Tax year under the Income-tax Act 2025: meaning and example
Tax year is the 1 April to 31 March period under section 3 of the Income-tax Act 2025. It replaced previous year and assessment year from April 2026.
Short answer
Tax year is the term used in the Income-tax Act, 2025 for the period whose income is taxed. Under section 3, it is the 12-month financial year starting on 1 April, or a shorter period for a newly set-up business. It replaced the dual concepts of previous year and assessment year under the 1961 Act from 1 April 2026.
- Provision
- Section 3, Income-tax Act 2025
- Period
- 1 April to 31 March
- New business
- Date of setting up to 31 March
- First tax year under new Act
- Tax year 2026-27
How the tax year works
Under the old Act, income earned in the previous year, say 2025-26, was assessed in the following assessment year, 2026-27, which confused many taxpayers. The new Act uses one term: income earned from 1 April 2026 to 31 March 2027 is the income of tax year 2026-27, and the return for it is filed after the year ends.
For a business or profession set up during a year, or a new source of income, the first tax year runs from the date of setting up or the date the source comes into existence to the following 31 March.
Transition from the old Act
The Income-tax Act, 2025 applies from 1 April 2026. Income for financial year 2025-26, which was assessment year 2026-27 under the old Act, is still governed by the 1961 Act, including returns filed during 2026. Proceedings for earlier years continue under the old law. As a result, during the transition, you may see both assessment year and tax year in notices and forms.
Why it matters for startups
Update your finance documents, contracts and internal policies to use tax year for periods from 1 April 2026, and refer to the new section numbers in tax clauses. When reading older notices or agreements, remember that assessment year 2026-27 refers to income of financial year 2025-26, not tax year 2026-27.
Related services
Sources
- EZTax: Income-tax Act 1961 vs 2025 section mapping
- Income Tax Department: Acts, rules and circulars
- Income Tax Department e-filing portal
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is tax year the same as financial year?
For most taxpayers, yes. The tax year is the financial year from 1 April to 31 March.
Does assessment year still exist?
Not under the Income-tax Act, 2025. It remains relevant only for years governed by the 1961 Act.
Which law applies to income of 2025-26?
The Income-tax Act, 1961, because the new Act applies to tax years beginning on or after 1 April 2026.