Income-tax Act 2025 for Small Businesses and Freelancers: What Changed and What Did Not

Income Tax | RegisCorp Team

Checked on 24 October 2026. The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026. For a small business owner, a freelancer or a professional, that raises two practical questions. First, which Act applies to the return you are filing this year? Second, what actually changes for you from FY 2026-27, apart from section numbers and form names? The short version, from the pages we read, is that the return for FY 2025-26 is still filed under the old Act, the tax rates did not change, and the new Act mostly re-organises the law and renames things. But some details do move: eligibility for presumptive taxation, the time to revise a return, several form numbers and a few tax-at-source rates. This post explains what is reported, what it means for different kinds of taxpayer, which dates are still ahead this year, and what we could not verify.

RegisCorp Consultancy LLP is a digital-first legal and compliance firm in Kota, Rajasthan, working with businesses across India. We write these guides so you can check the rules before you pay anyone, including us.

Key takeaways

• FY 2025-26 income is still taxed under the 1961 Act. The return you file now, for assessment year 2026-27, falls under the old law. One page says only one return is needed for that income and that revised returns for it also fall under the 1961 Act.
• The new Act applies to income from 1 April 2026. Its first return is for "tax year 2026-27", which you file after 31 March 2027. The terms "previous year" and "assessment year" are replaced by "tax year".
• The Act is a re-drafting, not a rate change. Pages report that the number of sections falls from 819 to 536, the word count roughly halves, and the government says tax policy does not change. We could not verify the section and word counts.
• Presumptive taxation continues under a new section number, with tighter conditions. Section 44AD moves to Section 58 of the new Act. One comparison says the turnover limits and the 6 and 8 percent rates are unchanged, but eligibility becomes assessee-wise, and losses and deductions cannot be set off against presumptive income.
• You get more time to revise. The window for a revised return is reported to extend from nine to twelve months after the end of the tax year, so a return for a tax year can be revised until the following 31 March.
• Non-audit business and professional returns are due 31 August. For FY 2025-26, ITR-3 and ITR-4 filers had until 31 August 2026. Pages say this is a permanent change. Audit cases have until 21 November 2026 after the extension.
• Form numbers changed. Reported examples are Form 130 for the TDS certificate that was Form 16, Form 131 for Form 16A, Form 124 for Form 12BB and Form 168 for Form 26AS. Pages disagree on some other numbers, including a Form 140 versus Form 141 conflict for TDS returns.
• Small tax-rate changes exist. TCS on overseas tour packages and on foreign remittances for education and medical treatment is reported to fall to 2 percent, and some TCS on liquor, scrap and minerals rises from 1 to 2 percent.
• Do not trust a section number you saw in a blog. Section mappings differ between pages. Use the department's mapping tool or ask your adviser.

The key numbers and dates in one place

Which Act applies to which year

This is the point that confuses most people, so we put it first.

• Income earned from 1 April 2025 to 31 March 2026 is FY 2025-26. You report it in the return for assessment year 2026-27. That return is governed by the Income-tax Act, 1961. A page we read says the new Act "does not change the law governing income earned before that date".
• Income earned from 1 April 2026 to 31 March 2027 is tax year 2026-27 under the new Act. You report it in a return filed after 31 March 2027.

So "AY 2026-27" and "tax year 2026-27" share a label but cover different income. One page makes exactly this point.

The same page says advance tax, TDS and income records for the current period fall under the new Act. If you pay advance tax on 15 December 2026, you are paying it for tax year 2026-27 under the new Act.

For the next few years, therefore, the department and the courts will be using two Acts at once. Notices about FY 2025-26 and earlier will quote the old section numbers. Notices about 2026-27 and later will quote the new ones.

What did not change

The government's stated aim, as reported, is to simplify language and structure without changing tax policy. The pages we read confirm these points.

