The Income-tax Act 2025 transition is the biggest change to Indian tax law in more than sixty years, and it has been in force since April 1, 2026. For NRIs, OCI holders and returning residents it does not create a new tax, but it changes the vocabulary, the section numbers, the form numbers and the year-by-year rules about which law governs a filing. This page explains what changed, what did not, and what to do now that FY 2025-26 filings sit under the old law while FY 2026-27 income sits under the new one.
What is the Income-tax Act 2025 transition?
The Income-tax Act, 2025 is Act 30 of 2025. The President assented on August 21, 2025, and section 1 states it comes into force on April 1, 2026. The Income-tax Rules, 2026 supply the new forms. CBDT describes the aim as simpler language and structure, not new taxes or higher rates. The "transition" is the set of savings rules in section 536 of the 2025 Act, which say that the 1961 Act continues to apply to proceedings and returns for any tax year beginning before April 1, 2026.
The replaced vocabulary matters. The 1961 Act used "previous year" for the year income is earned and "assessment year" for the year it is assessed. The 2025 Act has one label: tax year. Tax year 2026-27 is the twelve months from April 1, 2026, and the 2025 Act (section 3) allows a shorter first tax year only for a business or income source that starts mid-year. A reference to an earlier "tax year" in the 2025 Act is read as the corresponding previous year of the 1961 Act.
Which law governs which year and event?
| Situation | Law that applies | What it means in practice |
|---|---|---|
| ITR for FY 2025-26 (AY 2026-27) | 1961 Act | Old ITR-1 to ITR-7; belated return window closes December 31, 2026 |
| Notice, scrutiny or appeal for years before April 1, 2026 | 1961 Act, kept alive by section 536 | Response procedure follows the old Act |
| Income earned from April 1, 2026 | 2025 Act | Tax year 2026-27; return forms under the 2026 Rules; due date July 31, 2027 for most individuals |
| TDS on a payment or credit on or after April 1, 2026 | 2025 Act, section 393 | Rates and thresholds unchanged; deductors quote the new table item |
| Form 15CA/15CB for a remittance on or after April 1, 2026 | 2025 Act | New Forms 145 and 146 |
| Residential status for years starting before April 1, 2026 | 1961 Act, section 6 | Even if assessed later |
Residential status is decided year by year. For FY 2026-27 you apply section 6 of the 2025 Act, but the 60 days plus 365 days test and the "nine of ten years" test still look back at earlier years that fell under the 1961 Act. See India residency rules.
What changed and what stayed the same for NRIs?
CBDT's interplay FAQs address NRI points directly. The conclusion is that the core features carry over.
| Topic | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Residence, deemed residence and RNOR | Sections 6, 6(1A), 6(6) | Section 6, with 6(7) and 6(13); tests unchanged |
| NRI special regime (20% investment income, 12.5% on specified long-term gains) | Sections 115D to 115F | Sections 213 to 215 |
| No return needed for only investment income and long-term gains with TDS | Section 115G | Section 216 |
| Regime continuation and opt-out | Sections 115H and 115-I | Section 217 (substituted by the Finance Act, 2026) |
| NRE account interest exemption | Section 10(4)(ii) | Schedule IV |
| Capital gains on listed equity and other assets | Sections 111A, 112, 112A | Sections 196, 197, 198 |
| TDS on non-resident payments | Section 195 | Section 393(2) |
| Lower or nil deduction certificate | Section 197, Form 13 | Section 395(1), Form 128 |
| Return filing and verification | Section 139 | Sections 263 and 265 |
| Late filing fee | Section 234F | Section 428 |
| Default (new) tax regime | Section 115BAC | Section 202 |
The CBDT FAQs also confirm the foreign-currency method for non-resident gains on shares and debentures continues (section 72 of the 2025 Act) and that residents who opted into the new regime do not have to opt again.
Which forms were renumbered?
