Income Tax Act 2025 vs 1961: Complete CA Guide to the New Law

What ITA 2025 Actually Changes (and What It Does Not)

The Income Tax Act 2025 passed in February 2026 and takes effect on 1 April 2026. The government's stated objective was to make the Act readable, not to change tax policy. That means:

• Tax slabs, rates, and surcharges remain unchanged.
• Deductions under Chapter VI-A continue; they are just renumbered.
• Corporate tax rates (22% base, 15% for new manufacturing) stay the same.
• MAT at 15% continues — it moves to Section 168 of ITA 2025.

What does change is the architecture: 819 sections in ITA 1961 compress to 536 sections in ITA 2025, cross-references are replaced with internal definitions, and the language shifts from Victorian legalese to structured plain English. For CAs, the practical impact is in three specific areas: the Tax Year concept, TDS section renumbering, and form renames.

Tax Year vs Assessment Year: A Practical Example

Under ITA 1961, every transaction sits in two different years simultaneously — the Previous Year (PY) when income is earned, and the Assessment Year (AY) when it is taxed. This dual-year system has confused clients and caused portal errors for decades.

ITA 2025 replaces both with a single Tax Year that equals the financial year itself:

• FY 2025-26 → AY 2026-27 (ITA 1961 applies, as always)
• Tax Year 2026-27 = April 2026 to March 2027 (ITA 2025 applies for the first time)
• Tax Year 2027-28 = April 2027 to March 2028 (ITA 2025, second full year)

Practically: when a client asks "which year does my FY 2026-27 income go into?" the answer is simply "Tax Year 2026-27" — no more explaining PY vs AY. Client advisory letters and engagement scope documents should begin using Tax Year terminology from April 2026 onwards.

TDS Section Consolidation: Old vs New Numbers

ITA 1961 had 30+ separate TDS sections for different payment types. ITA 2025 collapses all non-salary TDS into a single Section 393 with serial codes 1001–1067. Salary TDS moves to Section 392. Using old section numbers (e.g., 194C) for transactions after 1 April 2026 will cause portal validation errors.

Salary TDS (previously Section 192) moves to Section 392, ITA 2025. All other non-salary deductions use Section 393 with the respective serial code on the TDS portal.

Form Renaming: What You Will Need to Update

Six widely used forms are renumbered under ITA 2025. The old forms remain valid for FY 2025-26 (AY 2026-27) returns. The new form numbers apply from the dates shown.

Form 168 (new AIS): filed by CBDT under Rule 245, published within 90 days of month-end. Combines the old Annual Information Statement and Form 26AS into one document.

Transition Timeline at a Glance

Presumptive Taxation: Section Mapping

CAs advising clients on presumptive taxation schemes should update their advisory letter templates with the new section references:

• Section 44AD (turnover up to ₹3 crore for businesses) → Section 58(2), ITA 2025
• Section 44ADA (professionals, gross receipts up to ₹75 lakh) → Section 61(2), ITA 2025
• Section 115JB (MAT at 15%) → Section 168, ITA 2025

Any engagement letter, computation sheet, or advisory note referencing the old section numbers for Tax Year 2026-27 transactions will be technically incorrect and may confuse portal reconciliation.

7-Item CA Checklist for ITA 2025 Transition

1. Audit your template library. Identify every document that references a specific section number (engagement letters, advisory notes, MIS reports, computation summaries, tax audit reports).
2. Create ITA 2025 versions of client-facing templates with new section references, effective from April 2026.
3. Update TDS challan workflows. Instruct staff to use Section 393 + serial codes for all non-salary deductions from April 2026 onwards.
4. Rename Form 16 references in client communications. For FY 2025-26 (AY 2026-27), continue using Form 16. Switch to Form 130 for FY 2026-27 starting June 2027.
5. Brief clients on the Tax Year concept. Send a one-page explainer so clients stop asking why the "assessment year" is gone.
6. Update presumptive taxation computations to reference Section 58(2) or Section 61(2) for Tax Year 2026-27 onwards.
7. Monitor Form 168 (new AIS) uploads. Rule 245 requires CBDT to publish it within 90 days of month-end — build this into your reconciliation calendar.

How Glomiq Helps CAs Adapt to ITA 2025

The biggest operational headache for most CA practices is not understanding ITA 2025 — it is updating dozens of document templates that currently reference old section numbers and form names.

With Glomiq, the process is:

1. Upload your existing engagement letter, MIS report, or advisory letter template.
2. AI detects every variable field, including section number references.
3. Update the template once — change "Section 44AD" to "Section 58(2)", add Tax Year field, update TDS section references.
4. Generate correct, updated documents for all clients in minutes.

One CA with 80 clients using ITR advisory letters updated all documents in under 30 minutes using Glomiq — compared to manually editing 80 individual Word files.

Frequently Asked Questions

Does ITA 2025 change my clients' tax liability for FY 2025-26?

No. FY 2025-26 (AY 2026-27) is governed by ITA 1961. ITA 2025 applies from Tax Year 2026-27 (FY 2026-27) onwards. Tax slabs, rates, and deductions for FY 2025-26 are unchanged.

Can I use old TDS section numbers (like 194C) after April 2026?

For FY 2025-26 transactions being reported in AY 2026-27, yes — use ITA 1961 sections. For transactions occurring from 1 April 2026 (Tax Year 2026-27), use the new Section 393 + serial codes. Mixing them will cause portal errors.

When does Form 16 become Form 130?

Form 16 (salary TDS certificate) transitions to Form 130 from June 2027 for FY 2026-27 (Tax Year 2026-27). You will still issue Form 16 for FY 2025-26 (AY 2026-27) in June 2026.

What is Form 168 and how is it different from AIS?

Form 168 is the new Annual Information Statement under ITA 2025, governed by Rule 245. It replaces both the old AIS and Form 26AS and must be published by CBDT within 90 days of month-end. It is effectively a consolidated view of all reported transactions for a taxpayer in a given Tax Year.