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TDS MasteryITA 2025
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Ep 1/23
Why a New Act — Philosophy, Structure and What Changed
The three objectives of ITA 2025, how it is organised, and what Tax Year means
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Speed:
Chapters
23
vs 298 sections in ITA 1961
Schedules
8
New consolidated structure
Effective
1 Apr 2026
Tax Year 2026-27
Tax Year
New
Replaces Previous Year + AY

After 64 years, the Income Tax Act 1961 has been replaced. The Income Tax Act 2025 came into force on 1 April 2026. The rates are the same. The principles are the same. The case laws are still valid. But the structure — the chapters, sections, and forms — has been completely reorganised. Understanding WHY the new Act was created and HOW it is organised is the foundation for mastering it. This episode gives you that foundation in clear, structured detail.

The Law

Three Objectives of the Income Tax Act 2025

The Income Tax Act 2025 was created with three stated objectives. First: simplification — the 1961 Act had grown to over 298 sections, 23 schedules, and hundreds of sub-clauses added through 64 annual Finance Acts. The new Act consolidates these into 23 well-organised chapters. Second: clarity — the new Act uses plain language where possible and eliminates contradictory provisions that had generated decades of litigation. Third: technology alignment — the new Act recognises digital assets, faceless processes, and online compliance as primary modes rather than exceptions.
Statement of Objects and Reasons, Income Tax Act 2025; Finance Minister's Budget Speech 2024-25
Tutor Explains

Tax Year — The End of the Assessment Year Confusion

Dear student, if you have spent years explaining to clients why they file a 2025-26 return in Assessment Year 2026-27 and why their 2024-25 income is taxed in 2025-26 — that confusion is over. The Income Tax Act 2025 introduces a single concept: Tax Year. Tax Year 2026-27 means income earned from 1 April 2026 to 31 March 2027. The return for that income is filed in Tax Year 2026-27 (by 31 July 2027 for non-audited, by 31 October 2027 for audited). There is no separate Previous Year and Assessment Year. One year, one name, one concept. This single change eliminates the most common confusion in Indian income tax.
The Law

Structure — 23 Chapters, 8 Schedules

The Income Tax Act 2025 is organised into 23 chapters. Chapter I: Preliminary (definitions). Chapter II: Basis of Charge. Chapter III: Incomes Not Included (exemptions). Chapter IV: Computation of Income (all heads of income). Chapter V: Clubbing and Aggregation. Chapter VI: Set-off and Carry Forward of Losses. Chapter VII: Deductions (Chapter VI-A equivalent). Chapter VIII: Rebate and Relief. Chapter IX: Special Rates (capital gains, VDA, gaming etc.). Chapters X-XIV: Special taxpayer categories (NRIs, companies, trusts etc.). Chapters XV-XVII: International tax, transfer pricing, DTAA. Chapters XVIII-XX: TDS, TCS, and Advance Tax. Chapters XXI-XXIII: Returns, Assessment, Penalties, Appeals. Plus 8 Schedules covering rates, depreciation, perquisites, forms, etc.
Income Tax Act 2025 — Table of Contents; CBDT Explanatory Circular 2026
Critical Intricacy

What Is the Same — Rates, Thresholds, Principles

Everything that determined how much tax you pay is unchanged. Income tax slab rates — identical. Surcharge rates — identical. Health and education cess at 4% — retained. All monetary thresholds — Rs.2,40,000 for rent TDS, Rs.30,000 for professional fees TDS, Rs.5,00,000 for presumptive business turnover limit — all unchanged. All case laws from the Supreme Court, High Courts and ITAT decided under the old Act remain valid and binding — Section 548 of the new Act expressly states old Act references are to be read as new Act references. No existing rights, obligations, or pending proceedings are affected.
Common Challenge

