Goodbye “Assessment Year”: What the New Tax Year Means for You from 1 April 2026

For decades, every Indian taxpayer has juggled two years at once — the year you earn (previous year) and the year you are assessed (assessment year). Ask a software engineer in Gachibowli which year their ITR is for, and you usually get a pause. From 1 April 2026, that confusion is officially retired.

The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. It works on a single concept — the tax year — the twelve months starting 1 April in which you earn the income. Income earned from 1 April 2026 to 31 March 2027 is Tax Year 2026-27. The Government’s stated aim is simpler language and structure, without altering the underlying tax policy.

What exactly is a “tax year”?

Under section 3 of the new Act, the tax year is the twelve-month period of the financial year beginning on 1 April. There is one exception: if a business or profession is newly set up, or a new source of income comes into existence, during the year, the first tax year runs from that date to 31 March.

So a startup incorporated in Kokapet on 10 September 2026 has its first tax year from 10 September 2026 to 31 March 2027.

Old terms vs new terms

Which law applies to your return right now?

This is where most people get confused, so here is the simple split:

• Income earned up to 31 March 2026 (FY 2025-26): still under the 1961 Act. The return is for AY 2026-27, filed in 2026 on the old forms.
• Income earned from 1 April 2026: under the 2025 Act. The return is for Tax Year 2026-27, filed in 2027 on the new forms.
• Pending assessments, appeals and proceedings for earlier years: continue under the 1961 Act through the repeal-and-savings provision in section 536. Existing circulars and notifications continue to the extent they are not inconsistent with the new Act.

Return due dates for Tax Year 2026-27

Return filing moves to section 263 of the new Act. Including the changes made by the Finance Act, 2026:

A belated return can be filed within nine months from the end of the tax year (31 December 2027). A revised return can be filed within twelve months (31 March 2028), with a fee if revised after nine months. Both are subject to the assessment not being completed earlier. (Confirm before relying on these dates — they can be extended or amended.)

What should you do now?

1. Stop quoting old section numbers for new transactions. Familiar references such as 80C, 139 or 194J have new numbers under the 2025 Act. Check the official mapping before you cite a section in an invoice, a declaration or a reply.
2. Employers and businesses: update payroll and accounting. TDS on payments made from 1 April 2026 is governed by the new Act and Rules, so your software, challans and TDS returns must use the new references and forms.
3. Salaried professionals: your regime choice still matters. Compare the old and new regimes for Tax Year 2026-27 as before — only the section references on the forms change. (Confirm the current slab rates.)
4. Keep FY 2025-26 papers separate. That return, any revision and any notice for it stay under the 1961 Act.
5. Update your contracts. Tax clauses that refer only to the “Income-tax Act, 1961” should be revised to cover the 2025 Act or any re-enactment, especially in agreements with vendors, landlords and investors.

CA in Kondapur & Gachibowli: why a CA, CS and advocate team helps during the switch

A change of law of this size touches more than your return. Your TDS and books are CA work, board resolutions and company documents are CS work, and the tax clauses in your contracts are an advocate’s. ComplianceKart is a boutique practice with all three under one roof — like a multi-speciality hospital — based in Kondapur, near Hitech City. We help businesses and professionals across Gachibowli, Kokapet and the Financial District move to the new law without missing a step.

FAQ

Does the new Act change my income-tax rates? The Act was rewritten to simplify language and structure, not to change underlying tax policy. Rates are set each year through the Finance Act, so always check the current year’s slabs.

I am filing my return for FY 2025-26 now. Which law applies? The Income-tax Act, 1961. You file for AY 2026-27 using the old forms.

I started my business in Hyderabad in 2026. What is my first tax year? From the date you set up the business to 31 March 2027, under section 3 of the new Act.

Is the “financial year” gone? No. The financial year (April–March) continues; the tax year simply aligns with it. Only “previous year” and “assessment year” are replaced.

What happens to notices for older years? Proceedings pending on 1 April 2026 continue under the 1961 Act through section 536. Check the section cited on each notice before you reply.

Sources: PIB — Income-tax Act, 2025 comes into force (1 April 2026); Income Tax e-filing portal — Objective and scope of the new Act; Income Tax Department — section 263; Finance Act, 2026 — key amendments, TaxGuru (as of October 2026).

Moving to the new Income-tax Act and not sure what changes for your salary, business or contracts? ComplianceKart’s team of CAs, CSs and advocates in Kondapur/Hitech City can review your TDS, payroll and agreements for the switch. Call or WhatsApp 9959536391, or email team@compliancekart.com.