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Finance Act 2026: Key Tax Changes & Income-tax Act 2025 Transition

This page was originally published when the Finance Bill, 2026 was a proposal. It has now been updated after enactment. For live compliance in August 2026, taxpayers should rely on the Finance Act, 2026, the Income-tax Act, 2025 (effective from 1 April 2026), the Income-tax Rules, 2026, and the notifications/circulars issued thereafter—not on the original Finance Bill wording.

What changed after the Bill stage?

  • A Finance Bill is a proposal; the Finance Act is the enacted law after assent.
  • The Income-tax Act, 2025 came into force from 1 April 2026 and is the principal direct-tax statute for Tax Year 2026-27 onward, subject to transition/savings provisions.
  • The Income Tax Department now publishes the Income-tax Act, 2025 as amended by Finance Act, 2026, along with Income-tax Rules, 2026 and new statutory forms.
  • Old 1961-Act sections remain relevant for earlier years and saved proceedings; do not mix old and new section numbers without checking the transaction/tax year.

Finance Bill vs Finance Act: why the distinction matters

Budget-day articles are useful for understanding proposals, but clauses can change before enactment and commencement dates may differ. Once the Finance Act is enacted, a tax article should stop presenting Bill clauses as final authority. For current compliance, verify the enacted provision and any subsequent notification, rule or circular.

Income-tax Act, 2025 is now in force

The Income Tax Department confirms that the Income-tax Act, 2025 came into force on 1 April 2026. The department also provides comparison utilities between the 1961 Act and the 2025 Act, transition FAQs, tax-reference tables and guidance on forms under the Income-tax Rules, 2026.

Period / issuePrimary law to check
Tax Year 2026-27 current transactionsIncome-tax Act, 2025 as amended + Income-tax Rules, 2026
Earlier financial/assessment yearsIncome-tax Act, 1961 as applicable to that year, subject to transition/savings
Legacy notices, appeals and proceedingsCheck Section 536 transition/repeal-and-savings guidance and the law applicable to the proceeding
New forms/TDS returnsUse the Income Tax portal's current 2026 form mapping and manuals

Examples of the section-number transition

The change is not merely cosmetic for finance teams because familiar section numbers are being replaced or consolidated. Examples already covered elsewhere on TaxQueries include:

  • Old Section 194R benefit/perquisite TDS → current Section 393 table entry.
  • Old Section 194T partner-payment TDS → current Section 393 table entry.
  • Old Section 206C(1G) LRS/overseas-tour TCS → current Section 394.
  • Old Section 43B(h) MSME payment rule → current Income-tax Act, 2025 mapping must be used for TY 2026-27.

Do not assume proposal-era procedural claims survived unchanged

Earlier versions of this article contained statements about universal ITR deadline extensions, automated TDS certificates and other procedural proposals. Those statements should not be used for a live filing decision unless the enacted provision and current portal instructions specifically support them. Due dates, form availability and filing workflows must be checked against current Income Tax Department guidance.

Tax rates: use the tax year, not an old article table

India's tax-rate tables differ by regime, taxpayer type and year. For example, official Income Tax Department reference material shows the new-regime slabs applicable for AY 2026-27 under the legacy Act framework, while TY 2026-27 is now administered under the 2025 Act structure. Use the current calculator/reference table for the exact tax year rather than carrying forward a Budget-day slab table into a later year.

GST and customs amendments

Finance legislation can also amend GST/customs laws, but GST amendments may have separate commencement notifications. CBIC's Tax Information Portal should be used to confirm whether a Finance Act amendment has been brought into force and whether a circular/notification subsequently changes the practical treatment.

Compliance checklist for FY/TY 2026-27

  1. Replace old section references in SOPs, ERP reports and tax workpapers with current mappings where required.
  2. Keep an old-to-new section cross-reference because earlier-year proceedings still use the 1961 Act.
  3. Use current Income-tax Rules, 2026 forms rather than assuming old form numbers continue.
  4. Verify every due date on the live portal/calendar before filing.
  5. Update TDS/TCS masters and vendor/customer compliance checklists for current section numbers.
  6. For GST/customs changes, confirm the commencement notification before changing tax treatment.

Frequently asked questions

Should I still rely on the Finance Bill 2026?

Use it only as historical/proposal context. Current compliance should be based on the enacted Finance Act, 2026 and current Acts, Rules, notifications and circulars.

When did the Income-tax Act, 2025 start?

The Income Tax Department states that it came into force from 1 April 2026.

Does the 1961 Act no longer matter at all?

It still matters for earlier years and saved/transition proceedings. Check the transition provisions rather than assuming every historical matter is governed only by the 2025 Act.

Official references

Reviewed 19 August 2026. This page now distinguishes proposal-stage Finance Bill material from enacted/current law.