Income tax in India

Income tax in India is the direct tax the Union government levies on the income of individuals, Hindu Undivided Families, firms, companies and other persons under the Income-tax Act 2025 (Act 30 of 2025), in force from 1 April 2026 and administered by the Central Board of Direct Taxes in the Ministry of Finance. Income of earlier years remains under the Income-tax Act 1961 .

For tax year 2026-27, the year running from 1 April 2026 to 31 March 2027, a resident individual in the default regime under section 202(1) of the 2025 Act pays nothing on total income up to Rs 4 lakh and 30 per cent above Rs 24 lakh, and the rebate in section 156(2) removes the slab tax entirely on total income up to Rs 12 lakh. A salaried resident with no other income therefore pays no income tax on a salary of Rs 12,75,000, after the Rs 75,000 standard deduction. Gains on shares and equity mutual funds are taxed at the special rates of sections 196 and 198, and section 156(3) limits the rebate to tax at the section 202(1) slab rates; the article on capital gains tax in India covers them.

The Receipt Budget 2026-27 estimates taxes on income at Rs 14,66,000 crore and corporation tax at Rs 12,31,000 crore, together about 61 per cent of the estimated gross tax revenue of Rs 44,04,086 crore for FY 2026-27. Every investor meets it at three points: tax deducted at source on dividends, interest and redemptions, the tax on the gain when an investment is sold, and the deductions in Chapter VIII that the old regime still allows for instruments such as ELSS funds .

The 2025 Act rewrote the 1961 Act rather than changing its rates. It cut the law from 819 sections to 536, replaced the paired previous year and assessment year with a single tax year, and gathered the scattered TDS provisions into three tables. Most rates, thresholds and reliefs carried across unchanged, so a reader who knew section 80C, section 87A or section 115BAC needs mainly a new set of section numbers: 80C is now section 123, 87A is section 156 and 115BAC is section 202.

Statutory framework and the 2026 transition

The Income-tax Act 2025 came into force on 1 April 2026 under section 1(3) and repealed the Income-tax Act 1961 under section 536(1). It received the President’s assent on 21 August 2025 and was published in the Gazette of India Extraordinary, Part II Section 1, the same day. The Press Information Bureau release of 1 April 2026 (Release ID 2248005) records that Parliament passed the Bill on 12 August 2025.

Section 536 and income of earlier years

Section 536(2)(c) keeps the 1961 Act applicable to pending and later proceedings, including assessment, reassessment, penalty and appeal, “in respect of any tax year beginning before the 1st April, 2026”. The effect for the 2026 filing season is direct:

Section 536(2)(j) keeps rules, notifications, circulars and schemes made under the 1961 Act in force so far as they are consistent with the 2025 Act, section 536(2)(m) carries forward house property, business, speculation, specified-business and race-horse losses computed under sections 71B to 74A of the 1961 Act, and section 536(2)(n) carries forward capital losses under section 74 “upto eight financial years immediately succeeding the financial year in which such loss was first computed”. The CBDT used both Acts together in Circular No. 07/2026 of 28 September 2026, issued under section 119 of the 1961 Act read with section 536 of the 2025 Act, to extend the assessment year 2026-27 deadline for audit cases.

The tax year

Section 3(1) of the 2025 Act defines one period, the tax year, as the financial year beginning on 1 April. Under the 1961 Act income was earned in a previous year and assessed in the following assessment year, so FY 2025-26 income belonged to assessment year 2026-27. The new label removes the one-year offset: tax year 2026-27 is both the year of earning and the year named on the return.

Structure of the 2025 Act

The Act has 536 sections in 23 chapters and 16 Schedules. The chapters that matter most to an individual taxpayer are these:

Income-tax Rules 2026

The CBDT notified the Income-tax Rules 2026 on 20 March 2026, and the corresponding forms with them, to operate the new Act from 1 April 2026 (PIB Release ID 2248005). They replace the Income-tax Rules 1962 for tax years from 2026-27. The 1962 Rules and their forms still govern returns and proceedings for assessment year 2026-27 and earlier.

