Income Tax Act 2025 will be implemented from 1 April:Assessment Year gets replaced by Tax Year making ITR filing easier

The Central Government has replaced the old Income Tax Act 1961 with the new Income Tax Act 2025, which will be effective from April 1, 2026. The biggest change in this is the use of ‘Tax Year’ instead of ‘Assessment Year’ and ‘Previous Year’. This will reduce confusion for common taxpayers in filing ITR, as the income earning year and tax reporting year will be the same. This change is a major step towards simplifying the tax system. What was the confusion in the old system? Until now, in the Income Tax Act 1961, the income earning year was called the Financial Year (FY) and its tax assessment was done in the next year, which was called the Assessment Year (AY). For example, income earned in FY 2024-25 was reported and assessed in AY 2025-26. Due to this, common people had difficulty understanding which year’s income it was and which year’s assessment it was. What will change with ‘Tax Year’? In the new law, ‘tax year’ will be considered as the same year for earning and reporting income. This means the income will be filed and assessed in the same year it was earned. This will eliminate the need for two separate terms. Tax experts say that the new Income Tax Act 2025 is bringing the concept of ‘tax year’. This will replace ‘previous year’ and ‘assessment year’ from April 1, 2026. It was difficult for common people to understand assessment year, like income from FY 2024-25 would go to AY 2025-26. Now it will be easier to understand with tax year. What changes will come in ITR filing? In the new system, ITR will be filed in the same tax year in which income was earned. There is no change in tax rates or slabs, only the terminology and process will be simplified. Experts say that the new act is bringing ‘tax year’ in place of ‘assessment year’. Tax year will match with the financial year related to income, eliminating the old gap. Taxpayers should become familiar with this new term. What is the impact on 2025-26 ITR filing? This change will be effective from April 1, 2026, so its full impact will be seen in ITR filing 2026-27 (Tax Year 2026-27). However, the language of forms may also change in 2025-26 ITR. Notices, assessments and other documents will mention ‘Tax Year’. This will make tax communication clearer and more straightforward. What does it mean for common taxpayers? In simple terms, the confusion of “previous year’s income, next year’s assessment” will now end. The income and tax filing year will be the same. The system will become more user-friendly for new tax filers. This government step is important in making tax compliance easier and creating a taxpayer-friendly system.