The Income-tax Rules, 2026 renumbered many forms. The CBDT forms page and FAQs give this mapping:
| Purpose | Old form | Form under the 2026 Rules |
|---|---|---|
| PAN, Indian citizen individual | 49A | 93 |
| PAN, individual not a citizen | 49AA | 95 |
| TAN, non-government | 49B | 135 |
| Lower or nil withholding certificate | 13 | 128 |
| Foreign remittance information | 15CA | 145 |
| Accountant's certificate for the remittance | 15CB | 146 |
| Tax residency details for treaty claims | 10F | 41 |
| Foreign tax credit statement | 67 | 44 |
| Annual statement of tax credits | 26AS / AIS | 168 |
| Self-declaration for no TDS | 15G / 15H | 121 |
ITR forms for tax year 2026-27 are to be notified under the 2026 Rules well before the filing dates; until then, the e-filing portal carries ITR-1 to ITR-7 for AY 2026-27. CBDT says the portal is designed to support both Acts, with a choice of assessment year or tax year.
What should NRIs do now?
- Separate your records. Keep one set for FY 2025-26 and one for FY 2026-27. TDS certificates, advance tax challans and bank interest letters should carry the right year.
- Finish the old year. If you have not filed your AY 2026-27 return, file it under the 1961 Act, using the old forms. A belated return is open until December 31, 2026, and a revised return is possible after that.
- Pay advance tax by tax year. The 15 June, 15 September, 15 December and 15 March instalments are unchanged but are now labelled by tax year.
- Use the new forms for April-onward events. Remittance forms 145 and 146, lower-deduction applications on Form 128 and PAN applications on Forms 93 or 95.
- Tell tenants and buyers. They quote section 393 table items, not 194 or 195, for payments after April 1, 2026; see TDS on property sale by an NRI and NRI income taxable in India.
A worked example
Rohan lives in Aurora, Illinois and sells units of a Hyderabad mutual fund in February 2026, then moves ₹40 lakh of NRO funds to the United States. He files Form 15CA and 15CB for a March 30, 2026 remittance, but the bank delays it into April. CBDT says the old forms stay valid only if the remittance happens by the date stated in them; otherwise he must file fresh Forms 145 and 146. His mutual fund gain is a FY 2025-26 item reported in his AY 2026-27 return. Interest he earns on the remaining NRO balance from April belongs to tax year 2026-27. He files two returns over two years, each under its own law.
Mistakes to avoid
- Quoting 194 or 195 section numbers on a payment made after March 31, 2026; the portal may reject the TDS statement.
- Calling a FY 2026-27 return "AY 2027-28".
- Assuming a pending notice for AY 2026-27 moved to the new Act. It did not.
- Relying on old Form 13 for a certificate request made after April 1, 2026.
U.S. side
Nothing in U.S. law changed on April 1, 2026, but your foreign tax credit depends on how Indian tax is described. The treaty's covered-taxes article extends to identical or substantially similar taxes imposed in place of existing ones, and we expect the income tax under the 2025 Act to stay covered; confirm against any official guidance. Your U.S. foreign-account reports are unaffected; see FBAR and Form 8938. For treaty and update context, see the US-India tax treaty explained and Indian income tax changes in 2026. The India hub lists every guide in the series.
How we can help
Our Aurora and Fox Valley CPA firm prepares the U.S. return and foreign-account reports and works with your Indian CA so both countries' filings agree. We do not prepare Indian returns or appear before the Indian tax authorities. See cross-border tax services and relocation and immigration tax planning.
Frequently asked questions
When did the Income-tax Act 2025 take effect?
On April 1, 2026, under section 1 of the Act. It applies to tax years beginning on or after that date.
Is assessment year still used?
Yes, for years up to AY 2026-27 under the 1961 Act. The 2025 Act does not use the term.
Do NRI tax rates change under the new Act?
CBDT says the NRI special regime, TDS rates and thresholds were retained. Rates for each year are set by the Finance Act, so confirm the year you are filing.
Do I need to opt into the new tax regime again?
No. CBDT says an option exercised under the 1961 Act is treated as exercised under the equivalent provision of the 2025 Act.
Will my Form 15CA from March 2026 still work?
Yes, if the remittance happens on or before the date stated in the form. Otherwise file again on the new forms.
Official sources
- Income Tax Department: Income-tax Act, 2025 (30 of 2025), as amended by the Finance Act, 2026
- CBDT: FAQs on Interplay and Transition from the Income-tax Act, 1961 to the Income-tax Act, 2025
- CBDT: Clarificatory FAQs on transition provisions under section 536 of the Income-tax Act, 2025
- Income Tax Department: FAQs and guidance notes on forms under the Income-tax Rules, 2026
- Income Tax Department e-filing portal home page
- IRS: United States-India income tax convention
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.