The Income Tax Act, 2025 came into force on April 1, 2026, replacing the Income Tax Act of 1961 that had governed direct taxes in India for more than six decades. While the overhaul modernises and simplifies the law, tax rates themselves remain unchanged.
The 'Tax Year' concept
The biggest structural change is a single, unified "Tax Year" — meaning the year you earn income is the year you file for. This removes the long-standing confusion between "financial year" and "assessment year".
Other key changes
- A standard deduction of Rs 75,000 applies under the new tax regime from FY 2026-27.
- Children's education allowance is set at Rs 3,000 per month per child, for up to two children.
- The list of "metro cities" eligible for the 50% HRA exemption now includes Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad.
Taxpayers should review how the new structure affects their filing and deductions for the year ahead.
Sources: Upstox, Outlook Money, Business Today.