The annual Finance Act

The rates the Act does not fix itself arrive each year in a Finance Act. The Finance Act 2026 (Act No. 4 of 2026, assented 30 March 2026) carries two rate schedules: Part I-A of its First Schedule for assessment year 2026-27 under the 1961 Act, and Part I-B for tax year 2026-27 under the 2025 Act. The split matters when reading a Budget. The default-regime slabs sit inside the Act, in section 202(1), as they sat in section 115BAC(1A) of the 1961 Act, so they change only when a Finance Act amends that section; the old-regime slabs, the corporate rates and the surcharge remain annual Finance Act rates.

Legislative history

Income tax was first introduced in India in 1860 by James Wilson, an event the Income Tax Department marks every 24 July as Income Tax Day (PIB Release ID 2035918). The Indian Income-tax Act 1922 created the first structured system, and the Central Board of Revenue Act 1924 set up its administration. The Income-tax Act 1961 (Act 43 of 1961) replaced the 1922 Act, after a Law Commission review in 1958 and the report of the Direct Taxes Administration Enquiry Committee.

Six decades of amendment

The Select Committee report on the 2025 Bill records that the 1961 Act had undergone nearly 4,000 amendments through annual Finance Acts and 19 Taxation Laws Amendment Bills. An earlier attempt at replacement, the Direct Taxes Code Bill 2010, was never enacted. The Central Board of Direct Taxes constituted a task force to draft a new direct tax law on 22 November 2017 under its Member (Legislation) Arbind Modi, and reconstituted it on 26 November 2018 with Akhilesh Ranjan as convenor (PIB Release IDs 1553890 and 1556549).

From the 2024 announcement to the 2025 Act

The Budget Speech of 23 July 2024 announced “a comprehensive review of the Income-tax Act, 1961”, to be completed in six months. The Income-Tax Bill 2025 (Bill No. 24 of 2025) was introduced in the Lok Sabha on 13 February 2025 and referred the same day, on a motion by Finance Minister Nirmala Sitharaman, to a Select Committee of 31 Lok Sabha members chaired by Baijayant Panda. The Committee adopted its report on 16 July 2025 and presented it on 21 July 2025; it received 288 memoranda, and the Ministry accepted 285 of its suggestions, 84 of them substantive and 201 drafting corrections.

The Act as published carries the bill number 104-F of 2025, so the text Parliament passed on 12 August 2025 was a different Bill (No. 104 of 2025) from the February Bill (No. 24 of 2025). The President assented on 21 August 2025.

The comparison is the Ministry of Finance’s own, from PIB Release ID 2102744 of 13 February 2025, and describes the February Bill; the enacted Act also has 536 sections and 23 chapters. The same release reported 20,976 online suggestions received during the review.

Tax administration

The Central Board of Direct Taxes is the statutory authority for income tax, defined in section 2(18) of the 2025 Act as the Board “constituted under the Central Boards of Revenue Act, 1963”, and sits in the Department of Revenue of the Ministry of Finance. Section 533(1) empowers it, “subject to the control of the Central Government”, to make rules for carrying out the purposes of the Act, and it issues the circulars and instructions that bind the Income Tax Department.

The Income Tax Department

The Income Tax Department carries out assessment, collection, investigation and taxpayer services under the CBDT. Returns are filed through the e-filing portal at incometax.gov.in. Under section 273 of the 2025 Act, which succeeds section 144B of the 1961 Act, faceless assessment runs through the National Faceless Assessment Centre set up under section 273(3)(a); the article on faceless assessment covers the procedure.

Permanent Account Number and Aadhaar

Section 262 of the 2025 Act, the successor to sections 139A and 139AA of the 1961 Act, governs the Permanent Account Number . An applicant must quote Aadhaar in the PAN application and the return (section 262(5)), a PAN “shall be made inoperative” if the holder does not intimate Aadhaar (section 262(6)(b)), Aadhaar may be quoted in place of PAN (section 262(7)), and no person may hold more than one PAN (section 262(8)). The steps are in how to link PAN and Aadhaar .