• The slabs and rates for the new regime are unchanged for FY 2026-27. One page lists the new regime as nil up to Rs 4 lakh, 5 percent from Rs 4 to 8 lakh, 10 percent from Rs 8 to 12 lakh, 15 percent from Rs 12 to 16 lakh, 20 percent from Rs 16 to 20 lakh, 25 percent from Rs 20 to 24 lakh and 30 percent above Rs 24 lakh.
• The rebate is unchanged. A rebate of up to Rs 60,000 under the new regime makes income up to Rs 12 lakh effectively tax-free. The rebate generally does not apply to special-rate income, and we have not checked the detail.
• The presumptive rates and turnover limits are unchanged. A comparison table in one article shows the same 6 and 8 percent rates for business and the same 50 percent rate for professionals.
• The due date for ITR-1 and ITR-2 remains 31 July. Most salaried people are unaffected by the shift to 31 August for business returns.

What did change, in plain terms

1. Presumptive taxation: same rates, tighter edges

If you use the presumptive scheme, this is the part to read twice.

Under the old law, Section 44AD let small businesses declare profit at 8 percent of turnover (6 percent for digital receipts) up to Rs 2 crore (Rs 3 crore if cash receipts are 5 percent or less). Section 44ADA let specified professionals declare 50 percent of receipts as profit up to Rs 50 lakh (Rs 75 lakh if cash receipts are 5 percent or less). Both are reported to continue in the new Act as Section 58, using a table.

One detailed comparison, from January 2026, reports these differences.

• Eligibility is assessee-wise. Under the old law you could claim 44AD for a business and compute other income separately. Under the new section, a disqualifying source of income, such as a specified profession or commission or brokerage income, makes the assessee ineligible for the whole scheme.
• No set-off of losses or deductions against presumptive income. The new text is reported to bar any loss, allowance or deduction under the Act, including brought-forward losses.
• Audit trigger. Declaring income below the presumptive rate while total income exceeds the basic exemption limit can trigger an audit. The article says the five-year continuity condition is broadly retained, but the table is not entirely clear.
• Advance tax. The relief for presumptive filers is reported to move to Section 408(2). One page says the first three instalments are relaxed for them, other than goods carriage operators.

A separate article on Section 58, from June 2026, agrees that the core limits and rates are unchanged and that the changes are structural. It adds that the full text of the section was behind a paywall, so it could not give subsection references.

We have not read Section 58. Treat these points as warnings to check, not as the final law.

2. Revised returns

One page reports that the window for a revised return is extended from nine months to twelve months after the end of the tax year. For FY 2025-26, another page gives 31 March 2027 as the last date for a revised return, and 31 December 2026 as the last date for a belated return. A fee applies to a revised return filed after 31 December, according to one page. We could not verify this.

3. Business and professional returns on 31 August

For ITR-3 and ITR-4 filers who do not need an audit, the date moved from 31 July to 31 August. Three pages report it, one as a Budget announcement of February 2026, and one says the Finance Act 2026 made it permanent. If you missed 31 August 2026, the belated return date of 31 December 2026 is the next window, and a late fee and interest apply.

4. Form numbers

The pages we read give these reported replacements.

One page also says Form 141 replaces four separate TDS forms. Our post on TDS and TCS for small businesses notes that sources disagree on whether the relevant form is numbered 140 or 141. We have not resolved that, and nothing here settles it. Before you file a TDS return, confirm the form number on the portal.

Another page says 54 priority forms went live on 1 April 2026 and the remaining 136 forms come in tranches during FY 2026-27. We could not confirm the counts.

5. TCS, TDS and securities tax

Reported changes from 1 April 2026:

• TCS on overseas tour packages falls to a flat 2 percent with no threshold. TCS on foreign remittances for education and medical treatment falls from 5 percent to 2 percent.
• TCS on sale of alcoholic liquor, scrap and certain minerals rises from 1 percent to 2 percent. TCS on tendu leaves falls from 5 percent to 2 percent.
• Manpower supply services are brought into contractor TDS at 1 or 2 percent, according to a Budget summary. This matters if you use contracted staff.
• Securities transaction tax on futures and options sales rises, according to one page. It is relevant only to traders.

6. Other items

• Buyback proceeds are reported to be taxed as capital gains instead of deemed dividends.
• Interest cannot be deducted against dividend or mutual fund income.
• The deduction for amounts owed to micro and small suppliers that we covered in our post on MSME-1 is reported to sit at Section 37(2)(g) in the new Act from FY 2026-27. See our post on the MSME-1 return for what it means.
• HRA exemption at the higher percentage is reported to extend to eight cities, with a disclosure of the relationship to the landlord.

