Published 16 September 2026
On 1 April 2026 the Income-tax Act, 1961 stopped applying to new income and the Income-tax Act, 2025 took over. The new Act, No. 30 of 2025, received the President's assent on 21 August 2025 and runs to 536 sections in 23 chapters with 16 schedules, against the 1961 Act's roughly 800 sections after six decades of amendment. The government's stated position is that rates, thresholds and the substance of the law are unchanged and the reform is simplification. For a business that is true and misleading at the same time: the tax you pay is the same, but every section number, form name and payment code your accounts team has used for years has changed, and the first filings under the new numbering have already fallen due.
"Tax year" replaces financial year and assessment year
The 1961 Act taxed income of a "previous year" in the following "assessment year", a two-year vocabulary that confused everyone outside the profession. The 2025 Act uses a single term, the tax year: the twelve months from 1 April in which income is earned and to which the return relates. Income earned from 1 April 2026 belongs to tax year 2026-27, and the return for it is the return for 2026-27. The return you file by 31 October 2026 is still the last one under the old vocabulary, for the year ended 31 March 2026, on the 1961 Act's rules.
TDS: two sections replace twenty-five
The 1961 Act's tax deduction provisions had grown into more than twenty-five sections: 192 for salary, 194A for interest, 194C for contractors, 194H for commission, 194I for rent, 194J for professional fees, and a long tail of sub-sections. The 2025 Act folds them into two. Section 392 covers TDS on salary. Section 393 covers every other resident and non-resident payment, listed in a schedule where each type of payment has a numeric code rather than its own section. Tax collected at source moves to section 394. A challan or statement no longer cites "194J"; it cites the item code under section 393. Rates and thresholds carry over unchanged, so the amount deducted on a contractor's bill is what it was in March; the label on it is not.
The forms have new numbers
- Quarterly TDS statement on salary: Form 138, replacing Form 24Q.
- Quarterly TDS statement on resident non-salary payments: Form 140, replacing Form 26Q.
- Quarterly TDS statement on payments to non-residents: Form 144, replacing Form 27Q.
- Quarterly TCS statement: Form 143, replacing Form 27EQ, and now due with the TDS statements rather than a fortnight earlier.
- Challan-cum-statement for property, rent and similar one-off deductions: Form 141, replacing Forms 26QB, 26QC, 26QD and 26QE.
- TDS certificates: Form 130 for salary (replacing Form 16) and Form 131 for other payments (replacing Form 16A); TCS certificate Form 133 (replacing Form 27D).
- Employee investment declaration: Form 124, replacing Form 12BB.
The first quarterly statements under the new forms, for April to June 2026, were due on 31 July 2026. The second quarter's, for July to September, are due on 31 October 2026. Any payment made or credited on or after 1 April 2026 is governed by the 2025 Act's provisions and must be reported under the section 393 item code, even where the contract was signed under the old regime.
What an MSME actually has to change
- Accounting software: confirm the vendor has updated section references, payment codes and form names. Statements filed with 1961-Act section numbers for post-April payments are the most common error of the first quarter.
- Vendor and customer communication: TDS certificates issued to suppliers now say Form 131, not 16A, and a supplier's accounts team may query the unfamiliar form. A one-line note on the first certificate saves a dozen calls.
- Payroll: Form 124 declarations from employees for tax year 2026-27, and Form 130 certificates at year end.
- Contracts and templates: any agreement, invoice template or policy that names a 1961-Act section ("TDS under section 194J") should be updated at the next revision; the old reference is not wrong for pre-April payments but will be for everything after.
- Presumptive taxation and business-income provisions are restated in plainer language; the thresholds are the same, but a business using presumptive schemes should read the new sections rather than assume the old section numbers map one to one.
What has not changed
Tax rates, slabs and the new-regime default; TDS and TCS rates and thresholds; advance tax instalments on 15 June, 15 September, 15 December and 15 March; the 31 July, 31 October and 30 November return dates; and the audit thresholds. The government was explicit that the rewrite was not a rate change, and the first six months have borne that out. What the 2025 Act removes is redundancy, cross-references to repealed provisions, and the accumulated provisos of sixty years of Finance Acts.
Frequently Asked Questions
When did the Income-tax Act, 2025 come into force?
On 1 April 2026, applying to income earned from that date, which is tax year 2026-27. It received the President's assent on 21 August 2025 as Act No. 30 of 2025 and repeals the Income-tax Act, 1961.
Which section replaces 194C, 194J, 194H and 194I for TDS?
Section 393, which consolidates all non-salary TDS on resident and non-resident payments into one section with a schedule of payment codes. Salary TDS is section 392 and TCS is section 394.
Have TDS rates or thresholds changed under the new Act?
No. The government stated that rates and thresholds carry over unchanged; the reform renumbers and consolidates. The amount deducted is the same; the section, code and form names are new.
What replaced Form 26Q and Form 16A?
Form 140 is the quarterly statement for resident non-salary TDS, replacing 26Q; Form 131 is the certificate issued to the deductee, replacing 16A. Salary uses Form 138 and Form 130.
Does the return I file in October 2026 come under the new Act?
No. The return due 31 October 2026 is for the year ended 31 March 2026 and is filed under the 1961 Act. The first return under the 2025 Act is for tax year 2026-27, filed in 2027.
Sources
Income-tax Act, 2025 (Act No. 30 of 2025), assented 21 August 2025, in force 1 April 2026 (PIB release of 1 April 2026); Income-tax Rules, 2026, notified by CBDT on 20 March 2026, which prescribe the new forms; Income Tax Department's TDS guidance and form mapping for tax year 2026-27 on incometax.gov.in. Section and form numbers are as notified; confirm against the Act and rules before changing a filing.
BookMyTM prepares and files quarterly TDS statements, certificates and returns for businesses across Kerala under the 2025 Act's forms, and reviews contracts and templates for outdated section references.