Income-tax Act 2025 for Small Businesses: Tax Year, New Section Numbers and What Changed on 1 April 2026

The Income-tax Act 2025 came into force on 1 April 2026 and replaced the Income-tax Act 1961 for income earned from that date. Your income for FY 2025-26 is still taxed under the 1961 Act (assessment year 2026-27); income from 1 April 2026 is tax year 2026-27 under the new Act. Most rates and limits that matter to small businesses carried over, but nearly every section number changed.

Sources checked: 20 October 2026

Facts checked on 20 October 2026 against the Income-tax Act 2025 section pages and the official 1961-to-2025 comparison utility on incometaxindia.gov.in, and the CBDT FAQs on interplay and transition.

Key facts

Point	What the official text says
In force from	1 April 2026 (section 1(3))
Act number	Act 30 of 2025, amended by Finance Act 2026 (Act No. 4 of 2026)
Size	536 sections and 16 schedules, against 819 sections and 14 schedules in the 1961 Act (CBDT FAQs)
Rules	Income-tax Rules 2026: 333 rules and 190 forms, against 511 rules and 399 forms (CBDT FAQs)
Year of income	"Tax year" = the financial year starting 1 April (section 3); "assessment year" is no longer used
FY 2025-26 income	Governed by the 1961 Act and assessed in AY 2026-27
New taxes	None, according to the CBDT FAQs

What is the "tax year"?

The tax year is the twelve-month financial year starting on 1 April, and it replaces both "previous year" and "assessment year". Under the 1961 Act, income of FY 2025-26 was the previous year 2025-26 and was assessed in AY 2026-27, two labels for one year of income. Under the 2025 Act, income of FY 2026-27 is simply tax year 2026-27, and the same label is used for assessing it.

Two practical points from section 3 and the CBDT FAQs:

• A business set up during the year has a short first tax year, from the date it was set up to 31 March. A unit started on 1 December 2026 has a tax year of 1 December 2026 to 31 March 2027.
• Your accounting year does not change. The tax year is aligned with the financial year, so no change to your books or financial statements is needed.

When you pay tax or file a form, pick the right label. CBDT advises keeping FY 2025-26 (old Act, AY 2026-27) and FY 2026-27 (new Act, tax year 2026-27) clearly separate in challans, TDS records and reconciliations.

Which old sections became which new ones?

The Income Tax Department publishes an official comparison utility that maps each section of the 1961 Act to the 2025 Act. The table below lists the mappings a small business meets most often, as shown in that utility on 20 October 2026.

1961 Act	Topic	Income-tax Act 2025
3	Previous year / tax year	3
43B	Deductions only on actual payment (includes the MSME 45-day clause)	37
40, 40A	Amounts not deductible	35, 36
44AA	Books of account	62
44AB	Tax audit	63
44AD, 44ADA, 44AE	Presumptive taxation	58
87A	Rebate	156
115BAA	Concessional tax for domestic companies	200
115BAC	New tax regime	202
139	Return of income	263
140A	Self-assessment tax	266
194C, 194J, 194Q and other non-salary TDS	Tax deducted at source	393
207, 208, 211	Advance tax liability, conditions, instalments	403, 404, 408
234A, 234B, 234C	Interest for late return and advance tax defaults	423, 424, 425
234F	Fee for late return	428

Forms changed too. The comparison utility maps the tax audit forms 3CA, 3CB and 3CD to Form No. 26, the TDS return 26Q to Form No. 140 (and 24Q to 138), TDS certificates 16 and 16A to Forms 130 and 131, and 26AS to Form No. 168. Rule 6G (audit report) is now rule 47.

What changed for presumptive taxation?

The three presumptive schemes now sit together in section 58, and the limits in its table are the same as before. A resident individual, HUF or firm (not an LLP) with business turnover up to ₹2 crore, or up to ₹3 crore where cash receipts are within 5%, can declare 6% of receipts received through banking or online channels and 8% of the rest. Specified professionals with receipts up to ₹50 lakh, or ₹75 lakh with cash within 5%, declare 50%. Owners of up to ten goods carriages use the per-vehicle rates.

The five-year lock-in for business income also continues (section 58(7)). Our presumptive taxation guide covers the scheme in detail.