Who is taxed: persons and residence

The 2025 Act charges tax on the total income of every person: individuals, HUFs, companies, firms, associations of persons, bodies of individuals, local authorities and artificial juridical persons. How much of a person’s worldwide income is taxed depends on residence under section 6.

The 60-day leg does not apply to an Indian citizen leaving India for employment or as a ship’s crew member (section 6(3)), or to a citizen or person of Indian origin visiting India (section 6(4)). For such a visiting citizen or person of Indian origin whose total income other than income from foreign sources exceeds Rs 15 lakh, section 6(5) replaces the 60 days with 120 days. A company is resident if it is an Indian company or its place of effective management is in India (section 6(10)). The NRI-specific consequences, including TDS under section 195 and double taxation avoidance agreements , are covered in the NRI articles.

Five heads of income

Section 13 of the 2025 Act, the successor to section 14 of the 1961 Act, classifies all income under five heads. Each head has its own computation rules, and income is computed head by head before losses are set off and Chapter VIII deductions are subtracted to reach total income.

Salaries

Section 19(1) Table serial 2 allows a standard deduction of Rs 75,000 or the salary, whichever is less, where tax is computed under the default regime in section 202(1), and Rs 50,000 in any other case. Professional tax is deductible under serial 1 of the same table only in the old regime, because section 202(2)(a)(iv) bars it in the default regime. The employer deducts tax through the year under section 392 at the average rate on the estimated salary for the year.

Income from house property

Section 22(1)(a) allows a standard deduction of 30 per cent of the annual value of a let-out property. For a self-occupied house, section 22(2) caps the deduction for interest on a loan taken to buy or build it at Rs 2,00,000 a year, provided the acquisition or construction is completed within five years from the end of the tax year in which the loan was taken, and at Rs 30,000 otherwise. Section 38 of the Finance Act 2026 amended section 22(2) so that the Rs 2 lakh cap covers the pre-construction interest instalments as well. In the default regime, section 202(2) disallows the self-occupied interest deduction and bars setting off a house property loss against any other head.

Profits and gains of business or profession

Business income is computed under sections 26 to 66, which include the presumptive schemes in section 58 (the old sections 44AD and 44ADA) and the tax audit requirement in section 63. Futures and options trading is business income under this head, as the article on F&O taxation explains.

Capital gains

Section 67 charges the profit on the transfer of a capital asset. For tax year 2026-27, short-term gains on listed equity shares and equity-oriented fund units on which Securities Transaction Tax is paid are taxed at 20 per cent under section 196 (formerly section 111A ), and long-term gains at 12.5 per cent above Rs 1,25,000 a year under section 198 (formerly section 112A ). Gains on debt fund units bought on or after 1 April 2023 are deemed short-term under section 76 and taxed at slab rates. Holding periods, indexation, reinvestment exemptions and loss set-off are in capital gains tax in India .

Income from other sources

Interest, dividends, IDCW distributions from mutual funds and gifts above the exempt limit are taxed under sections 92 to 95 at slab rates. Interest on a savings account is deductible up to Rs 10,000 under section 153(2)(a), the successor to section 80TTA, and a senior citizen may deduct up to Rs 50,000 of interest on any deposit, including fixed deposits, under section 153(2)(b), the successor to section 80TTB. Both deductions are old-regime only.

New tax regime under section 202

The default regime for an individual, HUF, association of persons (other than a co-operative society), body of individuals or artificial juridical person is section 202(1) of the 2025 Act, which succeeds section 115BAC(1A) of the 1961 Act. It applies “unless the person exercises the option” to leave it under section 202(4). The bands are in the Act itself and are the same as for FY 2025-26:

Source: Income-tax Act 2025, section 202(1) Table. Cumulative column computed from the rates, before rebate, surcharge and cess.

