Income Tax Act 2025 vs 1961: What Actually Changes for Raipur Businesses

A trader in Raipur's Malviya Road market asked us recently whether the "new income tax law" meant he'd be paying tax at different rates from April 2026. He'd heard about it from a supplier, half-remembered as some kind of overhaul. He isn't paying different rates. His GST-registered proprietorship will file returns under a renumbered, restructured Act, but the tax he owes on the same income is, for the overwhelming majority of taxpayers, unchanged.

That's the first thing to get straight about the Income Tax Act, 2025. It replaces the Income Tax Act, 1961 in its entirety from Tax Year 2026-27 — meaning income earned from 1 April 2026 onward — but it is a simplification exercise, not a rewrite of tax policy. The government's own stated objective was to make the law shorter, easier to read, and internally consistent, not to change how much tax anyone pays.

Why the government bothered

The 1961 Act had been amended by nearly every Finance Act for six decades. Sections got sub-clauses, then sub-sub-clauses, then provisos to the sub-sub-clauses. A section like 10, which lists exempt incomes, sprawled across dozens of sub-sections by the time anyone tried to read it start to finish. Cross-references pointed to other cross-references. It worked, more or less, but only for people who had spent years inside it.

The new Act consolidates that sprawl. Explanations and provisos that used to sit as dense footnotes to a section are now folded into the main text in plain language. Tables and formulas replace paragraphs of narrative conditions in many places. Redundant and long-obsolete provisions — the kind that existed only because nobody had gotten around to repealing them — are gone. The result is 536 sections organised into 23 chapters and 16 schedules, against 819 sections and 14 schedules in the old Act. The Income Tax Rules have shrunk too, from 511 rules and 399 forms down to 333 rules and 190 forms.

None of that changes what a manufacturing unit in Urla or a civil contractor working Chhattisgarh PWD tenders owes in tax. It changes where in the statute you find the rule that tells you.

What stays exactly the same

Tax rates under both the old and new regimes are unchanged. The slab structure, the surcharge thresholds, the cess — all carried forward. Most deductions a small business or salaried professional actually claims are intact in substance: home loan interest, depreciation schedules, business expense deductibility, the presumptive taxation schemes under what used to be Sections 44AD, 44ADA and 44AE. The basic filing rhythm — advance tax instalments, TDS deposit deadlines, the annual return cycle — is unchanged in mechanics, even where the section number that authorises it has moved.

If you've been maintaining books, deducting TDS on contractor payments, and filing ITR-4 as a presumptive-tax proprietor for years, your actual obligations from April 2026 look almost identical to what you've been doing. What changes is the citation on your Form 26AS, your TDS certificates, and any correspondence you get from the department.

What's genuinely new, not just renumbered

Three things are structural, not cosmetic.

The Tax Year replaces the Financial Year / Assessment Year split. Under the 1961 Act, income earned in FY 2025-26 was assessed in AY 2026-27 — two different labels for what was, in effect, one continuous cycle, and a permanent source of confusion for anyone new to Indian tax filing. Section 11 of the new Act collapses this into a single "Tax Year" concept: the year in which income is earned is the same year it's reported and assessed. We've written a separate, more detailed piece on this because it trips up even experienced filers during the transition.

TDS gets consolidated. Instead of TDS obligations scattered across roughly two dozen sections (192 for salary, 194A for interest, 194C for contractors, 194J for professional fees, 194Q for purchase of goods, and so on), the new Act houses almost the entire non-salary TDS framework under one section — Section 393 — with salary TDS under Section 392. For a business running payroll and vendor payments through accounting software, this is the change most likely to actually require a system update, because the software's TDS-rate lookup logic was almost certainly built around the old section numbers.

Some provisions moved out of the main section text into Schedules. The list of eligible 80C investments, for instance, now lives in Schedule XV rather than being spelled out inside the deduction section itself (now Section 123). Exemptions that used to sit under the many sub-clauses of old Section 10 are now largely organised as schedules too. This is mostly a drafting choice — it makes the main section shorter and the schedule easier to update — but it means the reflex of "go find Section 10" or "go find 80C" in the bare Act text won't work the way it used to.

A concrete example

Take a Raipur-based partnership firm doing steel fabrication with turnover of roughly ₹3.2 crore, paying a handful of contractors and one consulting engineer. Today, under the old Act, the firm deducts TDS under Section 194C on contractor payments above ₹30,000 per contract (or ₹1 lakh aggregate in a year) and under Section 194J on the engineer's professional fee above ₹30,000. From Tax Year 2026-27, both obligations continue at the same thresholds and rates — the deduction doesn't disappear — but both now trace back to Section 393 rather than to two separate old sections. The firm's TDS return software needs to map its vendor categories to the new section citation; the underlying commercial obligation to deduct and deposit tax on time is untouched.

Where the confusion actually comes from

Most of the anxiety we're hearing from clients isn't really about the new Act at all — it's about the overlap period. For the return you'll file in mid-2026, covering income earned in FY 2025-26, you're still working entirely under the old Act, old section numbers, old forms. The new Act only starts governing income earned from 1 April 2026. So for close to a year after the new Act is technically "in force," most practising professionals will be doing two things at once: closing out the last cycle under the old law and preparing systems for the first cycle under the new one. That dual-running period is where mismatched section citations, software lag, and general confusion are most likely to show up — not in the substance of anyone's tax liability.

It also explains why some of the commentary you'll come across this year contradicts itself. A source written in early 2026 discussing "this year's" tax audit threshold is almost certainly still talking about the old Section 44AB, because the return being filed at that point covers income from before the transition. A source discussing Tax Year 2026-27 itself is talking about income that, as of today, hasn't even fully accrued yet. Both can be accurate and still look inconsistent if you don't check which income period each is addressing.

What to actually do before April 2026

Don't panic-rewrite your compliance calendar. Do three things over the next several months: check with your accounting or payroll software vendor on whether their TDS-section mapping has been updated for Tax Year 2026-27; get comfortable with "Tax Year" as the term that will appear on new forms, challans and notices in place of "Assessment Year"; and treat any granular new-section citation you see in a vendor's marketing material or a WhatsApp forward with some scepticism until you've checked it against the Act text or a reliable professional source — a lot of the specific sub-section mapping is still being worked out in public commentary as this transition unfolds.

Related Advisory Services & Practice Guides

• Income Tax Advisory & Compliance
• ITR Filing in Raipur