the Income Tax Act 2025 apply?
It applies to tax years beginning from 1 April 2026, subject to the applicable rules and notifications.
Q: Do I need to file two returns because of the law change?
No. You file the return applicable to the income period concerned.
Q: Is Tax Year 2026-27 the same as AY 2026-27?
No. AY 2026-27 relates to income earned during FY 2025-26. Tax Year 2026-27 relates to income earned from 1 April 2026 to 31 March 2027.
Q: Will the old and new tax regimes continue?
Tax-law transition and tax-regime selection are separate matters. Check the rules applicable to your income and filing year.
Q: Where should I check the latest forms and deadlines?
Check the official Income Tax Department portal before filing because forms, instructions and deadlines may change.

Conclusion

The Income Tax Act 2025 creates an important transition for Indian taxpayers, but the change does not need to be confusing.

The main rule is to match your income period with the correct filing year. Income earned during FY 2025-26 continues to be filed as AY 2026-27 under the existing law. Income earned from 1 April 2026 falls under Tax Year 2026-27 and the new legal framework.

Keep your documents organised, check the official filing instructions and avoid selecting a form or year based only on the latest headline. A careful review before filing can help prevent notices, mismatches and unnecessary delays.