The new regime has no separate exemption limit for senior citizens. A resident aged 80 pays the same rates as one aged 30, and loses the Rs 50,000 deposit-interest deduction of section 153(2)(b), which the old regime keeps.

The section 156 rebate and marginal relief

Section 156(2)(a) gives a resident individual taxed under section 202(1) a rebate of 100 per cent of the tax or Rs 60,000, whichever is less, where income does not exceed Rs 12 lakh. Because the slab tax on exactly Rs 12 lakh is Rs 60,000, the rebate removes it entirely. Section 156(2)(b) adds marginal relief: where total income exceeds Rs 12 lakh, the tax cannot exceed the amount by which income exceeds Rs 12 lakh.

Section 156(3) reads: “The deduction under sub-section (2), shall not exceed income-tax payable as per the rates provided in section 202(1).” Tax on short-term equity gains under section 196, long-term gains under sections 197 and 198, and virtual digital asset income at 30 per cent is computed at other rates. On that wording, a resident with Rs 9 lakh of salary income and Rs 3 lakh of short-term equity gains, total income Rs 12 lakh, has a rebate limited to the slab tax on the salary portion, and the 20 per cent section 196 tax on the gains is not within the section 156(2) ceiling.

Figures still widely quoted, a section 87A rebate making income up to Rs 7 lakh tax-free and new-regime slabs at Rs 3, 7, 10, 12 and 15 lakh, were the FY 2024-25 rules under section 115BAC of the 1961 Act. They do not apply to FY 2025-26 or tax year 2026-27.

Worked example: salary of Rs 13,00,000

A resident salaried individual aged 35 with a gross salary of Rs 13,00,000 and no other income, in the default regime for tax year 2026-27:

The marginal relief stops mattering once slab tax equals the excess over Rs 12 lakh. Solving Rs 60,000 plus 15 per cent of the excess equal to the excess gives an excess of Rs 70,588, so the relief applies to total income up to about Rs 12,70,588 (a webnotes.in derivation from the section 202(1) rates and section 156(2)(b)).

Old tax regime

A taxpayer who opts out of the new regime under section 202 of the Income-tax Act 2025 is taxed at the rates in Paragraph A of the First Schedule, Part I-B, of the Finance Act 2026. These are annual rates, reset by each Finance Act.

Source: Finance Act 2026, First Schedule, Part I-B, Paragraph A. Age is reckoned “at any time during the tax year”.

The old-regime rebate under section 156(1) is 100 per cent of the tax or Rs 12,500, whichever is less, for a resident individual with total income up to Rs 5,00,000. That makes income up to Rs 5 lakh tax-free in the old regime, against Rs 12 lakh in the new.

Worked comparison: the same Rs 13,00,000 salary

A resident aged 35 with a gross salary of Rs 13,00,000 and no other income, opting out of the new regime for tax year 2026-27 and claiming Rs 1,50,000 under section 123 (the old section 80C) and Rs 25,000 of health insurance premium under section 126 (the old section 80D):

The old regime matches the new only if old-regime total income falls to Rs 5,62,500, where tax is Rs 25,000, which needs Rs 5,12,500 of further deductions or exemptions, such as house rent allowance and house loan interest, beyond the two already claimed (a webnotes.in computation from the two rate tables). The guide on choosing between the old and new regime works through the break-even for investors.

Choosing the regime

Section 202(4) of the 2025 Act sets two different opt-out routes, depending on whether the taxpayer has business or professional income.

• No business or profession income. Under section 202(4)(b), the option is exercised “along with the return of income to be furnished under section 263(1)” for the tax year, so the choice is made afresh each year when the return is filed. Section 263(1) is the provision for returns filed by the due date, which is why opting out in a belated return under section 263(4) is not clearly available.
• Business or profession income. Under section 202(4)(a), the option is exercised on or before the section 263(1) due date and applies to all later years. It “may be withdrawn only once”, and after withdrawal the person may never opt out again unless they cease to have business or profession income.

