Income Tax Law – The year 2026 is going to be very significant for taxpayers. A new financial year is about to begin in two months, and several important tax-related rules will change. The new Income Tax Act will be implemented from April 1, 2026. The concept of “Assessment Year” will be replaced by “Tax Year.”
The central government has replaced the old Income Tax Act of 1961 with the new Income Tax Act of 2025. After the implementation of the new tax law, taxpayers will experience less confusion while filing ITRs, as the year of income will be the same as the year of tax reporting. The new law will prove to be very effective in simplifying the tax system.
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What was the confusion in the old system?
Until now, under the Income Tax Act of 1961, the year in which income was earned was called the financial year. The tax assessment on that income was done in the following year, which was called the Assessment Year. For example, income earned in Financial Year 2024-25 was reported and assessed in AY 2025-26. This made it difficult for the common man to understand which year the income belonged to and which year the assessment was for.
What changes will the Tax Year bring?
With the implementation of the new law, some major changes will occur. The Tax Year will be considered as a single year for earning and reporting income. The income earned in a particular year will be filed and assessed in the same year. This will eliminate the need for two separate terms.
According to tax experts, the new Tax Act of 2025 is introducing the concept of ‘Tax Year’. It will replace ‘Previous Year’ and ‘Assessment Year’ from April 1, 2026. Understanding the Assessment Year was quite difficult for the common man, as it was linked to the Financial Year (e.g., Financial Year 2024-26). Now, understanding will become easier with the Tax Year.
What changes will occur in ITR filing?
The new system of Income Tax law will be quite different. The ITR (Income Tax Return) can be filed in the same tax year in which the income was earned. This means there will be no changes to the tax rates or slabs. Only the terminology and processes will be simplified.
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According to some experts, the new act will replace the assessment year with the tax year. The tax year will also align with the financial year associated with the income. This will eliminate the previous discrepancy.
