The Income-tax Act, 2025, seven months in: a checklist for businesses

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026. The CBDT notified the supporting Income-tax Rules, 2026 on 20 March 2026 (Notification No. 22/2026), with 333 rules and 190 forms. The new law was written mainly to simplify the old one rather than to change tax policy, but almost every reference a business uses has changed: section numbers, form numbers and even the name of the year.

Seven months in, most businesses have filed their first two quarterly TDS returns under the new framework. This is a good time to check that the changeover has actually been completed, because the gaps tend to show up at the year-end close and in the first assessments.

1. Two laws are running side by side

The most common source of errors this year is applying the wrong Act to a transaction.

So the income tax returns being filed this month for FY 2025-26 still follow the 1961 Act. For audit cases, CBDT Circular No. 07/2026 extended the due date to 21 November 2026. Everything from 1 April 2026 onwards follows the 2025 Act.

What to do: keep the two years clearly separated in your books, ledgers and working papers. When a notice arrives, check which Act it is issued under before replying.

2. "Tax year" has replaced previous year and assessment year

The new Act drops the familiar pair of "previous year" and "assessment year". Income is now taxed for a tax year, which is the same as the financial year. Income earned from April 2026 to March 2027 belongs to Tax Year 2026-27.

What to do: update the terms used in invoices, engagement letters, board resolutions, internal policies and payroll communication. Agreements that refer to an "assessment year" or to a specific section of the 1961 Act should be reviewed when they come up for renewal.

3. TDS has been consolidated into a few sections

The 1961 Act had a long series of TDS sections, from 192 to 194T. The 2025 Act brings them together:

• Section 392 covers TDS on salary (earlier section 192).
• Section 393 covers other payments, through a consolidated table: section 393(1) for payments to residents, section 393(2) for payments to non-residents, and section 393(3) for certain special payments.
• Section 394 covers tax collected at source (TCS).

Within these sections, each type of payment is identified by its serial number in the table and by a payment code used on the TRACES portal. Contracts and vendor masters that say "TDS under section 194J" or "194C" now need the new reference.

What to do: map every TDS section in your accounting software and vendor master to the new section and payment code. Check that rates and thresholds were carried over correctly from April 2026.

4. New form numbers for returns and certificates

Two practical points come up often. First, where one challan is used for salary and non-salary TDS, the amount must be allocated correctly between Forms 138, 140 and 143, so that each return picks up the right portion. Second, returns for transactions up to 31 March 2026 still use the old forms and section numbers, even when filed after April 2026.

What to do: check that your Q1 and Q2 returns for Tax Year 2026-27 were filed on the new forms and that the challans were matched without short-payment defaults. The Q3 return (October to December 2026) is due by 31 January 2027.

5. Declarations and certificates from deductees

Forms 15G and 15H, which let a deductee declare that no tax should be deducted, have been replaced by a single declaration under section 393(6). Lower or nil deduction certificates issued under the old Act should be checked for their validity period.

What to do: collect fresh declarations in the new format and refresh certificates where needed. A declaration in the old format is not a safe basis for deducting no tax in Tax Year 2026-27.

6. Systems, people and documentation

Most of the issues we see are not legal questions. They are mismatches between what the law now says and what the ERP, payroll software or internal checklist still says.

• Update the tax master in your accounting and payroll software, and test it on a sample of transactions.
• Brief the accounts team and any outsourced service providers on the new section and form numbers.
• Update internal checklists, due-date calendars and templates for TDS certificates and client communication.
• Keep a short note on file of how each old section maps to the new one. Auditors and assessing officers will ask.

Where to start

If you do only three things this month, file any pending FY 2025-26 audit-case return before 21 November 2026, confirm that your Q2 TDS returns for Tax Year 2026-27 were processed without defaults, and fix the TDS master in your software before the Q3 return is due on 31 January 2027.

The Vanadium team can review your TDS set-up under the new Act and help clear any defaults. Speak to us if you would like a review before the year-end close.

This article reflects the position as on 7 November 2026 and is for general information only. It is not professional advice. Please refer to the official notification or circular, or speak to us, before acting on it.