Section 202(4) leaves the form and manner of the option to the Income-tax Rules 2026. For an individual without business income the return decides the regime, so the regime an employer assumed for monthly TDS under section 392 does not bind the taxpayer.

Deductions that survive in the new regime

Section 202(2)(a)(xii) bars every Chapter VIII deduction except sections 124(1) and (2), 125(2) and 146. The salary standard deduction, which sits in Chapter IV rather than Chapter VIII, also survives:

Section 56 of the Finance Act 2026 omitted section 202(2)(a)(iii), so the deduction for units in Special Economic Zones under section 144 is no longer barred in the new regime from tax year 2026-27.

Deductions under Chapter VIII

Chapter VIII of the 2025 Act (sections 122 to 154) succeeds Chapter VI-A of the 1961 Act. The limits carried across unchanged; the section numbers did not. All of them except sections 124(1) and (2), 125(2) and 146 are available only to a taxpayer who has opted out of the new regime under section 202 of the Income-tax Act 2025.

Source: Income-tax Act 2025, Chapter VIII, sections 122 to 154. Section 124(5) bars claiming the same NPS contribution under both section 123 and section 124.

For mutual fund investors the relevant line is section 123: an ELSS investment is one of the Schedule XV instruments, with the three-year lock-in carried over from the 1961 Act. The NPS deduction guide covers the section 124 claims.

Surcharge and cess

Surcharge is an additional tax on tax, applied above income thresholds. For tax year 2026-27 the rates for an individual, HUF, association of persons, body of individuals and artificial juridical person are:

Source: Finance Act 2026, First Schedule Part I-B Paragraph F (old regime) and section 3(4)(b) Table serial 10 (section 202 persons). The 25% and 37% rows apply to total income excluding dividend and capital gains taxed under sections 196 to 198.

The surcharge on the part of tax attributable to dividend income and to capital gains under sections 196, 197 and 198 “shall not exceed 15%”, whatever the total income. Marginal relief applies at each threshold: tax plus surcharge cannot exceed the tax and surcharge on income at the threshold plus the income above it (Finance Act 2026, First Schedule Part I-B Paragraph F, Table 2).

Health and Education Cess is charged at 4 per cent of income tax and surcharge under section 3(15) of the Finance Act 2026. Section 3(17) exempts from cess the TDS and TCS covered by sections 3(7) to 3(9) on payments to residents and domestic companies; salary TDS under section 392 and advance tax, covered by section 3(10), carry the 4 per cent cess.

Top effective rates

At the 37 per cent surcharge, the old-regime marginal rate on salary or interest income above Rs 5 crore is 30 per cent times 1.37 times 1.04, or 42.744 per cent. The new regime caps it at 30 per cent times 1.25 times 1.04, or 39 per cent. These are webnotes.in computations from the Finance Act 2026 rates.

Special rates

Chapter XIII of the 2025 Act taxes certain income at flat rates outside the slabs. In the new regime, section 156(3) limits the rebate to tax at the section 202(1) rates, so the rebate ceiling is measured without these rates.

The last row is a Finance Act 2026 change. Section 55 of the Finance Act 2026 cut the rate on income deemed under sections 102 to 106 (unexplained cash credits, investments, money and expenditure) from 60 per cent to 30 per cent; section 3(4)(b) Table serial 8 sets the surcharge on that tax at 25 per cent. Under the 1961 Act the same income bore 60 per cent plus a 25 per cent surcharge.

Corporate tax rates

For tax year 2026-27 a domestic company pays 25 per cent or 30 per cent, depending on whether its tax year 2024-25 turnover was within Rs 400 crore, unless it opts for the concessional rates in sections 199 to 201 of the Income-tax Act 2025. The corporate tax article covers the conditions in full.

