Income-tax Act 2025: What Changes for Salaried People
The Income-tax Act, 2025 took effect on 1 April 2026. Tax year replaces FY and AY, 80C is now section 123, salary TDS is section 392 and Form 16 becomes Form 130.
Updated 27 September 2026 · 5 minute read
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026. If you are salaried, your tax bill for 2026-27 is worked out exactly as it would have been under the old law: the slab rates, the ₹75,000 standard deduction and the rebate that makes ₹12 lakh of taxable income tax-free all carried over. What changed is the vocabulary and the numbering. Your payslip, your Form 16 and every guide you read will now cite sections you have never seen.
This page is the translation table, plus the few things you actually need to do.
"Tax year" replaces FY and AY
The old law had two years for every income: the previous year in which you earned it (the financial year) and the assessment year in which it was assessed. That is why a salary earned from April 2025 to March 2026 belonged to "FY 2025-26, AY 2026-27".
The new Act has one: the tax year, which runs from 1 April to 31 March. Salary you earn from April 2026 to March 2027 belongs to tax year 2026-27, and you file the return for it in 2027. There is a longer explanation, with the transition year spelled out, in tax year 2026-27 meaning.
The section numbers you will see now
These are the provisions a salaried person runs into most, with the old number alongside. The new numbers come from the text of the Act as amended by the Finance Act, 2026, published on the Income Tax Department's website.
| What it covers | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Income from salary | Sections 15 to 17 | Sections 15 to 18 |
| Standard deduction and professional tax | Section 16 | Section 19 |
| Investments: PPF, EPF, ELSS, life cover, tuition fees | Section 80C | Section 123 |
| NPS, including the employer's contribution | Section 80CCD | Section 124 |
| Health insurance | Section 80D | Section 126 |
| Education loan interest | Section 80E | Section 129 |
| Donations | Section 80G | Section 133 |
| Rebate for taxable income up to ₹12 lakh | Section 87A | Section 156 |
| Relief on salary arrears | Section 89 | Section 157 |
| The new tax regime | Section 115BAC | Section 202 |
| Filing your return | Section 139 | Section 263 |
| TDS on salary | Section 192 | Section 392 |
| Other TDS, such as on FD interest or EPF withdrawals | Sections 192A to 196D | Section 393 |
| Advance tax | Sections 207 to 219 | Sections 403 to 408 |
| Interest for late filing and short payment | Sections 234A, 234B, 234C | Sections 423, 424, 425 |
| Late filing fee | Section 234F | Section 428 |
Gratuity and leave encashment exemptions, which used to sit in section 10, now appear in the table under section 19 along with the standard deduction. Most other exemptions, including HRA, moved into the Schedules at the end of the Act.
The forms change too
- Form 16 becomes Form 130. It is the same certificate of salary and TDS that your employer hands over after the year ends. You will get the first Form 130 for tax year 2026-27, in 2027.
- Form 12BB becomes Form 124. This is the declaration of rent, investments and home loan interest you give your employer so that monthly TDS reflects them. It asks for your relationship with the landlord, and still needs the landlord's PAN once rent passes ₹1 lakh a year. See the Form 124 guide.
- Form 26AS becomes Form 168, the annual statement of your TDS, tax payments and reported transactions. See Form 168 explained.
- Form 10E becomes Form 39, for relief on salary arrears under section 157, the old 89(1). See salary arrears relief.
What did not change
For a salaried person the new Act was written to be neutral, and for tax year 2026-27 it is:
- Slab rates are the same in both regimes. The 2026-27 slab guide has the tables.
- The standard deduction is still ₹75,000 in the new regime and ₹50,000 in the old.
- The rebate still cancels up to ₹60,000 of tax, so a salary of up to ₹12.75 lakh pays nothing in the new regime.
- The new regime is still the default. You can still choose the old regime each year if you have only salary income.
- The familiar limits, such as ₹1.5 lakh for section 123 investments, carried over.
One real change sits in the Income-tax Rules, 2026 that came with the Act: the 50% HRA limit now covers eight cities, adding Bengaluru, Hyderabad, Pune and Ahmedabad to Delhi, Mumbai, Kolkata and Chennai. The HRA calculator uses the new list.
Which law applies to which return
The old Act still governs income earned up to 31 March 2026. That means:
| Income earned | Law | Return filed | Name you will see |
|---|---|---|---|
| April 2025 to March 2026 | Income-tax Act, 1961 | In 2026 | FY 2025-26, AY 2026-27 |
| April 2026 to March 2027 | Income-tax Act, 2025 | In 2027 | Tax year 2026-27 |
So a notice or a revised return about FY 2025-26 will still quote the old section numbers. Anything about salary earned from April 2026 will quote the new ones.
What you actually need to do
Very little. Check that your employer has your regime choice for 2026-27, submit Form 124 if you are in the old regime and claim rent or investments, and keep your records as before. When your employer's payroll or the income tax portal shows an unfamiliar section number, the table above tells you what it used to be.
To see what the unchanged slabs mean for your own salary, run the income tax calculator.
Frequently asked questions
When did the Income-tax Act 2025 come into force?
On 1 April 2026. It applies to income earned from that date, which is tax year 2026-27 onwards. Income earned up to 31 March 2026 is still assessed under the 1961 Act.
Has section 80C been removed?
No. The same deduction, with the same ₹1.5 lakh limit, is now section 123 of the Income-tax Act, 2025. As before, it is available only in the old regime.
What is section 392?
It is the new home of TDS on salary, which used to be section 192. Your employer still estimates your tax for the year and deducts it month by month; only the section number changed.
What is Form 130?
The new name for Form 16, the certificate your employer gives you showing your salary and the tax deducted. The first Form 130 covers tax year 2026-27 and is issued in 2027.
Do I have to do anything differently because of the new Act?
Not for your tax bill. The practical changes are the new names: Form 124 instead of Form 12BB for declarations to your employer, and Form 130 instead of Form 16 at the end of the year.