Which tax rules will apply for ITR filing in FY 2526?

Which tax rules apply for ITR filing in 2026?

What is the difference between new and old income tax rules?

Important FAQs about Income Tax Act, 1961, and Income-tax Act, 2025

What is the primary objective of replacing the Income Tax Act, 1961, with the Income ax Act, 2025?

With the rollout of a new income tax framework- the Income-tax Act, 2025, many taxpayers are finding themselves unsure about which set of rules will apply when they file their Income Tax Return (ITR) for the Financial Year 2025-26. Such confusion is understandable.The proposed Income-tax Act, 2025, is scheduled to come into force from April 1, 2026, and its introduction has raised a common question among salaried individuals, professionals and business owners alike: will the next ITR be filed under the existing law- the Income Tax Act, 1961, or under the new act?Income earned in FY 2025–26 will still be taxed under the existing Income Tax Act, 1961, and will be reported while filing returns for AY 2026–27. The proposed new law will come into effect only for income earned from FY 2026–27 onwards.Chartered Accountant Abhishek Soni, CEO & co-founder, Tax2win, says, “When you file your ITR in 2026, there is often confusion about whether the old Income Tax Act, 1961, or the new Income-ax Act, 2025, will apply. The answer depends on which year your income belongs to. For ITR filing in 2026 (FY 2025–26/AY 2026–27), the Income Tax Act, 1961, will apply. This is because the new Income Tax Act, 2025, comes into effect on April 1, 2026, and will apply only to income earned from FY 2026–27 onwards.”The Central Board of Direct Taxes (CBDT) notified new income tax rules on March 20, 2026.Some of the changes include:The Income Tax Act, 2025, incorporates the idea of a ‘tax year,’ which replaces the ‘financial year’ in the present Income Tax Act of 1961.New income tax rules have hiked exemption limits for allowances—available only under the old regime—such as children’s education, hostel expenses, meal benefits, and so on.The house rent allowance (HRA) exemption for salaried individuals in Bengaluru, Pune, Hyderabad, and Ahmedabad would increase from 40% to 50% of their basic pay.To help taxpayers reconcile, navigate and compare the old income tax act’s provisions with the new tax act, an online interactive tool is launched by the Income Tax Department.Using this tool, your screen will be divided in two parts side by side (like dual view) where on one side the old Act and its provisions are visible and on the other, the new Act's provisions are visible. This tool can help you know what exactly has changed and using this information, you can make better tax centric decisions.Using Income Tax Department’s new tool, users can:Map old provisions to corresponding new provisions: Users can select a Section from the Income Tax Act, 1961Compare provisions side-by-side: The utility displays both versions togetherReduce confusion during transition: With Sections being renumbered and reorganised in the new law.Ans: The Income ax Act, 2025, has been enacted to provide a streamlined, simplified, and modern tax code with reduced compliance burden, consolidated provisions and clear definitions. Over six decades, the Income ax Act, 1961, had accumulated numerous amendments, provisos, and explanations, making it complex and difficult tonavigate. The new Act aims to present the same tax policy in a more logical, accessible and reader-friendly format. The Act further advances the taxpayer-centric approach by making compliance simpler, promoting the ease of doing business and aligning the Indian tax system with contemporary global standards.Ans: Yes. The 1961 act stands repealed on April 1, 2026. However, certain transitional provisions specify continuation of proceedings under the old Act to avoid disruption in pending matters and ensure a smooth transition.Ans: No. The income Tax Act, 2025, does not impose any new tax. The intent behind replacing the old Act with the new Act is to:• Simplify statutory language• Improve structural clarity• Reduce interpretational disputes• Align drafting style with modern legislative standards• Enhance voluntary complianceThe reform is aimed at making tax laws more predictable, transparent and easier tocomply with, rather than increasing the financial or compliance burden on taxpayers.