What it means for different taxpayers

A freelancer or consultant on the 50 percent scheme

Your rate and limit are reported to stay the same. Check that none of your income falls outside what Section 58 allows, because eligibility is reported to be tested for the whole assessee. Keep your records anyway. Our upcoming guide to freelancer tax goes through the details.

A small trader or shopkeeper on the 6 and 8 percent scheme

Same percentages, same limits. If you also earn commission or brokerage, or run a specified profession on the side, check the new eligibility test before you file for tax year 2026-27.

A proprietor with books and an audit

Your date for FY 2025-26 is the extended 21 November 2026, if the tax audit report was filed by 21 October. If the audit report was not filed by then, the position is unclear from the pages we read, so ask your auditor.

A company or LLP

Dates for FY 2025-26 are largely unchanged apart from the extensions reported for audit cases. For the LLP position, see our post on LLP annual compliance.

A salaried person with a side business

You may file ITR-3 or ITR-4 for the business, which moved to 31 August. Check whether your side income makes you ineligible for presumptive taxation under the new test.

A worked example: a freelancer with Rs 18 lakh of receipts

Take a freelance designer in Kota with Rs 18 lakh of gross receipts for FY 2025-26, nearly all received through bank transfer. The numbers are illustrative and assume the new regime with no other income.

• Presumptive profit. At 50 percent of receipts, taxable income is Rs 9 lakh. The receipts are within the Rs 50 lakh limit.
• Tax on the slabs. The first Rs 4 lakh is nil. Rs 4 to 8 lakh at 5 percent is Rs 20,000. Rs 8 to 9 lakh at 10 percent is Rs 10,000. That totals Rs 30,000 before rebate.
• Rebate. With total income below Rs 12 lakh, a rebate of up to Rs 60,000 as reported wipes out the Rs 30,000.
• Result. Tax is nil, but the return is still due. For FY 2025-26, the due date for a non-audit business or professional return was 31 August 2026.

If the same freelancer missed that date, she can still file a belated return until 31 December 2026, with a late fee reported at Rs 1,000 for income up to Rs 5 lakh and Rs 5,000 above. At Rs 9 lakh of income, the fee is Rs 5,000, even though no tax is due. A nil-tax return is not free if it is late.

A second worked example: a trader with Rs 1.2 crore of turnover

A small trader has turnover of Rs 1.2 crore, of which Rs 90 lakh came by bank transfer or UPI and Rs 30 lakh in cash.

• Eligibility. Turnover is within Rs 2 crore. The cash share is 25 percent, so the higher Rs 3 crore limit is not available, but the Rs 2 crore limit applies.
• Presumptive profit. 6 percent of Rs 90 lakh is Rs 5.4 lakh. 8 percent of Rs 30 lakh is Rs 2.4 lakh. Total is Rs 7.8 lakh.
• Tax on the slabs. Nil to Rs 4 lakh, then 5 percent of Rs 3.8 lakh is Rs 19,000, and the rebate makes it nil.

Does that mean no tax? Only if there is no other income and the rebate applies as reported. It also assumes the trader has no ineligible income and files on time. A mistake with the cash share or with a commission side-line can change the whole analysis.

Dates still ahead this year

For the TDS dates, see our post on TDS and TCS. We have not verified the advance tax instalment dates against the new Act, but pages we read still give 15 June, 15 September, 15 December and 15 March.

Practical steps for a small business

1. Check which year each document belongs to. A notice about FY 2025-26 will cite the old Act. Tax year 2026-27 will cite the new one.
2. Update your accounting and payroll software. Make sure it supports the new section references and form numbers for TDS certificates.
3. Ask your adviser about presumptive eligibility. If you have more than one kind of income, the test may now work against you.
4. Re-issue templates. Contracts and invoices that quote old section numbers will not be wrong, but they will look dated.
5. Keep records anyway. Presumptive filers are not asked for books, but a notice or a bank loan will ask for proof.
6. Do not rely on a section number from a blog. Use the department's mapping tool for the section you need.

