Tax Year replaces Assessment Year: what the new Income-tax Act means for you
Every year, salaried people ask the same question: why is the income of 2025-26 reported in the return for 2026-27? Under the old law, two different years were involved. The Income-tax Act, 2025 has removed that confusion. This post explains the change using the Income Tax Department's own frequently asked questions, last reviewed on 5 November 2026.
The old way and the new way
Under the Income Tax Act, 1961, you earned income in the previous year and paid tax on it in the assessment year that followed. So income earned in the financial year 2025-26 was the previous year, and the matching assessment year was 2026-27. Many people mixed the two up.
The department explains that the new Act uses the single term tax year instead of previous year, and that the term assessment year has been discontinued. A tax year is a period of twelve months within a financial year. It applies from 1 April 2026, so income earned during FY 2026-27 is called Tax Year 2026-27. The income of a tax year is still assessed after that year ends, much as before. The department also says the Act introduces no new tax; the aim is simpler language and fewer cross-references. It says the new Act has 536 sections against 819 in the 1961 Act.
Which law applies to the return you file now
The 1961 Act stands repealed from 1 April 2026, but the department says its provisions continue to govern all tax years beginning before that date. In practice, this means the return you file for AY 2026-27, which covers income of FY 2025-26, is filed with the forms prescribed under the old Act. The department gives this exact example in its FAQ. Advance tax payments for Tax Year 2026-27, starting from June 2026, are made under the new Act. Old assessments, appeals and notices for earlier years continue under the old Act.
For the return still open this season, the department's news page records that for persons covered by the extended category, the ITR due date for AY 2026-27 was moved from 31 October 2026 to 21 November 2026 by Circular No. 07/2026. Check which category you fall into before you rely on that date.
What stays the same for salaried people
The new tax regime stays the default. The FAQ says it is now provided under section 202 of the new Act, and that you can still opt out of it. If you had chosen an option under the old Act, it is treated as made under the equivalent provision of the new Act, so you do not need to opt again. PAN, TAN and faceless proceedings continue.
A simple way to remember it
Take a salary earned from April 2026 to March 2027. Under the old law this was the previous year 2026-27 and you would file in the assessment year 2027-28. Under the new Act, it is simply Tax Year 2026-27. One label now covers the whole cycle. For earlier years, the department says a reference to a tax year such as 2024-25 corresponds to the previous year 2024-25 under the old Act, which matches Assessment Year 2025-26.
What you should do
Keep using the same records: Form 16, salary slips, interest certificates and your AIS. When you read news about the new Act, check whether it concerns a year before or after 1 April 2026, because that decides which law applies. If you are unsure, ask a tax professional.
Results on Gunaka are estimates, not tax or financial advice.
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