What Is Different — Section Numbers, Form Names, Terminology

Everything that described WHERE in the Act a provision lived has changed. Section 192 (salary TDS) is now Section 392. Section 194C (contractor TDS) is now covered under Section 393 Nature Code 1023/1024. Form 24Q is now Form 138. Form 26Q is now Form 140. Form 16 is now Form 130. Form 15G and 15H are replaced by Form 121. The term Previous Year is gone — it is now Tax Year. The term Assessment Year is gone — also Tax Year. Gross Total Income is still used but Chapter VI-A deductions are now simply called Chapter VII deductions. The structure is reorganised for clarity — not the substance.
Section 1 — Short Title, Extent and Commencement
(1) This Act may be called the Income Tax Act, 2025. (2) It extends to the whole of India. (3) It shall come into force on the 1st day of April, 2026, and shall apply in relation to the assessment of income for the tax year commencing on the 1st day of April, 2026, and subsequent tax years. [Section 1, Income Tax Act 2025] — Note: The term 'assessment year' used in old Act is replaced by 'tax year' in new Act. Tax Year 2026-27 = income earned from 1 April 2026 to 31 March 2027.
Section 1, Income Tax Act 2025
ITA 2025 Application — When New Act Governs
Apply / Deduct
  • +All income earned from 1 April 2026 onwards — Tax Year 2026-27 and subsequent years
  • +All TDS on payments made on or after 1 April 2026 — use Section 393 Nature Codes
  • +All returns for Tax Year 2026-27 — use new Form ITR variants and new form numbers
  • +All certificates from Tax Year 2026-27 — Form 130 (salary), Form 131 (others)
  • +All nil TDS declarations from April 2026 — use Form 121 only
Not Required
  • −Income earned before 31 March 2026 — ITA 1961 governs
  • −TDS on payments made before 31 March 2026 — use old section codes
  • −Returns for FY 2025-26 / Assessment Year 2026-27 — still under ITA 1961
  • −Old Form 16 and Form 16A valid for FY 2025-26 certificates
  • −Old Form 15G and 15H valid for FY 2025-26 declarations
Practical Challenges
CHALLENGE 1 — Tax Year vs Assessment Year: A client asks — I earned Rs.20 lakhs from April 2026 to March 2027. When do I file my return and what year is it called?
Answer: Tax Year 2026-27. You file the return for Tax Year 2026-27 by 31 July 2027 (non-audited individuals) or 31 October 2027 (audited). Under the old Act, this income would have been called Previous Year 2026-27 income taxable in Assessment Year 2027-28. Under the new Act, both are simply called Tax Year 2026-27. Same income, same return, same due dates — just one name instead of two.
CHALLENGE 2 — Which Act governs a pending assessment: Income Tax Officer issued a scrutiny notice in December 2025 for FY 2023-24 income. The assessment is completed in July 2026 after ITA 2025 is in force. Which Act governs?
Answer: ITA 1961 governs. The income was earned in FY 2023-24 under ITA 1961. The assessment (even if completed after April 2026) must follow ITA 1961 provisions. Only income earned from Tax Year 2026-27 onwards is assessed under ITA 2025. Pending proceedings for prior years are completed under the Act that was in force when the income was earned.
CHALLENGE 3 — Old case law: Supreme Court decided a case on Section 194C interpretation in 2023. Does that judgment still apply under ITA 2025?
Answer: Yes — fully applicable. Section 548 of ITA 2025 provides that all references to old Act provisions are to be read as new Act provisions. The Section 194C principles from the 2023 judgment apply to the equivalent provision (Section 393 Nature Code 1023/1024) in ITA 2025. All case laws remain valid — the principles of interpretation do not change when section numbers change.
Worked Examples — ITA 2025 Basics
Example 1 — Tax Year concept: computing due date
Scenario: An individual (non-audited) earns salary income from April 2026 to March 2027. What is the Tax Year and when is the return due?
Working: Tax Year: 2026-27 (April 2026 to March 2027). Return due date for non-audited individual: 31 July 2027. Under old Act: this would have been Previous Year 2026-27 income, return filed for Assessment Year 2027-28 by 31 July 2027. The due date is identical. The terminology is simpler — one year, one name.
⚠ Common Mistake: Calculating return due date as 31 July 2026 — confusing the new Tax Year concept with the old Assessment Year. The return for income earned in Tax Year 2026-27 is due by 31 July 2027 — the year AFTER the income year, same as the old Assessment Year concept.
Example 2 — Old case law applicability
Scenario: A contractor dispute arose in 2022 under Section 194C. The landmark ITAT ruling held that the threshold applies per payee not per contract. Does this apply under ITA 2025?
Working: Yes — fully applicable. The Section 194C principles carry forward to Section 393 Nature Code 1023/1024 under ITA 2025. Section 548 provides this automatically. The 2022 ITAT ruling's holding that the Rs.30,000/Rs.1,00,000 threshold is per payee aggregate (not per contract) applies identically under the new Act. Citation in legal arguments: reference both the old Section 194C and the equivalent Section 393 Nature Code 1023/1024 for clarity.
⚠ Common Mistake: Ignoring old case laws because the section numbers changed. All established principles from decades of SC/HC/ITAT jurisprudence under ITA 1961 remain binding under ITA 2025 by virtue of Section 548.
Example 3 — Pending assessment after April 2026
Scenario: ITO issued notice under Section 143(2) of ITA 1961 in January 2026 for FY 2022-23. Assessment completed August 2026. Which Act and which sections apply?
Working: ITA 1961 governs entirely. The income was FY 2022-23 income earned under ITA 1961. The fact that the assessment was completed in August 2026 (after ITA 2025 came into force) is irrelevant. The assessment authority uses ITA 1961 section references, ITA 1961 penalty provisions, and ITA 1961 appeal provisions. The assessment order will cite old Act sections. Appeals will also be under old Act provisions (CIT(A), ITAT under ITA 1961).
⚠ Common Mistake: Assuming the assessment must switch to ITA 2025 because it is being completed in August 2026. The governing Act is determined by the year of income, not the year of assessment completion.
Action Guide
  1. 1Study the chapter structure of ITA 2025 — know which chapter covers which head of income
  2. 2Print the complete section mapping table (available in Episode 21) and keep it on your desk through transition
  3. 3Identify all your software, templates, and client communication that reference old Act section numbers and plan to update
  4. 4Remember: Tax Year replaces both Previous Year and Assessment Year — brief your entire team on this single terminology change
  5. 5Subscribe to CBDT circulars — the transition period (April 2026 to December 2026) will see multiple clarificatory circulars
✓ Do This
  • ✓Learn the new chapter structure — it makes navigating the Act much easier than the old Act
  • ✓Remember Section 548 — old references in contracts are automatically valid, no amendments needed
  • ✓Treat ITA 2025 as a reorganised and clarified version of ITA 1961 — not a new set of laws to learn from scratch
✗ Avoid This
  • ✗Do not assume rates or thresholds changed — they are identical to ITA 1961 as amended up to Finance Act 2025
  • ✗Do not panic about pending cases — they continue under the Act applicable to the year of income
  • ✗Do not discard your ITA 1961 knowledge — it is the foundation and all principles carry forward