The Income-tax Act, 2025: what actually changes for founders, NRIs and foreign companies.
India is replacing the six-decade-old Income-tax Act, 1961 with the Income-tax Act, 2025, effective 1 April 2026. It is largely a consolidation and simplification — but it renumbers almost everything and introduces a single “tax year”. Here is what matters in practice, and a map from the sections you already know.
What it is — and isn't
The Income-tax Act, 2025 is a structural rewrite of Indian direct-tax law: shorter sections, plain language, consolidated schedules and fewer cross-references. It is not, for the most part, a change in tax policy — rates, heads of income, capital-gains treatment, TDS and treaty relief broadly carry forward. The practical disruption is in terminology and numbering: every section reference in your agreements, ESOP policies, valuation reports and engagement letters will need a second look.
The three changes you will actually feel
- One “tax year.” The “previous year” and “assessment year” distinction is replaced by a single tax year — simpler to reason about, but it changes how deadlines and disclosures are phrased.
- Renumbered sections. The provisions you cite daily — 9, 90, 92, 195, 197 — carry forward in substance but under new numbers. Templates and memos referencing “Section 195” should now read “the Income-tax Act, 2025 (erstwhile Section 195 of the 1961 Act)”.
- Consolidated reliefs and schedules. Exemptions and special-rate provisions are reorganised into tables/schedules, which makes them easier to find but means old paragraph references break.
Section map — 1961 → 2025
The provisions cross-border founders and NRIs rely on most, and where they stand:
| Erstwhile (1961) | Subject | Status under the 2025 Act |
|---|---|---|
| Sec 6 | Residence & RNOR status | Retained. The Act introduces a single “tax year”, replacing the “previous year / assessment year” split. |
| Sec 9 | Income deemed to accrue in India; indirect transfer | Retained — the indirect-transfer rule that catches offshore share sales deriving value from India continues. |
| Sec 10 | Exemptions | Largely consolidated into schedules; substance carried forward. |
| Sec 54 / 54F / 54EC | Capital-gains reinvestment relief | Retained — property and bond reinvestment reliefs continue. |
| Sec 56(2)(viib) | “Angel tax” on share premium | Abolished for all investors from AY 2025-26 and not carried as a charge into the 2025 Act. |
| Sec 90 / 91 | DTAA relief & Foreign Tax Credit | Retained — treaty relief and FTC (Form 67) continue across 90+ treaties. |
| Sec 92–92F | Transfer pricing | Retained — Form 3CEB, ALP and documentation obligations continue. |
| Sec 139 | Return of income | Retained — filing framework continues under the new numbering. |
| Sec 195 | TDS on payments to non-residents | Retained — withholding on foreign remittances (with Form 15CA/15CB) continues. |
| Sec 197 | Lower / Nil deduction certificate (Form 13) | Retained — the NRI cash-flow tool for property sales continues. |
Note: new section numbers should be confirmed against the final Act and notified Rules before filing or drafting. We track the mapping for active engagements.
What it means if you are…
A founder
ESOP policies, share-issue documentation and Rule 11UA valuation reports cite 1961-Act sections throughout. With angel tax (erstwhile Section 56(2)(viib)) already gone, the main task is a citation refresh and confirming capital-gains and ESOP-perquisite treatment under the new numbering before your next round or secondary.
An NRI
Residence and RNOR planning, Form 13 lower-deduction certificates and DTAA/FTC claims continue unchanged in substance — see our Form 13 note and the USD 1M repatriation guide for the mechanics that survive intact. If you are selling property or repatriating funds across the 2026 transition, confirm which Act governs the tax year of the transaction.
A foreign company / GCC
Permanent-establishment exposure, Section 195 withholding, transfer-pricing documentation and treaty positions carry forward. Intercompany agreements and TP policies that hard-code 1961-Act sections should be updated at the next review cycle.
What to do now
- Refresh section references in ESOP policies, SHAs, TP documentation and engagement letters.
- Re-confirm any time-sensitive position (property sale, repatriation, exit) against the governing tax year.
- Keep a 1961 → 2025 concordance on file for audit and assessment correspondence.
The bottom line
The Income-tax Act, 2025 is more re-plumbing than revolution — but in cross-border work, a wrong section reference is exactly the kind of detail that surfaces in an assessment years later. The cost of getting ready is low; the cost of ignoring it is a document trail that no longer matches the statute.
This note is general guidance and is not legal or tax advice; it reflects our reading of the Income-tax Act, 2025 ahead of the notified Rules. Get in touch to review how the transition affects your structure.
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