As India prepares to transition to a new direct tax framework, many taxpayers are understandably confused about which law will apply when they file their Income Tax Return (ITR) this year. With the proposed Income-tax Act, 2025 set to come into force from April 1, 2026, the key question is: will your next ITR be filed under the old law or the new one?
What applies for ITR filing in 2026?
According to tax expert Amit Kamthe, Manager – Global Payroll and Compliance, Nexdigm, there is no ambiguity in how the transition will work.
“India’s tax system is entering a transition phase with the proposed Income-tax Act, 2025 set to take effect from April 1, 2026. Naturally, this has led to confusion among taxpayers about which law applies for ITR filing in 2026.”
He explains that for taxpayers filing returns in 2026, the existing law will continue to apply.
“In practice, the answer is straightforward. Income earned during FY 2025–26 will continue to be governed by the existing Income-tax Act, 1961 and will be reported in AY 2026–27. The new law will apply only to income earned from FY 2026–27 onwards.”
This means your upcoming ITR filing (for income earned between April 1, 2025 and March 31, 2026) will not be impacted by the new Income-tax Act.
When will the new Income Tax Act be implemented?
The proposed Income-tax Act, 2025 is expected to be implemented from April 1, 2026, i.e., from FY 2026–27 onwards. This ensures a clean break between the two systems.
“This ensures a clean transition, with no overlap of laws within a single filing cycle,” Kamthe adds.
Old vs New Income Tax Act: Key differences
While the current ITR filing remains unchanged, the new law brings several structural and compliance-related changes:
Simplified terminology: The concepts of “financial year” and “assessment year” may be replaced by a single “tax year”
Revised allowances: Changes in exemptions and allowances are expected
HRA rules: Possible expansion of metro city definitions for HRA calculations
Perquisites valuation: Updated rules for taxing employee benefits
Stricter disclosures: More detailed reporting requirements for exemptions and deductions
These changes indicate a shift towards a simpler yet more compliance-driven tax regime.
What about ITR forms and Form 16?
While filing for FY 2025–26 will continue under the existing system, changes are expected once the new law kicks in:
ITR forms may be redesigned to align with the new structure and reporting requirements
Form 16 could also see changes, including possible terminology updates in line with the shift to the “tax year” concept
Enhanced disclosures could mean more detailed information reporting by employers and taxpayers
However, these changes will only come into effect from the next filing cycle (ITR 2027 onwards).
What taxpayers should do now
For now, there is no change in compliance requirements for the upcoming ITR filing.
“For now, taxpayers should focus on complying with existing provisions. However, businesses and professionals should begin preparing for enhanced documentation and reporting standards under the new regime,” Kamthe advises.
Summing up…
While the introduction of the new Income-tax Act marks a major reform, it does not impact ITR filing in 2026. Taxpayers can continue to follow the existing provisions for one more year, even as they prepare for a more streamlined but stricter regime ahead.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.