The Income Tax Act 1961 died on March 31, 2026. A 65-year-old law is gone. From April 1, India runs on an entirely new tax system. Your salary, your investments, your trades — all affected. Here is everything, explained simply.

The Income Tax Act, 1961 has been completely replaced by the Income Tax Act, 2025, effective April 1, 2026. The CBDT has simultaneously released new Income Tax Rules, 2026 covering updated deductions, revised PAN norms, and new reporting forms.

The term "Financial Year" no longer exists in the law. It is now officially called "Tax Year."

From April 1, the New Tax Regime is the default. If you do nothing, you are automatically in it. To use the Old Regime, you must specifically opt in every year.

New Tax Regime — Default from April 1:

Income up to ₹12 lakh remains effectively tax-free in the new regime due to the Section 87A rebate.

Old Tax Regime — Still available but you must opt in:

The old regime still allows deductions like 80C, HRA, home loan interest, and NPS. The new regime does not. If your total deductions exceed ₹3.75 lakh, the old regime likely saves you more money. Run the calculation before choosing.

Two allowances that were stuck at 1990s-era limits have finally been revised:

Children's Education Allowance: Was ₹100 per month per child. From April 1, 2026 it is ₹3,000 per month per child. That is a 30x increase.

Hostel Allowance: Was ₹300 per month per child. From April 1, 2026 it is ₹9,000 per month per child. That is a 30x increase.

If you have children in school or hostel, update your salary structure with HR immediately to claim these. They are exempt from tax.

Important: The revised return deadline has been extended from 9 months to 12 months. The new deadline for revised returns is March 31 — giving you a full year to correct mistakes.

TCS Rates Simplified:

Several TCS rates have been standardised to a flat 2%:

Overseas travel packages — was 5% up to ₹10 lakh and 20% above that. Now a flat 2% on everything. Major relief for travellers.

LRS for education and medical — was 5%. Now 2%.

Tendu leaves — was 5%. Now 2%.

Scrap, minerals, alcoholic liquor — was 1%. Now 2% (slight increase here).

Securities Transaction Tax has been increased in Budget 2026. This affects every person who trades futures and options.

Options: Premium STT — was 0.1%, now 0.15% Intrinsic price STT — was 0.125%, now 0.15%

Futures: Sale STT — was 0.02%, now 0.05%

The futures rate went up 2.5 times in one go. For an occasional trader the impact per trade is small. For someone trading daily at high volumes this compounds on every single transaction. If you trade 100 futures contracts a day, recalculate your cost of trading — your break-even point has moved.

When a company buys back its shares from you, the money you received used to be taxed like a dividend — at your income slab rate, which could be as high as 30%.

From April 2026, buyback proceeds are treated as capital gains instead.

What this means practically:

Individual promoters will now pay an effective rate of approximately 30% on buyback gains. Corporate promoters will pay approximately 22%.

For regular retail investors receiving buyback proceeds, this is a significant change. Depending on your holding period it will be taxed as short-term or long-term capital gains rather than as income. For long-term holders at 12.5% LTCG this is a major saving compared to the old dividend-style taxation at slab rates.

This one matters if you hold SGBs or were planning to buy them.

Previously, if you held SGBs until maturity — whether you bought them at original issue or from the secondary market — the capital gains on redemption were fully tax-free.

From April 2026, the tax-free exemption only applies if you subscribed at the original issue AND held until maturity.

If you bought SGBs from the secondary market — even if you hold them until maturity — the capital gains are now taxable.

Before Budget 2026: Original issue held to maturity → Capital gains fully exempt Secondary market buy held to maturity → Capital gains fully exempt

After Budget 2026: Original issue subscribed and held to maturity → Capital gains exempt Secondary market buy held to maturity → Taxable capital gains

Action needed: If you hold SGBs purchased from the secondary market, factor the new tax cost into your expected returns. The 2.5% annual interest remains taxable at slab rate as before — but now the maturity gains are also taxable if you bought in the secondary market.

Decide new regime or old regime before filing — this decision now has to be made actively. Salaried employees who do not opt in will be defaulted to the new regime.

Ask HR to update your salary structure for the new children's education and hostel allowances if applicable.

If you are a business owner or freelancer filing ITR-3 or ITR-4, your deadline is now August 31 — use the extra month wisely.

If you trade futures and options, recalculate your cost per trade and adjust your strategy.

If you hold SGBs bought from the secondary market, account for the taxable capital gains at maturity.

All information based on Income Tax Act 2025, Budget 2026, and CBDT notifications. For personalised advice consult a qualified Chartered Accountant. Tax laws are subject to further clarification and notifications.