New Income Tax Act 2025: Everything That Changes from April 1, 2026
India's income tax law is undergoing its biggest overhaul in over 60 years. The Income Tax Act, 2025 — passed by Parliament in February 2025 and notified for implementation from April 1, 2026 — replaces the Income Tax Act, 1961. The new Act doesn't change the fundamental tax liability for most salaried taxpayers, but it restructures how taxes are calculated, reorganises section numbers, and brings important updates to TDS rules and digital asset taxation.
This guide covers everything salaried taxpayers, investors, and freelancers need to know before the new Act takes effect.
Why Was the 1961 Act Replaced?
The Income Tax Act, 1961 had grown to over 900 sections, riddled with amendments, provisos, and cross-references that made it nearly incomprehensible without a CA. The 2025 Act consolidates and rewrites the law in plain language, eliminates redundant provisions, and organises chapters logically. Key goals:
- Remove ambiguity in language
- Consolidate scattered provisions (e.g., capital gains rules across 40+ sections into one chapter)
- Standardise TDS rates and thresholds
- Explicitly address digital assets and crypto
New Tax Slabs Under the New Act (New Regime — Default)
The new Act retains the restructured slabs introduced in Budget 2025-26 under the new regime:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Rebate under Section 87A: Income up to ₹12,00,000 gets full tax rebate — effectively zero tax for most salaried employees earning under ₹12.75 lakh (after standard deduction).
The old regime (with deductions like 80C, HRA, 80D) remains available as an opt-in.
Key Section Number Changes
One of the biggest adjustments will be getting used to new section references. Here's a mapping of common sections:
| Old Section | New Section | Description |
|---|---|---|
| Section 10(13A) | New Chapter 3 | HRA exemption |
| Section 80C | New Chapter 6 | 80C deductions (old regime) |
| Section 80D | New Chapter 6 | Health insurance deduction |
| Section 115BBH | New Chapter 8 | Crypto / VDA taxation |
| Section 194S | New Chapter 9 | TDS on VDA transfers |
| Section 44AD | New Chapter 5 | Presumptive business |
| Section 44ADA | New Chapter 5 | Presumptive profession |
Note: The CBDT is expected to release a detailed section mapping circular before April 2026. For filing purposes, your CA software will handle the new references automatically.
TDS Changes Under the New Act
The new Act significantly overhauled TDS provisions, making them more consistent and easier to comply with:
1. Unified TDS Rate Schedule
Instead of rates scattered across 40+ sections, the new Act introduces a consolidated TDS schedule with standardised thresholds. Key changes:- TDS on salary (new Section equivalent of 192): No change — still based on average rate
- TDS on interest (bank FD): Threshold raised from ₹40,000 to ₹50,000 per bank per year
- TDS on professional fees: Threshold raised to ₹30,000 per transaction / ₹1,20,000 per year
2. Lower TDS for New Regime Filers
Taxpayers who declare their new regime preference upfront to their employer will now have TDS deducted at the exact new regime slab rate without approximation.3. Employer TDS Simplified
Form 16 Part B structure is being updated to reflect new section references. If you receive a Form 16 for AY 2027-28, it will carry new section numbers.Digital Asset (Crypto) Tax Rules
The 2025 Act brings crypto and digital asset rules into a dedicated chapter:
Taxation of Virtual Digital Assets (VDAs)
- Tax rate: 30% flat on all VDA gains (unchanged)
- No deductions: Only cost of acquisition allowed; no set-off with losses from other sources
- TDS: 1% TDS on transfers above ₹50,000 per year (₹10,000 for specified persons) — unchanged
- New: Clear definition of "Virtual Digital Asset" now includes NFTs, DeFi tokens, and stablecoin holdings
What Changed for Crypto
The new Act explicitly allows carry-forward of VDA losses within the same head (VDA income) — a significant clarification. Under the old Act, this was ambiguous. You can now carry forward crypto losses for 8 years and set them off against future crypto gains.How It Affects Salaried Taxpayers — Practical Checklist
What stays the same:
- Your CTC and take-home salary are unaffected
- New regime tax slabs remain the same
- ₹75,000 standard deduction continues
- 80C limit (₹1.5L) under old regime unchanged
- Section references in Form 16 (for AY 2027-28 onwards)
- TDS thresholds slightly higher for freelancers/professionals
- Crypto loss carry-forward now explicitly permitted
- Simplified language in notices/assessments you may receive
- Inform your employer which regime you prefer for FY 2026-27
- If you have crypto holdings, track cost of acquisition for each transaction
- Update any CA software or tax filing tools to new section references
Old Regime vs New Regime — Still Relevant?
Yes. The old regime continues as an option under the new Act for taxpayers with significant deductions. The decision framework remains the same:
Choose Old Regime if:
- You have 80C investments ≥ ₹1.5L
- You pay significant HRA (metro city)
- You have home loan interest deduction (up to ₹2L)
- Total deductions exceed ₹3–3.5L
- Your deductions are minimal
- Your income is below ₹12.75L (zero tax after rebate)
- You prefer simplicity and lower compliance burden
Frequently Asked Questions
Q: Do I need to re-file old returns under the new Act? No. All pending assessments and appeals under the 1961 Act will continue under the old law. The new Act applies only from AY 2027-28 (FY 2026-27).
Q: Will my CA charge more for the new Act? Most CAs are already trained on the new Act. Filing fees should remain similar for standard salaried returns.
Q: Is the LTCG exemption of ₹1.25L still there? Yes. The ₹1.25 lakh LTCG exemption on equity and equity mutual funds is retained in the new Act.
Conclusion
The New Income Tax Act 2025 is primarily a structural reform — cleaner language, better organisation, updated TDS thresholds. For salaried taxpayers, the day-to-day impact is minimal: same slabs, same deductions, same filing deadlines. The key changes to watch are the new section numbers in Form 16 and the explicit crypto loss carry-forward rules.
Use our free calculator to check your tax under the new act → Income Tax Calculator