NEW DELHI — In her historic Sunday, February 1, 2026 Budget presentation, Finance Minister Nirmala Sitharaman officially signaled the end of the 64-year-old Income Tax Act, 1961. The Income Tax Act, 2025, which received Presidential assent last August, will become the law of the land starting this April.
The reform is described as “revenue-neutral,” meaning it focuses on simplicity and clarity rather than changing how much tax you pay.
1. Key Structural Changes: Less Volume, More Clarity
The new Act is significantly leaner, designed to be read and understood by ordinary citizens without an army of consultants.
- Section Reduction: The total number of sections has been slashed from 819 to 536.
- Chapter Consolidation: Chapters have been reduced from 47 to 23, grouping related topics logically.
- Consolidated TDS: All provisions related to Tax Deducted at Source (TDS), previously scattered across sections 192–194T, are now unified under Section 393.
- Plain Language: The Act removes archaic “Provisos” and “Explanations,” replacing them with direct sub-sections and clauses.
2. The Death of “Assessment Year”
One of the most significant shifts for taxpayers is the simplification of the tax timeline:
- The “Tax Year” Concept: The confusing distinction between “Previous Year” (income earned) and “Assessment Year” (income taxed) has been abolished.
- Unified Term: There is now only a single “Tax Year,” defined as the 12-month period starting April 1.
- Filing Reference: For the upcoming cycle, you will simply refer to Tax Year 2026-27.
3. Tax Slabs: No Change for 2026-27
The Finance Minister confirmed that the substantial relief provided in the 2025 Budget remains the standard. The New Tax Regime (Default) slabs are:
| Income Bracket | Tax Rate |
| ₹0 – ₹4 Lakh | Nil |
| ₹4 – ₹8 Lakh | 5% |
| ₹8 – ₹12 Lakh | 10% |
| ₹12 – ₹16 Lakh | 15% |
| ₹16 – ₹20 Lakh | 20% |
| ₹20 – ₹24 Lakh | 25% |
| Above ₹24 Lakh | 30% |
Note: Individuals with a net taxable income of up to ₹12 Lakh continue to pay zero tax due to the enhanced rebate under Section 87A (introduced in 2025).
4. Major Compliance Wins for Taxpayers
The Budget 2026-27 introduced several “ease of living” measures within the new framework:
- Revised Return Deadline: The deadline to file a revised return has been extended from December 31 to March 31 (with a nominal fee).
- Staggered ITR Deadlines: * July 31: Individuals (ITR 1 & 2).
- August 31: Non-audit business cases and trusts (extended by one month).
- TDS Refund Relief: Taxpayers can now claim TDS refunds even if they file their ITR after the deadline, without facing penal charges.
- LRS Relief: The TCS rate on foreign remittances for education and medical treatment above ₹10 lakh has been reduced from 5% to 2%.