When does the Income Tax Act 2025 come into effect?

From April 1, 2026. It applies from Tax Year 2026-27 onwards. The return you file in 2026 for FY 2025-26 is still governed by the old 1961 Act.

What is a Tax Year under the new Act?

Tax Year is the new single term that replaces both Previous Year and Assessment Year. It is the 12-month period starting April 1 in which you earn the income — removing the confusing FY vs AY distinction.

Did tax slabs change under the Income Tax Act 2025?

No. Budget 2026 made no changes to slabs for FY 2026-27. The new-regime rebate under Section 87A (up to ₹60,000) continues, keeping income up to ₹12 lakh effectively tax-free.

Is Section 80C still available under the new Act?

The deduction survives but the number changed — old Section 80C is now Section 123, 80CCD is 124, and 80D is 126 under the Income Tax Act 2025.

What is the HRA change for Hyderabad from April 2026?

From April 1, 2026, Hyderabad joins the 50% HRA exemption list — along with Bengaluru, Pune, Ahmedabad — which was earlier limited to Delhi, Mumbai, Chennai and Kolkata. Renters in Hyderabad claiming HRA under the old regime get a bigger exemption.

Income Tax Act 2025: What Actually Changes for You from April 2026

By Anurag · Anukram, Hyderabad · Updated 18 July 2026

After 65 years, India has a new income tax law. The Income Tax Act, 2025 replaced the Income-tax Act, 1961 with effect from April 1, 2026. The old Act's 819 sections across 23 chapters have been compressed into 536 sections — same 23 chapters, far less clutter.

Headlines have made it sound dramatic. For most taxpayers it isn't — the law changed shape more than substance. But a few changes genuinely matter, and one of them is a straight-up win for anyone renting in Hyderabad. Here's the honest breakdown.

First, the most important clarification

The ITR you're filing right now (by July 31 / August 31, 2026) is still under the old 1961 Act. It covers FY 2025-26. The new Act applies from Tax Year 2026-27 — the income you're earning now, which you'll report in the return you file in 2027. Don't let anyone confuse you this filing season. Full deadline calendar here: ITR last dates AY 2026-27.

"Tax Year" replaces FY and AY — finally

The single most useful change is vocabulary. The old law made everyone juggle two overlapping terms: Financial Year (when you earn) and Assessment Year (when you file). Endless confusion — wrong-AY challans, wrong-year filings.

The new Act uses one term: Tax Year — the 12-month period starting April 1 in which you earn the income. You earn in Tax Year 2026-27, you file for Tax Year 2026-27. Done.

Your favourite sections have new numbers

The deductions survive — the numbers changed:

What it does	Old (1961 Act)	New (2025 Act)
LIC, PPF, ELSS, tuition fees etc. (₹1.5L)	Section 80C	Section 123
NPS contributions	Section 80CCD	Section 124
Health insurance premium	Section 80D	Section 126

Expect payroll declaration forms, bank tax-saver FD receipts, and insurance ads to slowly switch numbering through 2026-27. Both numbering styles will float around for a while — now you know they're the same thing.

The Hyderabad win: 50% HRA exemption

Under the old rules, only Delhi, Mumbai, Chennai and Kolkata qualified as "metro" for the higher 50%-of-salary HRA exemption. Hyderabad renters — some paying Gachibowli and HITEC City rents higher than Kolkata's — were stuck at 40%.

From April 1, 2026, the 50% list expands to 8 cities: Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Ahmedabad — and Hyderabad.

What it means: if you claim HRA under the old regime, your exemption ceiling rises meaningfully from Tax Year 2026-27. Example: basic salary ₹50,000/month → the 50%-of-salary limb of the HRA formula rises from ₹2.4L to ₹3L per year. For high-rent tenants this can tip the old-vs-new regime decision back toward old. Run both sides in our free tax calculator.

What else changes

Share buybacks → capital gains. From April 1, 2026, amounts received on buyback are taxed as capital gains in your hands (the old buyback-tax-on-company + exempt-in-your-hands structure is gone).
Cleaner drafting for TDS, salary, house property — tables and formulas replace cross-referenced provisos. Same outcomes, easier reading.
Digital-first administration — faceless assessment and e-verification are baked into the new Act's structure rather than bolted on.

What does NOT change

Tax slabs and rates — Budget 2026 changed nothing for FY 2026-27. New regime stays default.
₹12 lakh effectively tax-free — the Section 87A rebate (up to ₹60,000) continues in the new regime, plus ₹75,000 standard deduction for salaried.
Old vs new regime choice — both regimes continue exactly as before.
Capital gains rates, TDS rates, advance tax schedule — carried forward as-is.

Confused between the old and new regime?

Send us your salary structure on WhatsApp — we will work out your exact tax under both regimes, including the HRA change. ITR filing from ₹499.

WhatsApp us → +91 96315 26999

Frequently asked questions

Do I need to do anything for the new Act right now?

No. For now, just file your FY 2025-26 ITR on time (under the old Act). The new Act applies to your 2026-27 income — that return is filed in 2027.

Has the 80C limit changed?

No — the deduction is the same (₹1.5 lakh); only the section number changed: it is now Section 123. Note: it is available only in the old regime.

Can I claim Hyderabad's 50% HRA in this year's ITR?

No — the 50% rate applies from Tax Year 2026-27 (salary earned after April 2026). In the return you are filing now (FY 2025-26), Hyderabad is still 40%.

Does the new Act stop notices for old cases?

No — assessments and notices for earlier years continue under the old Act. The new Act applies only to income from Tax Year 2026-27 onwards.

This article is general information based on the Income Tax Act, 2025 and announcements up to 18 July 2026 — not professional advice for your specific situation. Confirm details on incometax.gov.in. Related: ITR Filing · Salaried ITR · Income Tax Calculator