Preparing for the Income-tax Act, 2025: What Businesses Should Review

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, applying to tax year 2026-27 onwards. It was designed largely to simplify and restructure the law rather than to overhaul tax rates, but it changes section numbers, terminology and forms. This guide sets out what businesses should review.

What Changed in Structure

• The concepts of 'previous year' and 'assessment year' are replaced by a single 'tax year'.
• Provisions have been reorganised and renumbered, and many consolidated — TDS provisions, for example, are brought together.
• Language has been simplified and obsolete provisions removed.

For most businesses, the broad structure of taxation — rates, heads of income, TDS on familiar payments — was carried forward, but every reference to a section number needs updating.

What Still Uses the Old Act

Returns, assessments and appeals for years up to FY 2025-26 continue under the 1961 Act. So for some time, businesses will deal with both laws: the old Act for past years, the new one for current transactions.

What to Review

1. Accounting and ERP systems: TDS section codes, tax masters and reports.
2. Payroll software: TDS on salaries under the new provisions and forms.
3. Contracts: clauses that refer to specific sections of the 1961 Act, like gross-up or TDS clauses.
4. Vendor and customer documents: declarations and forms referring to old sections.
5. Internal policies and compliance calendars: due dates and forms.
6. Lower deduction certificates and declarations for the new year.

What Not to Assume

Don't assume every rate, threshold and condition carried over unchanged. Check each type of payment and deduction under the new law, and watch for rules issued under it.

Getting Help

Think Filing reviews businesses' systems, contracts and compliance processes for the transition to the Income-tax Act, 2025.