What changed for the tax audit?

The tax audit is now section 63 and the thresholds did not change. The CBDT FAQs confirm the limits: business turnover above ₹1 crore, or above ₹10 crore where cash receipts and cash payments are each within 5%; professional receipts above ₹50 lakh; and presumptive cases that declare less than the deemed profit.

Two things did change:

• One form. From tax year 2026-27 the report is Form No. 26, which merges Forms 3CA, 3CB and 3CD. For FY 2025-26 the old forms still apply.
• A fee instead of a penalty. Finance Act 2026 moved the consequence of not getting the audit done into section 428(c): a fee of ₹75,000 for a delay of up to one month and ₹1,50,000 after that.

See tax audit limits for MSMEs for who needs one and the due dates.

What changed for TDS?

Non-salary TDS is now in one section, 393, laid out as a table, and salary TDS is in section 392. The comparison utility maps sections 194C (contractors), 194J (professional and technical fees) and 194Q (purchase of goods) to section 393. The CBDT FAQs state that deposit due dates remain the same under the new Act, now in rule 218 of the Income-tax Rules 2026 from April 2026; for most months that is the 7th of the following month. Quarterly TDS returns for tax year 2026-27 use the new forms (140 for non-salary payments).

What happened to the 45-day MSME payment rule?

The rule moved from section 43B(h) to section 37(2)(g). Section 37 allows certain expenses only in the tax year they are actually paid. Clause (g) covers any amount payable to a micro or small enterprise beyond the time limit in section 15 of the MSMED Act 2006. As before, the grace period up to the return due date in section 37(3) does not apply to this clause. Our 45-day payment rule guide explains the time limit and gives examples.

Return and advance tax dates under the new Act

For tax year 2026-27 onwards, section 263(1) (as amended by Finance Act 2026) sets these return due dates in the following year:

Who	Due date
Transfer pricing cases (report under section 172)	30 November
Companies, and other persons (and partners of firms) whose accounts must be audited	31 October
Business or profession not requiring audit, and partners of such firms	31 August
Everyone else	31 July

So the return for tax year 2026-27 falls due in 2027. Advance tax instalments are in section 408. The advance tax guide lists the dates, and the new regime slabs cover the rates.

FY 2025-26 is different. Those returns and audit reports are filed under the 1961 Act. CBDT Circular No. 7/2026 (28 September 2026) extended the AY 2026-27 due dates for audit cases: audit report by 21 October 2026 and return by 21 November 2026.

Steps for a small business this year

1. Label every payment correctly. Use AY 2026-27 for FY 2025-26 and tax year 2026-27 for the current year.
2. Finish the FY 2025-26 compliance under the old Act: old forms, old section references, extended dates where they apply.
3. Update your templates. Invoices, contracts and accounting notes that quote "44AD", "43B(h)" or "194C" should now cite sections 58, 37(2)(g) or 393 for tax year 2026-27 matters.
4. Keep a mapping sheet. CBDT itself suggests keeping an old-to-new section reference handy.
5. Check supplier status. Mark which suppliers are micro or small enterprises on Udyam, so the 45-day rule is tracked.
6. Put the dates in a calendar. The compliance calendar lists the statutory due dates month by month.

Common mistakes

• Applying the new Act to FY 2025-26. That year stays under the 1961 Act, including its audit forms and penalties.
• Choosing the wrong year on a challan. A payment booked to the wrong year is credited to the wrong year.
• Assuming limits changed because numbers changed. The audit and presumptive limits are the same; only the section numbers moved.
• Relying on unofficial mapping tables. Third-party tables do not always agree. Use the department's comparison utility.
• Forgetting the MSME clause has no grace period. Paying a micro supplier late, even before your return date, still delays the deduction.

What to do now

If your FY 2025-26 accounts need a tax audit, the extended audit report date is 21 October 2026, so speak to your independent chartered accountant today. Then plan tax year 2026-27 under the new section numbers: check advance tax, TDS returns in the new forms, and payments to micro and small suppliers.

For help with returns, advance tax planning or the move to the new Act, ask our expert team or book a consultation. Official changes are also tracked on our government updates page.