Income Tax Act 2025: CA explains big terminology shifts for taxpayers and professionals

India’s tax regime is set for its most significant transformation in over six decades with the introduction of the Income-tax Act, 2025. The new law, which received the President’s assent on 21st August 2025, will come into force from 1st April 2026, applying to income earned in FY 2026–27 and onwards. 

What Happens to the Old Act? 

The current Income-tax Act, 1961 will be repealed from April 1, 2026. However, it will continue to govern pending cases and assessments from earlier financial years. This effectively means that for some time, both laws will operate in parallel, creating a transitional phase that could pose practical challenges for taxpayers and professionals. 

New Terminology, New Framework 

One of the most notable changes is in terminology. 

• The familiar “Previous Year” will now be called “Tax Year”. 
• The term “Assessment Year” does not find a direct mention in the new Act, though assessments will still happen in the year following the Tax Year. 

In practice, this means that: 

• Tax Year = The financial year in which income is earned. 
• Assessment = Conducted in the subsequent financial year. 

According to CA Nitin Kaushik, who highlighted the key provisions in a post on X (formally twitter), this change will directly impact filing deadlines and compliance procedures, as everything will now be aligned with the Tax Year. He noted that professionals will need to adjust reporting formats and practices to stay compliant. 

Why This Matters 

The overhaul is not just about new labels. It represents an attempt to simplify India’s tax system, modernize legal language, and reduce litigation that has plagued the current framework for decades. However, the dual operation of the old and new laws during the transition could create confusion in the short term. 

The Bigger Picture 

“This is the first complete overhaul since 1961. It aims to modernize India’s tax system, simplify terms, and reduce litigation,” CA Nitin Kaushik observed. But he also raised an important question: Will it actually make compliance easier, or just replace old complexity with new jargon? 

Key Takeaway 

From 2026 onwards, tax planning in India will have to be recalibrated entirely under the Income-tax Act, 2025. As Kaushik emphasized, the next year will be crucial for taxpayers, professionals, and businesses to adapt to the new framework and ensure a smooth transition.