With the 10 per cent surcharge and 4 per cent cess, a section 200 company pays an effective 25.168 per cent. The option under section 200, once exercised, cannot be withdrawn (section 200(6)).

Minimum alternate tax

Section 206 of the 2025 Act, the successor to section 115JB, levies minimum alternate tax on book profit where normal tax is lower. Section 59 of the Finance Act 2026 cut the rate from 15 per cent to 14 per cent from tax year 2026-27, and substituted section 206(3) and (4): a domestic company that moves to section 200 or 201 for a tax year beginning on or after 1 April 2026 may set off MAT credit carried forward under section 115JAA as on 31 March 2026, up to 25 per cent of the tax on normal computation each year, within 15 tax years of the year the credit first arose. The rate for a unit in an International Financial Services Centre earning solely in convertible foreign exchange is 9 per cent.

Tax deducted and collected at source

Chapter XIX Part B of the 2025 Act (from section 392) collects most income tax before the return is filed. The Bill reduced the TDS and TCS provisions from 69 sections to 13 (Select Committee report, para 1.18).

The section 393 tables

Tax deducted at source on payments other than salary sits in one section, 393, laid out as tables:

• Section 393(1): payments to residents, with columns for the nature of the payment, the payer, the threshold and the rate. Rent, contract payments, commission, professional fees, interest, dividends and mutual fund income distributions (the old section 194K ) are here, as is the 1 per cent TDS on immovable property bought for Rs 50 lakh or more (serial 3(i), formerly section 194-IA).
• Section 393(2): payments to non-residents, the successor to section 195.
• Section 393(3): payments to any person, resident or not.
• Section 393(4): a table of payments on which no tax is deducted, with conditions.

Section 84 of the Finance Act 2026 amended section 393 to remove TDS on interest on compensation awarded by a Motor Accidents Claims Tribunal to an individual, and, from 1 April 2027, to let an investor file the no-deduction declaration (the Form 15G and 15H route) electronically with a depository for dividends, interest on securities and listed units held in demat.

Salary TDS and lower deduction

Section 392 requires the employer to deduct tax at the average rate on the employee’s estimated salary income for the year. Section 395 provides certificates for lower or nil deduction. TDS appears in the taxpayer’s annual statement of tax credits, the successor to Form 26AS , and in the Annual Information Statement .

Tax collected at source

Section 394 lists receipts on which the seller collects tax. Tax collected at source on remittances under the Liberalised Remittance Scheme is 2 per cent or 20 per cent depending on purpose from 1 April 2026, as the guide on tracking TCS on foreign remittance explains; section 85 of the Finance Act 2026 cut the education and medical treatment rate from 5 per cent to 2 per cent. The same section cut five other entries in the section 394 table to 2 per cent: liquor, scrap and minerals from 1 per cent, tendu leaves from 5 per cent, and overseas tour packages from 5 or 20 per cent.

Advance tax

Advance tax is payable under Chapter XIX Part C (sections 403 to 410) where the tax for the year is Rs 10,000 or more (section 404). A resident individual aged 60 or more with no business or profession income is exempt (section 403(3)).

Source: Income-tax Act 2025, section 408(1) Table. A taxpayer under the presumptive schemes in section 58 pays the whole amount by 15 March (section 408(2)), and tax paid by 31 March counts as advance tax (section 408(3)). Shortfalls attract interest under Chapter XIX Part E, from section 423.

Returns of income

Chapter XV Part B of the 2025 Act (from section 263) governs returns, replacing section 139 of the 1961 Act. For tax year 2026-27 the returns are filed in 2027.

Due dates

Source: section 263(1) as amended by section 66 of the Finance Act 2026; section 139 as amended by section 5 of the Finance Act 2026; CBDT Circular No. 07/2026, F. No. 225/128/2026/ITA-II, 28 September 2026, which also moved the audit report date to 21 October 2026.

