The first Budget under the Income-tax Act, 2025: what actually changes for promoter-led companies

For the first time since 1961, Indian businesses are reading their tax position out of a different statute. The Income-tax Act, 2025 came into force on 1 April 2026, reorganising the law into 536 sections across 23 chapters in place of the sprawling 1961 Act. For promoter-led enterprises the significance lies less in headline rates than in architecture — and architecture is harder to retrofit than a rate change.

One tax year, and the end of a familiar confusion

The Act replaces the twin concepts of "previous year" and "assessment year" with a single tax year running 1 April to 31 March. In practice this removes a genuine source of error: clients who filed for the wrong year, notices quoting an assessment year that nobody in the finance team recognised, advance-tax challans tagged to the wrong period.

The transition itself is clean but unforgiving of sloppiness. Income earned in FY 2025-26 remains governed by the 1961 Act and is assessed in AY 2026-27. Income from 1 April 2026 falls under the new Act as Tax Year 2026-27. For roughly two filing cycles, your finance team is operating two statutes at once. Label your working papers accordingly — we have already seen reconciliations that silently mix the two.

Renumbering is not cosmetic

Every internal document that cites a section number is now potentially wrong: your tax notes to the accounts, your TDS manual, board resolutions approving concessional regimes, the standard paragraph your CFO pastes into every investment memo, your ERP's tax masters.

None of this changes the tax you pay. All of it changes how quickly you can defend what you paid. We are running section-mapping exercises for clients precisely because an assessing officer's question arrives with a deadline attached, and "we're still locating the equivalent provision" is not an answer.

The three questions boards keep asking

• Do concessional regimes carry forward? Elections made under the old Act generally continue, but the paperwork evidencing the original election has to exist. If the board minute is missing, reconstruct it now, not when it is asked for.
• How do presumptive thresholds interact with GST turnover? For closely held groups the two numbers rarely agree, and the gap is exactly what a scrutiny letter asks about. Reconcile them once a year, in writing.
• What is the new disclosure standard? Broader, and increasingly matched against data the department already holds from GST returns, TDS filings and the AIS.

Our reading

The transition rewards entities that already maintain contemporaneous documentation and penalises those relying on historical positions that were never formally papered. A position taken in 2019 and never written down is not a position; it is a memory, and memories do not survive faceless assessment.

The next two filing cycles will sort companies into those two categories. The work to move from the second to the first is unglamorous — minute books, elections, mapping tables, a reconciliation between GST and income-tax turnover — and it is very much cheaper before a notice arrives than after.

Build a single mapping table — old section, new section, where it is cited in your documents, who owns the fix — and treat it as a live document rather than a one-off project. Every finance team we have handed one to has found at least three internal documents nobody remembered were quoting a section number at all.