Tax Planning
Navigating India’s New Income Tax Act, 2025: Key Changes and Action Steps
From April 1, 2026, India replaced the Income-Tax Act, 1961 with the Income-Tax Act, 2025—bringing in simplified terminology, revamped structure and continuity for past tax matters. Here's what individuals and businesses need to know.
By NomadicTax Research Team • 5-8 min read • August 11, 2026
## Overview
India has enacted the Income-Tax Act, 2025 which came into force from **1 April 2026**. It replaces the Income-Tax Act, 1961. This update is not just linguistic; it's structural and operational with important implications. ([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))
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## What’s Changed (and What Remains)
| Aspect | Under Old Act (1961) | Under New Act (2025) |
|---|---|---|
| Terminology | "Previous Year" and "Assessment Year" | Defined uniform term "Tax Year"; Assessment Year concept discontinued. ([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)) |
| Structure & Forms | Many amendments piled into provisos, explanations | Cleaner, reorganized chapters; Forms streamlined. ([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)) |
| Applicability | Old Act governs incomes till 31March2026 | New Act applies from 1April2026, but old Act continues for tax years before that date. ([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)) |
| Tax Payment Rules | Advance tax, self-assessment etc under 1961 framework | Advance tax for Tax Year 2026-27 payable under new Act; interest rates remain unchanged. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/tax-payments-faq?mobile-app=1&utm_source=openai)) |
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## Two Recent Notifications You Should Know
1. **Non-Deduction of TDS on Aircraft Lease Rent to IFSC Lessors**
* The Government issued *Notification No. 74/2026*—no TDS to be deducted on payments made for aircraft lease rent or supplemental lease rent to IFSC Units under section 147 of the new Act; subject to certain declarations by lessor covering 20 consecutive tax years. Effective 1 April 2026. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/sites/default/files/2026-07/ENnotification-no-74-2026.pdf?utm_source=openai))
2. **Non-Deduction of TDS on Ship Lease Rent to IFSC Units**
* Another notification (No. 75/2026) grants similar non-deduction treatment for ship lease rent paid to IFSC Units under section 147. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/latest-news/11875?utm_source=openai))
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## Practical Action Items and Tips
- **Check your tax filings**: If your income relates to ship or aircraft lease rent and the lessor is an IFSC Unit, ensure you have the required **statement-cum-declaration** (Form 1(N)) for tax years. Without it, the lessee must deduct TDS. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/sites/default/files/2026-07/ENnotification-no-74-2026.pdf?utm_source=openai))
- **Advance tax payments**: For FY 2026-27, payments should follow new Act rules. Installment schedules for presumptive tax remain same. ([incometax.gov.in](https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/tax-payments-faq?mobile-app=1&utm_source=openai))
- **Using e-filing portal**: Two parallel systems will run during transition (old forms for AY 2026-27 for incomes earned until 31 March; new for Tax Year from 1 April onwards). Key to select right form. ([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))
- **Assess your IFSC exposure**: Entities making or receiving payments under IFSC, especially in leasing, financial services etc., may benefit under new non-TDS exemptions. Ensure eligibility.
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## Example Scenarios
- *Scenario A*: A lessor in IFSC leases an aircraft starting April 2026. They file Form 1(N) covering 20 upcoming tax years. The lessee receives the form and doesn’t deduct TDS on payments.
- *Scenario B*: A company pays ship lease rent to IFSC lessor without receiving the Form 1(N). It must deduct TDS on payments.
- *Scenario C*: An individual making advance tax payments in June 2026 must apply new Act rules, even though return for AY 2026-27 (for FY 2025-26) uses old structure.
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India’s tax reform via the 2025 Act and recent IFSC TDS-relaxation notifications are a big deal. They simplify processes, create clarity, and offer opportunities—but only if you're aware. Review recent notifications, check your eligibility, and align your compliance accordingly.