Overview

For over sixty years, India’s direct tax structure was driven by the Income Tax Act, 1961 and morphed into a sprawling 819 sections via multiple Finance Acts, circulars and amendments. Since April 1, 2026, it stands replaced by a pared-down 536-section Income Tax Act, 2025 – nearly 300 sections short of its predecessor. Despite being a mammoth piece of legislation, the new Act may not be treated as a conventional tax reform since it leaves tax rates and slab rates intact. Following the unveiling of the Finance Act 2026 on February 1, the Finance Minister reconfirmed that the tax slabs presented in Budget 2025 will not be changed for the 2026-27 financial year. The focus of the new law is rather on simplification and consolidation to produce a tighter and more readily intelligible body of direct tax legislation.

This guide includes what the Income Tax Act, 2025 actually changes (and what it doesn’t): New tax regime slabs vs old regime; structural changes including unified Tax Year concept, updated TDS thresholds and tax planning India considerations for FY 2026-27.

Features	New Tax Regime (Default from April 2026)	Old Tax Regime (Optional)
Basic exemption	Rs. 4 lakh	Rs. 2.5 lakh (Rs. 3 lakh for senior citizens)
Tax at 5%	Rs. 4-8 lakh	Rs. 2.5-5 lakh
Tax at 10%	Rs. 8-12 lakh	N/A
Tax at 15%	Rs. 12-16 lakh	N/A
Tax at 20%	Rs. 16-20 lakh	Rs. 5-10 lakh
Tax at 25%	Rs. 20-24 lakh	N/A
Tax at 30%	Above Rs. 24 lakh	Above Rs. 10 lakh
Standard deduction	Rs. 75,000 (salaried)	Rs. 50,000 (salaried)
Section 87A rebate	Rs. 60,000 (income up to Rs. 12 lakh)	Rs. 12,500 (income up to Rs. 5 lakh)
Effective zero-tax threshold	Rs. 12.75 lakh for salaried	Rs. 5 lakh
Section 80C, 80D, HRA	Not available	Available

What is the New Income Tax Bill?

Passed on August 11-12, 2025 and effective from April 1, 2026. The changes in the Income Tax Code include 819 Sections to 536 Sections, 23 Thematic Chapters, the tax year replaces the previous year and Assessment Year (Tax Year 2026-27=year income is earned and assessed), the new tax regime is default under Section 202 (previously Section 115BAC).

What is NOT changed: tax rates, progressive structure, corporate tax rates, old regime availability.

Why is the New Income Tax Bill Important for Taxpayers?

Budget 2025 reduced actual tax liability, and Budget 2026 confirmed continuity. The budget taxation income tax changes that matter most: income up to Rs. 12 lakh effectively zero-tax via Section 87A rebate of Rs. 60,000; for salaried individuals, Rs. 75,000 standard deduction makes income up to Rs. 12.75 lakh effectively tax-free.

Income bracket implications:

• Up to Rs. 12.75 lakh (salaried): zero tax, no investment declarations required.
• Rs. 12.75-15 lakh: new regime likely better unless large 80C and 80D deductions exist.
• Above Rs. 15 lakh: calculate both; home loan interest, HRA, and multiple 80C investments may make the old regime more beneficial.

New tax regime does not allow Section 80C, 80D, HRA, or home loan interest; in exchange of lower tax rates.

How Does the New Income Tax Bill Impact Your Family Budget?

Rs. 10 lakh salaried income, new tax regime: taxable income Rs. 9.25 lakh (after Rs. 75,000 standard deduction).

Tax = Rs. 20,000 (5% on Rs. 4-8 lakh) + Rs. 12,500 (10% on Rs. 8-9.25 lakh) = Rs. 32,500 before cess.

Section 87A rebate applies (income below Rs. 12 lakh): zero tax payable.

Old regime at Rs. 10 lakh with Rs. 1.5 lakh 80C deduction: taxable income Rs. 8.5 lakh, tax approximately Rs. 85,000 + cess.

The new tax regime’s direct tax code change is most impactful for Rs. 7-12 lakh income; this bracket moves from meaningful tax liability to near-zero.

What are the Key Features of the New Income Tax Bill?

Tax slab changes and income tax changes:

• New 25% slab for Rs. 20-24 lakh (previously taxed at 30%)
• Basic exemption raised to Rs. 4 lakh (from Rs. 3 lakh under new regime)
• Section 87A rebate increased from Rs. 25,000 to Rs. 60,000

Income tax rules changes in filing process:

• Tax Year replaces Assessment Year and Previous Year (from FY 2026-27)
• ITR filing deadline for non-audit cases (ITR-3/ITR-4): extended to August 31
• Updated return window: extended to 4 years (from 2 years)
• Form 15G and 15H: merged into Form 121
• TDS on senior citizen interest: Rs. 1 lakh threshold (from Rs. 50,000)
• TDS on rental income: Rs. 6 lakh threshold (from Rs. 2.4 lakh).

How Can You Prepare for the New Income Tax Bill?

1. For income up to Rs. 12.75 lakh: zero tax under new regime; no investment declarations required. To claim 80C or HRA deductions, actively declare old regime to employer before April 1.
2. For income Rs. 12.75-25 lakh: calculate both regimes; if total deductions exceed approximately Rs. 3.75 lakh, old regime may save more.

Financial planning steps:

• Review 80C investments (PPF and ELSS remain wealth tools but do not reduce income under new regime).
• Maximise employer NPS (Section 80CCD(2) remains deductible under new tax regime as one of the few permitted deductions).

How Can a Financial Service Platform Assist You with the New Income Tax Bill?

• New vs old regime tax calculator: compare FY 2026-27 tax liability automatically
• Demat account ELSS tracking for 80C claims (old regime)
• Employer NPS contribution optimisation under Section 80CCD(2) (permitted under new tax regime)
• Capital gains tracker: LTCG at 12.5% (equity above 12 months), STCG at 20% (under 12 months).

Conclusion

The new income tax bill (Income Tax Act, 2025) is primarily a structural simplification: 536 sections, 23 chapters, unified Tax Year. The budget tax changes and tax reforms India needed to reduce liability happened in Budget 2025. Budget 2026 confirmed continuity. Simpler compliance, lower effective taxes for the middle class, and a readable direct tax code: the tax reforms India and budget taxation relief for the middle class arrived together at the Income Tax Act, 2025’s April 1, 2026 effective date.

Final Takeaways:

• New income tax bill: Income Tax Act, 2025 effective April 1, 2026; replaces the 1961 Act; 819 sections reduced to 536
• New tax regime (default): Rs. 12 lakh effective zero-tax threshold with Section 87A rebate; Rs. 12.75 lakh for salaried with Rs. 75,000 standard deduction
• Tax slab changes: new 25% slab for Rs. 20-24 lakh; basic exemption raised to Rs. 4 lakh; 30% begins only above Rs. 24 lakh
• Income tax code structural changes: Tax Year replaces Assessment Year/Previous Year; ITR filing extended to August 31 for non-audit cases; updated return window extended to 4 years
• Income tax rules change for TDS: senior citizen interest TDS threshold Rs. 1 lakh; rental income TDS threshold Rs. 6 lakh; Form 15G and 15H merged to Form 121

Open demat account for ELSS investment under 80C (old regime) and capital gains tracking under the new income tax rules