Income Tax Act 1961 vs 2025 — What Changed, What Didn't
First, understand this: tax rates and deduction limits did NOT change. What changed is the structure, the language and the numbering. The law has been rewritten for the 21st century.
The 6 Big Changes
1. One "Tax Year" — the end of PY & AY
Act 1961 (Old)
You earned income in a Previous Year (PY) and paid tax in the Assessment Year (AY) — the following year. Two years to track everywhere: "income of FY 2025-26, assessed in AY 2026-27..."
Act 2025 (New)
A single term — Tax Year (Section 3) — running 1 April to 31 March. Income is earned and reported for the same Tax Year 2026-27. Done. Read the full guide →
2. Sections: 819 → 536 (Numbering Reset)
Act 1961 (Old)
819 sections, 47 chapters. Sections carried alphabetical suffixes — 80C, 80DDD, 115BAC, 269ST... Sixty years of patch upon patch, cross-referenced like a puzzle.
Act 2025 (New)
536 sections, 23 chapters, 16 schedules. All sequential numbers, no letter suffixes. 80C is now Section 123; 115BAC is now Section 202. Full mapping →
3. Plain, Modern Language
Act 1961 (Old)
"Notwithstanding anything contained in... provided that..." — decades of layered provisos and explanations. Practically unreadable without professional help.
Act 2025 (New)
Long tangled sentences were broken up, 1,200+ provisos removed or merged, and tables and formulae added. TDS rates, for instance, now sit in a clean table.
4. TDS: 60+ Sections → Just 3
Act 1961 (Old)
Section 192 (salary), 194A (interest), 194C (contractors), 194J (professionals), 194H (commission), 194I (rent)... a separate section, rate and threshold for every payment type.
Act 2025 (New)
Sec 392 → salary TDS. Sec 393 → every other payment, organised in one table with payment codes (1001–1067). Sec 394 → TCS. See rates →
5. HRA Metro List: 4 → 8 Cities
Act 1961 (Old)
The 50% HRA exemption applied to only 4 cities: Delhi, Mumbai, Kolkata and Chennai. People living in Bengaluru — India's IT capital — were stuck at 40%.
Act 2025 (New)
The Income Tax Rules 2026 (Rule 279) added Bengaluru, Hyderabad, Pune and Ahmedabad to the 50% club (old regime only). Calculation →
6. A Digital-First Law
Act 1961 (Old)
Faceless assessment was bolted on later through schemes. Digital records were scattered. Crypto (VDA) taxation arrived as a 2022 patch.
Act 2025 (New)
Faceless proceedings and electronic records are written into the statute, and Virtual Digital Assets (crypto/NFTs) are defined in the law itself.
What Stayed Exactly the Same
- Tax slabs and rates — new and old regimes remain identical (rates come through the annual Finance Act, as before)
- Deduction limits — 80C (now Sec 123) stays at ₹1.5 lakh, 80D (Sec 124) unchanged, HRA formula unchanged
- New regime remains the default — you must opt out to use the old regime
- Five heads of income — Salary, House Property, Business/Profession, Capital Gains, Other Sources
- ITR due dates — 31 July for most individuals
- Capital gains rates — 12.5% LTCG / 20% STCG on equity, as before
• Until March 2026 he would say: "Send your Section 80C declaration."
• Now he says: "Send your Section 123 declaration."
The benefit is identical — the same ₹1.5 lakh limit, the same eligible investments (PPF, ELSS, LIC...). Only the address changed.
By TaxSetu Editorial Team · Last reviewed: 7 October 2026
Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in