India now has two tax systems running in parallel: a practical household checklist
The Income-tax Act, 2025 took effect on 1 April 2026, but older income still follows the repealed 1961 Act. Here is how to organise records and avoid mixing the two timelines.
The new Act is live, but the old Act still matters
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961 for tax years beginning from that date. The Income Tax Department says the change is intended to simplify language, consolidate provisions and reduce compliance friction rather than introduce a new tax merely through the rewrite.
The transition creates an important practical split. Income earned during FY 2025–26 is filed for Assessment Year 2026–27 under the 1961 Act, even though the filing occurs after the new Act began. Income from 1 April 2026 belongs to Tax Year 2026–27 under the 2025 Act.
Assessment Year gives way to Tax Year
For periods governed by the new Act, the term ‘Tax Year’ replaces the older combination of ‘Previous Year’ and ‘Assessment Year’. The Department’s FAQ explains that Tax Year 2026–27 covers the twelve months beginning 1 April 2026, while assessment and filing happen after that period ends.
This is a terminology change with real record-keeping consequences. Salary slips, interest certificates, capital-gains statements, rent documents and deduction evidence should be grouped by the period in which the income or event arose, not only by the date on which a portal form is submitted.
The default regime continues—but comparison still matters
The Department states that the new tax regime continues under section 202 of the 2025 Act and remains the default for eligible taxpayers, with an option to opt out subject to the applicable rules. ‘Default’ does not mean optimal for every household.
Compare both regimes using actual eligible deductions, exemptions, special-rate income and business-income restrictions. Do not decide from gross salary alone. Capital gains, house property, deductions, employer benefits and the ability to switch regimes can materially affect the result.
Your July record-keeping checklist
Keep separate folders for FY 2025–26/AY 2026–27 and Tax Year 2026–27. Reconcile Form 26AS, the applicable information statement, bank interest, salary income and broker capital-gains reports. Preserve proof of tax payments and acknowledgements. If advance tax applies for Tax Year 2026–27, use the new Act’s portal workflow and challans.
The Department also clarifies that proceedings and updated returns for earlier periods can continue under the old Act. A notice concerning an older year does not automatically move to the new Act merely because it arrives after 1 April 2026.
Use calculators as preparation, not filing software
Use the Fincal India Income Tax Calculator to form an initial estimate and test the effect of income or deductions. Then use the official e-filing portal and the forms applicable to the correct period. A general calculator cannot capture every residential-status rule, capital-gains provision, set-off, surcharge, cess or special-rate item.
The most valuable personal-finance response is administrative: separate the two periods, reconcile source documents early and avoid waiting until the filing deadline to discover a mismatch.