Income Tax Act, 2025 – Key Changes, Transitional Provisions & Compliance Guide
by C.A. Pranjal Gupta
The Income Tax Act, 2025 marks a significant reform in India's tax framework by replacing the Income-tax Act, 1961 effective 1 April 2026. The new legislation aims to simplify tax laws, improve transparency, and enhance ease of compliance for taxpayers.
With this transition, businesses, professionals, and individuals must understand the implications on tax filings, TDS compliance, advance tax, and ongoing proceedings to ensure a smooth shift to the new regime.
Transitional Provisions: Ensuring Continuity
The repeal of the Income-tax Act, 1961 does not disrupt existing proceedings. Key points include:
- All pending assessments, appeals, and proceedings will continue seamlessly
- Rights, liabilities, and obligations under the earlier law will remain valid
- No requirement to restart or refile past compliance
Introduction of the "Tax Year" Concept
- A Tax Year refers to a 12-month financial period
- Applicable from FY 2026–27 onwards
- Eliminates confusion between Previous Year and Assessment Year
TDS and TCS: Simplified Structure
- Multiple TDS sections (192–194 series) consolidated into Section 392 (TDS) and Section 393/394 (TCS)
- TDS rates and thresholds remain unchanged
- New section references must be used for transactions after 1 April 2026
Updated TDS Return Forms
| Description | Old Forms | New Forms |
|---|---|---|
| Salary TDS | 24Q | 138 |
| Non-Salary TDS | 26Q | 140 |
| NRI Payments | 27Q | 144 |
| TCS | 27EQ | 143 |
Advance Tax
- Applicable if tax liability exceeds ₹10,000
- Instalment due dates remain the same
- Section 424 (earlier 234B) → 1% per month; Section 425 (earlier 234C) → 1% to 3%
MAT / AMT Credit Carry Forward
- Existing credits will be preserved
- Carry forward allowed for up to 15 years
- Set-off permitted under applicable conditions
PAN, TAN & Form 15G/15H
- Existing PAN applications remain valid
- TAN application (Form 49B) has been restructured into two forms
- Single UIN per PAN per Tax Year for 15G/15H declarations
Tax Audit Changes
- Form 26 replaces Forms 3CA, 3CB, and 3CD
- Due date: 30 September 2027 (for first year)
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