Union Budget 2026: Finance Minister Introduces New Tax Act Effective April 1, 2026

The Union Budget 2026‑27 presented on February 1, 2026, includes the implementation of the Income Tax Act 2025, which will become operative from April 1, 2026, replacing the Income Tax Act 1961. 

Key Features of the Income Tax Act 2025 

The new legislation spans more than 600 pages, containing 536 sections, 23 chapters, and 16 schedules. It retains existing tax rates but reorganises provisions for clearer navigation. Simplified language and a restructured layout aim to reduce compliance complexity for taxpayers and administrators. 

Single Tax Year Framework 

The Act eliminates the dual “Previous Year” and “Assessment Year” system. A single Tax Year now runs from April 1 to March 31. Income earned in a Tax Year will be assessed in the following Tax Year, removing parallel year references that previously caused confusion. 

Read More: Capital Gains Tax Framework Ahead of Union Budget 2026! 

Consolidated TDS Provisions 

All tax deductions at source rules are now housed under Section 393, replacing the earlier spread across Sections 192 to 194T. The consolidation does not alter existing TDS rates or thresholds but provides a single reference point for compliance. 

Continuity of Tax Regimes 

The default tax regime remains unchanged, now referenced as Section 202, mirroring the earlier Section 115BAC. Taxpayers can continue to choose between the standard and concessional regimes without procedural changes. 

Conclusion 

The Income Tax Act 2025 introduces a single Tax Year, consolidates TDS rules and presents a more navigable structure while keeping core tax rates intact. The law is set to take effect from April 1, 2026, as part of the Budget 2026 reforms. 

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