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April 1, 2026: A New Era in Indian Tax Law

For the first time in 64 years, India has a new income tax statute. The Income Tax Act, 2025, which received Presidential assent on March 29, 2025, officially replaces the Income Tax Act, 1961, effective today. This is not a set of amendments layered on top of old law. It is a ground-up rewrite that changes how every taxpayer, employer, and professional interacts with the tax system.

If you run a startup, manage payroll, or advise clients on tax compliance, here is what you need to act on immediately.

What Changed: The 5 Reforms That Matter Most

1. One Tax Year, No More AY/FY Confusion

Section 2(94) of the new Act introduces the “Tax Year” concept, merging Financial Year and Assessment Year into a single period. Tax Year 2026-27 runs from April 1, 2026 to March 31, 2027. For founders and finance teams, this simplifies every compliance conversation. No more explaining which year you mean.

2. TDS Consolidated Under Two Sections

The old Act scattered TDS provisions across 30+ sections (194C, 194J, 194I, and dozens more). The new Act consolidates everything under Section 392 (salary TDS, replacing old Section 192) and Section 393 (all other payments, organized into three structured tables). For startups making contractor payments, vendor payments, and rent payments, this means one framework to learn instead of memorizing dozens of threshold-rate combinations.

3. Form 130 Replaces Form 16

Every employer issuing TDS certificates must now use Form 130 instead of Form 16. The deadline for issuance is June 15, 2026. If your payroll software still generates Form 16, it needs an update before that date. This affects every company with salaried employees.

4. HRA Benefits Expand to 8 Cities

The 50% HRA exemption, previously limited to Delhi, Mumbai, Chennai, and Kolkata, now includes Bengaluru, Pune, Hyderabad, and Ahmedabad. If your startup has employees in these four new cities, their take-home pay just improved. Update your salary structures accordingly.

5. ITR Deadlines Extended for Non-Audit Taxpayers

Founders filing ITR-3 or ITR-4 without a tax audit now have until August 31, 2026, instead of the earlier July 31 deadline. Audit cases retain the October 31 deadline. This extra month can be significant during fundraising season when finance teams are stretched thin.

What Founders Should Watch Carefully

Capital gains restructuring: Clauses 67 and 196-198 reorganize capital gains treatment. Share buybacks are now taxed as capital gains rather than deemed dividends (reversing the old Section 115QA treatment). If your company is planning a buyback, the tax impact for shareholders has changed fundamentally.

TDS correction window shrinks: The window for filing TDS correction statements has been permanently reduced from six years to two years. If you have pending corrections for any period from FY 2018-19 onward, the clock is ticking.

NRI property purchases simplified: Buyers purchasing property from NRIs can now use their own PAN for TDS deduction, eliminating the need to obtain a separate TAN. This removes a friction point in cross-border real estate transactions.

Your Immediate Action Items

1. Update payroll systems to generate Form 130 before June 15, 2026
2. Recalculate HRA for employees in Bengaluru, Pune, Hyderabad, and Ahmedabad
3. File pending TDS corrections before the 2-year window closes
4. Review planned buybacks under the new capital gains treatment
5. Remap section references in all internal compliance documents

Download the full carousel PDF for a visual summary of all 10 changes with section mappings and key deadlines.

Need Help With the Transition?

The Income Tax Act 2025 is the most significant tax reform in six decades. Getting the transition right, from payroll systems to compliance manuals to advisory frameworks, requires structured professional guidance. Talk to an expert at A S Banka Advisors Private Limited: Book a quick call.