What does the Income-tax Act, 2025 change for freelancers and small businesses?
By Ajaj Mohammad Qureshi · Published · 6 min read
Not legal, tax or investment advice.
The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961. It does not impose any new tax. The big visible changes are the single "tax year", which replaces "previous year" and "assessment year", and new section numbers: presumptive taxation moves from sections 44AD, 44ADA and 44AE into section 58, advance tax into sections 403 to 410, and double taxation relief into sections 159 and 160. Income earned up to 31 March 2026 stays under the old Act.
Indian exporter or freelancer? Payzoplus gets you paid from abroad, in rupees.Open a free account →
On this page
What is the Income-tax Act, 2025?
It is India’s new income tax law, Act No. 30 of 2025. It received the President’s assent on 21 August 2025 and was published in the Gazette of India the same day. Section 1 says that, save as otherwise provided, it comes into force on 1 April 2026, and it did, repealing the Income-tax Act, 1961. The Income Tax Department’s FAQ on the new Act calls it a streamlined, simplified code and says plainly that it does not impose any new tax. Tax rates still come from each year’s Finance Act.
The new Act and Rules at a glance
- 536
- Sections in the 2025 Act
- 819
- Sections in the 1961 Act, by the Department’s count
- 333
- Rules in the Income-tax Rules, 2026
- 190
- Forms under the 2026 Rules
with 16 schedules
with 14 schedules
down from 511
down from 399
What is a "tax year"?
The 1961 Act taxed the income of a "previous year" in the following "assessment year", which confused almost everyone: income of 2025-26 was "AY 2026-27". The new Act drops both terms. Income is charged for a tax year, normally the financial year from 1 April to 31 March. So income from April 2026 to March 2027 is tax year 2026-27, assessed after the year ends, as before.
If you start a business or profession during the year, your first tax year runs from the start date to 31 March. The Department’s example: a business set up on 1 December 2026 has a first tax year from then to 31 March 2027. Your accounting period does not change, because the tax year is still the financial year.
Which law applies to my 2025-26 income?
The old one. Tax years beginning before 1 April 2026 stay under the 1961 Act, and section 536 of the new Act (repeal and savings) keeps pending proceedings and old-year rights alive.
| What | Which Act | Example |
|---|---|---|
| Return for income of April 2025 to March 2026 | 1961 Act (old forms, old section numbers) | Filed in 2026 as AY 2026-27 |
| Advance tax on income from April 2026 | 2025 Act | First instalment due 15 June 2026 |
| Interest on short advance tax for 2025-26 | 1961 Act, sections 234B and 234C | Charged on the 2025-26 return |
| Income from April 2026 to March 2027 | 2025 Act | Tax year 2026-27 |
| Assessment, rectification or appeal for an old year | 1961 Act provisions continue | Saved by section 536 |
Which section numbers changed for freelancers?
Almost all of them. The Department’s own examples include section 115BAC becoming section 202 and sections 44AD, 44ADA and 44AE being merged into one table in section 58. Here are the ones a freelancer or small exporter meets most often, checked against the text of the Act as published in the Gazette:
Old section, new section
| Income-tax Act, 1961 | Income-tax Act, 2025 | |
|---|---|---|
| Presumptive tax: business, profession, goods carriage | 44AD, 44ADA, 44AE | 58 (one table) |
| Books of account | 44AA | 62 |
| Tax audit | 44AB | 63 |
| New tax regime | 115BAC | 202 |
| Double taxation relief (treaty / no treaty) | 90 / 91 | 159 / 160 |
| Return of income | 139 | 263 |
| Advance tax: liability, instalments | 207–211 | 403–410 |
| Interest: late return, advance tax default, deferment | 234A / 234B / 234C | 423 / 424 / 425 |
| TDS on contract payments | 194C | 393 |
The Rules were renumbered as well. The Income-tax Rules, 2026 (notified on 20 March 2026 as G.S.R. 198(E)) took effect with the Act. For an exporter, two changes stand out: the foreign tax credit rule is now rule 76, claimed in Form 44 instead of Form 67, and the rule on converting foreign-currency income into rupees is rule 206. See foreign tax credit and DTAA.
What stayed the same?
- PAN, TAN, faceless assessment and faceless appeals continue.