Belated, revised and updated returns

The additional tax on an updated return under section 267(5), as substituted by section 68 of the Finance Act 2026, is 25 per cent if filed within 12 months from the end of the financial year after the tax year, 50 per cent within 24 months, 60 per cent within 36 months and 70 per cent within 48 months. A further 10 per cent applies to an updated return filed in response to a reassessment notice under section 280. The Finance Act 2026 also allows an updated return after a loss return. The guide on revising a return covers the steps.

Forms

Returns for assessment year 2026-27 use the ITR forms under the 1961 Act and the 1962 Rules: an individual investor with capital gains beyond the limited long-term equity gains the simpler forms accept files ITR-2 , and one with business income, including F&O, files ITR-3 . The guide on choosing the ITR form sets out the tests. Returns for tax year 2026-27 will be filed on the forms prescribed under the Income-tax Rules 2026.

Assessment, appeals and penalties

Under the Income-tax Act 2025, an assessment begins with the processing of the return and an intimation under section 270, may proceed to scrutiny, and is conducted faceless through the National Faceless Assessment Centre under section 273. Best judgment assessment is section 271 and reassessment of escaped income is section 279. An eligible assessee may object to a draft order before the Dispute Resolution Panel under section 275 (formerly section 144C), a collegium of three Principal Commissioners or Commissioners.

Appeals

Alternate dispute resolution is in Chapter XVIII Part D, from section 379, which section 83 of the Finance Act 2026 amended.

Penalties

Section 439, the successor to section 270A, imposes a penalty of 50 per cent of the tax on under-reported income (section 439(9)) and 200 per cent where the under-reporting is in consequence of misreporting (section 439(10)). Section 98 of the Finance Act 2026 inserted section 439(13A), so additional income tax paid on an updated return does not form the basis of a penalty. Section 427 levies Rs 200 a day for late TDS and TCS statements, capped at the tax involved.

Section map: 1961 Act to 2025 Act

The 2025 Act itself carries no table mapping its sections to the 1961 Act. This table maps the provisions an investor or salaried taxpayer meets most often, compiled by webnotes.in from the margin notes of the 2025 Act.

Collections and the budget

Income tax and corporation tax together are the largest component of Union revenue. The Ministry of Finance’s Receipt Budget 2026-27, presented in February 2026, gives these figures in Rs crore:

Source: Receipt Budget 2026-27, Ministry of Finance (Budget Division). The Budget’s “taxes on income” includes Securities Transaction Tax, which the CBDT reports separately in its own collection tables.

The budget estimate for taxes on income in FY 2026-27 is split into Rs 12,60,000 crore of tax, Rs 79,000 crore of surcharge, Rs 53,000 crore of Health and Education Cess, Rs 73,700 crore of STT and Rs 300 crore of other receipts. The revised estimate for FY 2025-26 was Rs 1,26,000 crore below the budget estimate of Rs 14,38,000 crore, while corporation tax was revised up by Rs 27,000 crore. The CBDT’s provisional collection figures for FY 2025-26 are published on incometaxindia.gov.in as a PDF that could not be opened, so no figure from them is stated here.

Criticism and open questions

The 2025 Act was presented as a simplification, and the reduction from 819 to 536 sections is real. Several criticisms and uncertainties remain on the face of the text:

• Two Acts at once. Until the last 1961-Act assessment, reassessment and appeal closes, taxpayers and the Department work under both statutes. Section 536 keeps the old Act alive for every tax year before 2026-27, and reassessment windows run for years.
• Rebate wording. Section 156(2)(a) refers to “income” while section 156(2)(b) refers to “total income”, and section 156(3) is the only clause limiting the rebate to slab-rate tax. The interaction with special-rate income will be settled by the Department’s processing and by appeal, not by the text alone.
• Regime choice in a belated return. Section 202(4)(b) ties the opt-out to the section 263(1) return. Whether a taxpayer who misses the due date can still opt out in a section 263(4) belated return is not stated in terms.
• MAT credit. Section 59 of the Finance Act 2026 omitted the MAT credit clauses inside section 206(1) while preserving the set-off of credit carried forward to 31 March 2026. Whether fresh credit accrues for tax years from 2026-27 is not stated in the substituted text.
• General anti-avoidance rule. GAAR moved from Chapter X-A of the 1961 Act to Chapter XI of the 2025 Act (from section 178), and the 2025 Act’s version has not yet been interpreted by a court.

