Income-tax Act 2025 — What Changes From 1 April 2026: the Single 'Tax Year', a Rewritten and Renumbered Act With the Same Rates and Slabs, Revised Allowance Limits Under the 2026 Rules, the 31 August 2026 Return Date for FY 2025-26, ITR-U for Four Years, AIS/SFT Reporting, PAN and TCS Thresholds, and What Salaried Taxpayers, Traders, NRIs and Property Buyers Should Do Now

The Income-tax Act 2025 received the President's assent on 21 August 2025 and applies to income earned from 1 April 2026. It is a re-write, not a re-rating: the government's stated purpose was to simplify language, remove redundant provisos and explanations, put TDS/TCS provisions and deductions into tables, and renumber the Act so that a taxpayer can read it. The concepts of 'previous year' and 'assessment year' are merged into one 'tax year' — the twelve months starting 1 April in which income is earned and by reference to which it is taxed. The slabs, the new regime as default, the section 87A rebate up to ₹12 lakh of total income, the ₹75,000 standard deduction, the capital-gains rates and holding periods, and the TDS/TCS rates all continue as they stood under the Finance Act 2025 (and as amended by the Finance Act 2026).

• •Regime: the new regime is the default; tax is nil up to ₹12 lakh of income (₹12.75 lakh with standard deduction) through the 87A rebate, with marginal relief just above. The old regime with HRA, 80C, 80D and home-loan interest still wins for some taxpayers — compute both every year; salaried employees may switch each year through the return.
• •Allowances: the 2026 Rules revise the decades-old exemption limits for children's education and hostel allowances, meal vouchers and small gifts upward. These matter only in the old regime (and for the few exemptions available in the new regime); ask the employer to update the salary structure and Form 12BB once the rule is notified.
• •HRA: exemption is the least of actual HRA, rent paid minus 10% of salary, and 50% of salary in Mumbai, Kolkata, Delhi or Chennai (40% elsewhere). Rent paid to parents is allowed if it is real — a rent agreement, transfers to their bank account, their PAN when annual rent exceeds ₹1 lakh, and the rent shown in their return. TDS under section 194-IB at 2% applies when rent exceeds ₹50,000 a month.
• •Form 16 and AIS: the AIS now carries SFT data (mutual-fund purchases, high-value transactions, foreign remittances) beside TDS; reconcile Form 16, AIS and bank interest before filing — mismatches are where notices come from.
• •Arrears and perquisites: relief under section 89 (Form 10E) continues; ESOP taxation and employer NPS contribution (14% in the new regime) are unchanged.

• •AIS/SFT: banks, registrars, mutual funds, brokers and the GST system report to the AIS; mutual-fund purchases above ₹10 lakh, cash deposits, property registrations above the threshold, credit-card payments and foreign remittances appear there. The location of the reporting has moved into the AIS; the scrutiny has not reduced.
• •PAN: rule 114B-type requirements continue — PAN (or Aadhaar) for opening accounts, cash deposits above ₹50,000 a day, property transactions above the notified value, motor-vehicle purchases, and high-value cash spends including foreign-exchange purchases. The 2026 Rules revise some thresholds; quote PAN whenever a bank, registrar or dealer asks — the alternative is a rule 114B declaration and a report to the department.
• •TCS on foreign remittances (LRS): no TCS up to ₹10 lakh a year (raised from ₹7 lakh by the Finance Act 2025); nil on education financed by a loan from a financial institution; concessional rates for education and medical treatment above ₹10 lakh; 20% for other purposes above ₹10 lakh; overseas tour packages 5% up to ₹10 lakh and 20% above. TCS collected is credited in the return like TDS. Rate rationalisation announced for 2026 should be confirmed on the portal's TCS chart before remitting.
• •TDS consolidation: the rates are unchanged, but the sections are tabulated and renumbered; deductors must use the new section codes in challans and statements from tax year 2026-27.

• •STT on derivatives rose from 1 October 2024 — futures to 0.02% and options to 0.1% of premium; F&O remains business income (see our F&O trader guide).
• •Buybacks: since 1 October 2024 the amount received on buyback is taxed as a deemed dividend in the shareholder's hands at slab rate, with the cost of the shares becoming a capital loss; companies no longer pay buyback tax. TDS at 10% applies under section 194 and the amount appears in the AIS.
• •Dividend: taxed at slab rate; in the old regime interest on money borrowed to buy the shares is deductible up to 20% of the dividend, in the new regime no deduction — plan margin-funded portfolios accordingly.
• •Capital gains: 12.5% long-term (₹1.25 lakh exemption for equity), 20% short-term on equity, 12.5% without indexation on property with the 20%-with-indexation option for property bought before 23 July 2024 — unchanged by the 2025 Act.
• •Buying property from an NRI: TDS under section 195 on the sale consideration at the capital-gains rate (plus surcharge and cess) or at the lower rate certified under section 197; today the buyer needs a TAN and files Form 27Q — the PAN-based deposit route announced for 2026 should be used only once the utility is live. Sellers should apply for a lower-deduction certificate before the agreement.