Compliance
Compliance Checklist: Transitioning to the Income Tax Act, 2025 & What Every Indian Taxpayer Must Know
With the Income-tax Act, 2025 now in force from 1 April 2026, Indian taxpayers face a transition from the old regime – here’s what compliance actions you need to take now to stay aligned.
By NomadicTax Research Team • 5-8 min read • August 10, 2026
## What Changed in the Legal Framework
- The **Income-tax Act, 1961** was formally repealed effective **01 April 2026**; the **Income-tax Act, 2025** is the governing law for all **Tax Years 2026-27 and beyond**. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act-faq?utm_source=openai))
- Transitional provisions ensure that for **all tax years beginning before 1 April 2026**, assessments, appeals, notices etc. continue under the old system. That means any income earned during FY 2025-26 (Assessment Year 2026-27) is handled under the old Act. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act?mobile-app=1&utm_source=openai))
## Key Compliance Deadlines & Return Types
- Filing for AY 2026-27 (income in FY 2025-26) must still use **ITR forms** prescribed under the old Act (ITR-1, ITR-2 etc.), with due dates **31 July 2026** for most returns, or 31 August 2026 where audit obligations apply. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/node/11724?utm_source=openai))
- For Tax Year 2026-27 income, advance tax obligations, TDS obligations, and return filing under the new Act begin from 1 April 2026 onwards—but the actual return filing will take place well after the close of that tax year. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act?mobile-app=1&utm_source=openai))
## New Features to Monitor
- Concept of **‘Tax Year’** replaces “Previous Year”/“Assessment Year” terminologies — simplifying or aligning references throughout. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act-faq?utm_source=openai))
- Consolidation of **presumptive taxation schemes** like Sections 44AD, 44ADA, 44AE into a single section in the new Act (Section 58). ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act-faq?utm_source=openai))
- Unified section for returns: original, belated, revised, updated returns all fall under Section 263 in the 2025 Act. Timespans for revised / updated returns are different. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/node/11724?utm_source=openai))
## What to Do Right Now: Actionable Steps
- **Audit your income types** for FY 2025-26: ensure all foreign income, dividends, capital gains etc. are properly reported under old Act forms. Misreporting due to unfamiliarity with rules may draw notices.
- **Watch Forms and Rules**: Rules (e.g. Income-tax Rules, 2026) have been amended (e.g. via Notification No. 97/2026) for search and requisition cases, new appendices etc.—read the specific Rules affecting your case. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/latest-news?link=2&link=6&page=%2C0&year=2026&utm_source=openai))
- **Keep documentation**: For those seeking benefits in IFSC (per other article), but also general taxpayers, maintain proof of foreign asset disclosure, receipts, TDS certificates etc.
- **Plan audits** appropriately early, especially for businesses. Form ITR-5, ITR-7 etc. have new / updated utilities and formats announced recently. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/latest-news?page=%2C0&year=2026&utm_source=openai))
## Enforcement and Penalties
- Failure to comply with new rules on TDS, failure to submit Form 1(N) where required, or misapplication of exemptions may lead to **disallowance of deductions**, demand notices, or penalties. The retrospective nature of some changes means even earlier payments could be under scrutiny.
- Belated and updated return time-limits have changed under new Act: updated return may be filed within 48 months from end of following financial year. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/node/11724?utm_source=openai))
## Practical Example
**Case of Mr. X with mix of foreign income + service payments**
- FY 2025-26 (ends 31 March 2026): use old Act for return in July 2026; include foreign dividends, interest etc. under Schedule FA / equivalent under old forms.
- From 1 April 2026: any income in TY 2026-27 reported under new Act; make sure foreign asset disclosures continue; for IFSC-related income use new rules if eligible.
**Bottom line**: The transition to the 2025 Act simplifies structure and introduces new kinds of exemptions (especially IFSC-related), but neglecting the rules or missing deadlines can be costly. Start early, review your eligibility, document everything.