See also

• Income-tax Act 2025
• Income-tax Act 1961
• Finance Act 2026
• Central Board of Direct Taxes
• New tax regime in India
• Old tax regime in India
• Section 87A rebate
• Section 123 of the Income-tax Act 2025
• Section 80C
• Section 80D
• Section 80TTA
• Residential status under section 6
• Capital gains tax in India
• Section 111A
• Section 112A
• Grandfathering rule for LTCG
• Securities Transaction Tax
• Mutual fund taxation in India
• Equity mutual fund taxation
• Debt mutual fund taxation after 2023
• F&O taxation in India
• Buyback tax reforms 2024
• ELSS mutual funds
• ELSS and the section 80C deduction
• Tax deducted at source
• Tax collected at source
• Section 194K
• TDS on mutual fund IDCW for residents
• NRI mutual fund TDS under section 195
• DTAA for NRI mutual fund investors
• Advance tax
• Updated income tax return
• Faceless assessment
• Income Tax Appellate Tribunal
• Corporate tax in India
• Section 44AB tax audit
• ITR-2
• ITR-3
• Form 26AS and mutual fund TDS
• AIS for mutual fund investors
• PAN card
• Aadhaar
• How to link PAN and Aadhaar
• How to choose between the old and new regime
• How to choose the ITR form for mutual funds
• How to revise an ITR
• How to claim the NPS deduction
• How to track TCS on foreign remittance
• Liberalised Remittance Scheme
• HUF as a mutual fund investor
• IDCW option in mutual funds
• Mutual funds in India

External references

• Income Tax Department e-filing portal
• Income Tax Department, CBDT
• Income-tax Act 2025, Gazette of India
• Finance Act 2026, Gazette of India
• Receipt Budget 2026-27, Ministry of Finance
• CBDT Circular No. 07/2026
• Select Committee report on the Income-Tax Bill 2025 (Lok Sabha document, PRS copy)

References

1. Income-tax Act 2025 (Act 30 of 2025), sections 1, 3, 6, 13, 15 to 25, 67, 122 to 156, 194 to 206, 262, 263, 267, 270 to 279, 356 to 367, 392 to 410, 423 to 428, 439 and 536. Gazette of India Extraordinary, Part II Section 1, No. 35, 21 August 2025.
2. Finance Act 2026 (Act No. 4 of 2026), assented 30 March 2026: sections 2, 3, 5, 38, 55, 56, 59, 66, 68, 84, 85, 96 and 98, and the First Schedule Parts I-A and I-B. Gazette of India Extraordinary, CG-DL-E-31032026-271439.
3. Central Board of Direct Taxes, Circular No. 07/2026, F. No. 225/128/2026/ITA-II, 28 September 2026, extension of due dates for assessment year 2026-27.
4. Lok Sabha Secretariat, Report of the Select Committee on the Income-Tax Bill 2025, Eighteenth Lok Sabha, presented 21 July 2025.
5. Press Information Bureau, Ministry of Finance: Release ID 2102744, 13 February 2025 (Income-tax Bill 2025 tabled); Release ID 2248005, 1 April 2026 (Income-tax Act 2025 in force, Income-tax Rules 2026 notified on 20 March 2026); Release ID 2035918 (Income Tax Day 2024); Release IDs 1553890 and 1556549 (task force on the direct tax law, 2018).
6. Ministry of Finance, Budget Division, Receipt Budget 2026-27, February 2026.
7. Income-tax Act 1961 (Act 43 of 1961), sections 87A, 115BAC, 139 and 270A, as amended to the Finance Act 2026.