Income-tax Act 2025: What Founders Must Change

The Income-tax Act, 2025 has replaced the Income-tax Act, 1961. It applies from 1 April 2026, together with the new Income-tax Rules, 2026. For a founder or a finance team, the change is less about new tax and more about new names, new numbers and new forms, plus a few real changes to dates and procedures.

This guide covers the changes that matter to businesses, startups and payroll teams. It is based on published analyses of the Act and the Rules, listed under Sources. Please check the official text for your own case.

Quick summary

The Income-tax Act, 2025 (Act No. 30 of 2025) came into force on 1 April 2026. According to published analyses, it has 536 sections, against 819 in the 1961 Act.
The Income-tax Rules fell from 511 rules to 333, and the number of forms from 399 to 190.
A single "Tax Year" replaces "Assessment Year" and "Previous Year". Tax Year 2026-27 runs from 1 April 2026 to 31 March 2027.
The new Act is a rewrite of the law's structure. By itself it does not change tax rates.
Non-audit business and professional taxpayers, and partners of firms, now file their ITR by 31 August instead of 31 July.
The window for filing a revised return grows from 9 months to 12 months, with a fee for late revisions.
Many forms have new numbers, for example Form 16 is now Form 130.

What changed in structure

The 1961 Act had grown over decades through hundreds of amendments. The 2025 Act reorganises it into fewer sections with simpler wording, and removes provisions that were no longer needed. The Income-tax Rules, 2026 do the same for procedures and forms.

The most visible change is the numbering. Existing deductions and exemptions continue, but they sit under new section numbers. The Income Tax Department has published a utility that maps old section numbers to new ones, and you should use it before updating contracts, accounting software or tax policies that quote the old numbers.

What did not change

Tax rates and slabs. Published analyses say the slabs are unchanged for FY 2026-27. Under the new regime, income up to ₹4 lakh is nil-rated, and a section 87A rebate makes income up to ₹12 lakh effectively tax-free for resident individuals.
The old law for old income. Income for FY 2025-26 (assessment year 2026-27) is still computed and assessed under the 1961 Act. The returns for it were due on 31 July 2026 for non-audit cases. The new Act applies to income earned in Tax Year 2026-27, with filings due in 2027.
Proceedings already started under the 1961 Act continue under the old provisions.

So for a while, your finance team will work under both laws at once.

ITR due dates

ITR-1 and ITR-2 (salaried individuals and others without business income): 31 July, unchanged.
ITR-3 and ITR-4 for non-audit business or professional taxpayers, and partners of firms: 31 August. This used to be 31 July.
Audit cases: 31 October, unchanged, according to ClearTax's summary. One other article did not state a date for audit cases, so confirm yours.

If you are a founder who files as a proprietor or partner and does not need a tax audit, the extra month is useful, but plan for it so that it does not become a last-minute rush.

Revised, belated and updated returns

Revised returns: the window to revise a return grows from 9 months to 12 months after the end of the tax year. A fee applies to returns revised after the old 9-month point. According to Business Today, it is ₹1,000 where income is below ₹5 lakh and ₹5,000 otherwise. The article is unclear about the exact ₹5 lakh boundary, so check the Rules before relying on it.
Updated returns (ITR-U): published analyses say an updated return can now be filed even after a reassessment notice, within the prescribed timeline. Filing it with tax, interest and an additional levy gives protection from penalties for under-reporting or misreporting.
Loss returns: a return showing a loss can now be revised if the updated return reduces the declared loss. Earlier, a revision was allowed only if it turned the loss into taxable income.

New form numbers

Many forms were renumbered or merged. According to published summaries:

Form 16 (salary TDS certificate) is now Form 130.
Form 16A (non-salary TDS certificate) is now Form 131.
Form 12BB (employee investment declaration) is now Form 124.
Form 26AS (tax credit statement) is now Form 168.
Forms 15G and 15H are now Form 121.
Forms 3CA, 3CB and 3CD (tax audit) are consolidated into Form 26.

These apply from FY 2026-27. If you run payroll or issue TDS certificates, update your templates, your payroll software and any employee-facing instructions.

Other changes that can touch a startup's finances

Share buybacks. Before 1 April 2026, buyback proceeds were treated as deemed dividends taxed at slab rates. From that date, they are taxed as capital gains, according to ClearTax. If you plan a buyback, ask your advisor to model the effect.
Interest deduction. Published summaries say interest expenditure can no longer be deducted against dividend and mutual fund income from April 2026.
PAN. PAN is now needed for a wider set of high-value transactions, and it is no longer needed for some others such as foreign travel payments. Business Today does not give the threshold amounts, so check the Rules.
HRA. The 50% HRA exemption now covers 8 metro cities, with Bengaluru, Pune, Hyderabad and Ahmedabad added, and taxpayers must disclose their relationship with the landlord.

One caution: some published tables of perquisite limits (for example, children's education allowances and meal limits) were based on the draft Income-tax Rules. Check the final notified Rules before you change any payroll or reimbursement policy.

A checklist for founders and finance teams

Update payroll templates. Switch to Form 130 and the other new form numbers for FY 2026-27.
Map old section numbers to new ones in your accounting software, vendor TDS master, contracts and internal policies.
Calendar the dates. Note 31 July, 31 August and 31 October, and which one applies to each person or entity you file for.
Keep working under both laws. FY 2025-26 returns, notices and assessments stay under the 1961 Act.
Review any buyback plan with your advisor.
Check final Rules, not drafts, before changing allowances, reimbursements or PAN-related checks.

Frequently asked questions

Does the new Act change how much tax I pay?

Not by itself. It is a structural rewrite. Changes in tax come from specific provisions, such as the buyback rule, not from the new Act as a whole.

Which law applies to FY 2025-26?

The Income-tax Act, 1961 still applies to income earned in FY 2025-26, including its return, assessment and notices.

Has section 80C disappeared?

The deduction continues, but under a new section number. Use the old-to-new mapping utility to find it.

Where do I check the official text?

On the Income Tax Department's website, which hosts the Act, the Rules and the new forms.

This article is general information and not tax advice. Dates, fees and forms are changing quickly, so confirm the position for your own case with a tax professional.

Not sure how the new Act affects your payroll, TDS or ITR filing? Talk to the StartupKaro team about your set-up.

Sources

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Income-tax Act 2025 Explained: What Founders and Finance Teams Must Change from April 2026