- The tax year lines up with the financial year, so your books and invoices do not change.
- The new tax regime remains the default (now section 202), with the option to opt out; options you exercised under the old Act are treated as made under the new one.
- Presumptive taxation for professionals keeps the 50% of gross receipts deemed profit and the ₹50 lakh and ₹75 lakh limits. See presumptive tax under section 58.
- Advance tax keeps the ₹10,000 threshold and the 15 June, 15 September, 15 December and 15 March instalments. The Department says there are no policy changes. See advance tax for freelancers.
- Approvals, registrations, circulars and notifications under the old Act continue where they are consistent with the new one.
- Refunds and other rights under the old Act carry over.
What actually changed in practice?
Mostly the vocabulary and the drafting. Long provisos and explanations were turned into tables and formulas: advance tax is now worked out by a formula in section 405, and the instalment schedule and interest for deferment sit in tables in sections 408 and 425. Some points are now spelt out in so many words: section 58(4), for example, says no loss, allowance or deduction is allowed against presumptive income. And the new Act was amended before it even started: the Finance Bill, 2026 carried amendments effective from 1 April 2026, one of them to section 58.
For freelancers the main practical risk is mixing up references: an old-Act section number on a 2026-27 advance tax challan, a Form 67 filed for tax year 2026-27 income, or a CA’s checklist that still says "AY". When you pay or file, choose tax year 2026-27 for income from April 2026 onwards; the Department’s payment FAQ warns that the year selected decides where the credit goes.
What should a freelancer do now?
- File the return for April 2025 to March 2026 under the old Act, as usual.
- Pay advance tax for tax year 2026-27 under the new Act. Professionals on the presumptive scheme pay it all by 15 March 2027.
- Update invoice templates and engagement letters that quote section numbers, for example "section 44ADA".
- Keep your remittance advices and foreign tax certificates from April 2026: the new forms ask for the same evidence.
- Ask your CA which new forms apply before you file anything for tax year 2026-27.
How Payzoplus helps you
How Payzoplus helps at tax time
- Every settlement shows the rate, the fees and the rupees credited, with the bank’s FIRA — the records your CA asks for.
- Every payment arrives already matched to the customer who sent it, so reconciling is one step, not a hunt.
- Rupees reach your own bank account on T+1 after you reconcile.
No setup fee · No monthly fee · Verification usually takes one working day
Frequently asked questions
When did the Income-tax Act, 2025 come into force?
On 1 April 2026. It received the President’s assent on 21 August 2025 and repealed the Income-tax Act, 1961 from 1 April 2026. Income of tax year 2026-27 is the first taxed under it.
What is a tax year under the new Income-tax Act?
The twelve-month financial year from 1 April to 31 March, which replaces "previous year" and "assessment year". If a business starts mid-year, its first tax year runs from the start date to 31 March.
What is the new section for 44ADA?
Section 58. The presumptive schemes in sections 44AD, 44ADA and 44AE of the 1961 Act are combined in one table in section 58 of the Income-tax Act, 2025. Professionals are Serial No. 3 of that table.
Does the new Income-tax Act change tax rates?
No. The Income Tax Department says the Act imposes no new tax. Rates are set each year by the Finance Act.
Is my 2025-26 return filed under the new Act?
No. Income of April 2025 to March 2026 is taxed under the 1961 Act, and its return (AY 2026-27) uses the old forms. The new Act applies from tax year 2026-27.
Sources
The primary texts this article was checked against, on 30 October 2026.
- The Income-tax Act, 2025 (No. 30 of 2025), Gazette of India, Extraordinary, 21 August 2025
- Income Tax Department — FAQs on the objective and scope of the new Act (e-filing portal)
- Income Tax Department — Tax payments FAQs (advance tax under the 2025 Act)
- The Finance Bill, 2026, as introduced in Lok Sabha (amendments to the Income-tax Act, 2025)
- Income Tax Department — Income-tax Rules, 2026: Notification No. 22/2026, G.S.R. 198(E), 20 March 2026
General information, not tax, legal or investment advice. Rules and products change: confirm the details for your business with your CA, your bank or the regulator.
How useful was this article?
Be the first to rate it.
Comments
Be kind and stay on topic. Comments with links or contact details are checked before they appear.