Income Tax Department Clarifies New Act Transition, Eases Taxpayer Confusion

Confusion surrounding the new Income Tax Act, 2025, and its transition from Assessment Year (AY) to Tax Year (TY) is clarified by the Income Tax Department. Taxpayers will not need to file two returns for income earned between April 1, 2025, and March 31, 2026.

As the New Income Tax, 2025, applied from April 1, 2026, and the tax year (TY) replaced the assessment year (AY), many taxpayers are confused if they need to file two Income Tax Returns (ITRs), one for AY 2026-27 and another for TY 2026-27, for income earned during the Financial Year 2025-26. The Income Tax (I-T) Department in a guideline book called Kar Setu has replied to that query along with many other questions that taxpayers may face while filing their ITR for FY 2025-26 in the transition year (FY 2026-27) of the Income Tax Act.

Replying to the answer whether taxpayers need to file two ITRs for AY 26-27 and TY 26-27 during the transition year of FY 26-27, the Income Tax Department said in the Kar Setu document, “No. The obligation to file the return for the Tax Year 2026-27 will arise after the end of the Tax Year, and it is similar to the framework existing in Income Tax Act, 1961.

For income earned between April 1, 2025, and March 31, 2026, taxpayers will file their return under the existing system as Assessment Year (AY) 2026-27.

Depending on the category of a taxpayer, the due date will be July 31, August 31, October 31 or November 30, 2026.

For income earned in the next financial year, that is from April 1, 2026, to March 31, 2027, the return will be filed under the new Tax Year (TY) 2026-27 framework. This return will be due only in 2027 with July 31, August 31, October 31 and November 30, 2027, as applicable.

Period of Income Reference Due date for filing of Income Tax Return 1 April 2025 – 31 March 2026 AY 2026-27 31 July 2026, 31 August 2026, 31 October 2026 or 30 November 2026, as applicable 1 April 2026 – 31 March 2027 Tax Year 2026-27 31 July 2027, 31 August 2027, 31 October 2027 or 30 November 2027, as applicable

“In simple words, the obligation to file the return for the Tax Year 2026-27 will arise after the end of the Tax Year. ITR forms, etc., for the Tax Year 2026- 27 will be notified by the Government well before the due dates,” says the Income Tax Department.

Under which Act will ITR for income earned during FY 2025 -26 be filed?

The ITR for income earned during FY 2025 -26 will be filed for Assessment Year 2026 -27 under the provisions of the Income Tax Act, 1961. Even though the filing will typically occur after April 1, 2026 (i.e., after the new Act has come into force), the return relates to a tax year beginning before April 1, 2026, and is therefore governed entirely by the old Act, as per the Income Tax Department.

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