Common mistakes

• Assuming the new Act applies to this year's return. It does not. FY 2025-26 is filed under the 1961 Act.
• Assuming a nil-tax return can be skipped. The late fee is charged on the filing, not on the tax.
• Using a section number from an unreliable source. Mappings differ, and one reader comment we saw contradicted the article it was attached to.
• Mixing professional and trading income and still claiming the business scheme. The eligibility test is reported to be tougher.
• Missing the belated return window. After 31 December 2026, the options are narrower and costlier.
• Forgetting that TDS and advance tax now follow the new Act. Current-year payments belong to tax year 2026-27.
• Using an old Form 16 or Form 16A template. The reported new numbers are Form 130 and Form 131.

Frequently asked questions

Which Act applies to my FY 2025-26 return?

The Income-tax Act, 1961. The return is for assessment year 2026-27.

When does the new Act apply?

To income of tax year 2026-27, from 1 April 2026. Its first return is filed after 31 March 2027.

What is a "tax year"?

The single term that replaces "previous year" and "assessment year". Tax year 2026-27 runs from 1 April 2026 to 31 March 2027.

Have the tax rates changed?

The pages we read say the slabs for the new regime are unchanged for FY 2026-27, and that the stated aim of the Act is simplification, not a change of policy.

Did Section 44AD and 44ADA go away?

No. They are reported to continue as Section 58 of the new Act, with some changes in eligibility and set-off.

What is the ITR due date for a non-audit business or professional?

For FY 2025-26, 31 August 2026. A belated return can be filed until 31 December 2026, with a late fee and interest.

What is the due date for audit cases?

The ITR is due 21 November 2026 after the reported extension, and the tax audit report was due 21 October 2026. We have not read the CBDT order.

How long do I have to revise a return?

For FY 2025-26, until 31 March 2027, according to the pages. The new Act is reported to allow twelve months after the end of the tax year.

Are Form 16 and Form 16A gone?

They are reported to be replaced by Form 130 and Form 131 for the new Act. Salary certificates for FY 2025-26 may still use the old forms. Check with your payroll provider.

Does the new Act change TDS rates?

Mostly not. Reported changes affect specific items such as manpower supply. See our TDS post for the full picture.

Do I need to change my accounting software?

Check that it supports the new section references and forms for current-year TDS and certificates.

Is the rebate still available?

A rebate of up to Rs 60,000 under the new regime is reported to continue, making income up to Rs 12 lakh effectively tax-free. Check how it applies to your type of income.

Where can I find the section mapping?

The department publishes a mapping tool between the two Acts, according to one page. We have not used it, so ask your adviser or find it on the department's website.

What to do next

1. Confirm that your FY 2025-26 return was filed under the 1961 Act and on time. If not, plan a belated return before 31 December 2026.
2. If you use presumptive taxation, ask your adviser whether any part of your income affects eligibility under the new Section 58.
3. Update the forms and section numbers in your payroll, TDS and invoicing templates.
4. Put 15 December 2026 in your calendar for advance tax.
5. Keep your own records, even if the scheme does not require books.

If you want help with income tax returns, advance tax, TDS or choosing between the presumptive scheme and regular books, contact RegisCorp.

This post is general information, not legal or tax advice. Rules change, so check your facts with a qualified professional before you act.

Sources and what we could not verify

Sources used

• ClearTax, income tax changes from April 2026: tax year, slabs and rebate, return dates, TCS changes and form numbers. The page does not state its publication date.
• Outlook Money, no second return needed for FY 2025-26 income: which Act applies to which year. Updated 2 July 2026.
• Outlook Business, new Income Tax Act effective April 2026: background on the Act and the forms rollout. Published 18 November 2025.
• TaxGuru, Income-tax Act 2025 in force from 1 April 2026: the CBDT release, dates of passage and assent, and the Rules. Published 4 April 2026.
• TaxGuru, presumptive taxation under the 1961 Act and the 2025 Act: the comparison table. Published 25 January 2026.
• Taxscan, Section 58 versus Section 44AD: limits, rates and eligibility. Dated 22 June 2026.
• Patron Accounting, Income-tax Rules 2026 timeline: the Rules, form numbers and rollout phases. Updated 6 April 2026.
• Ujjivan Small Finance Bank, ITR filing deadline guide: dates, late fee and which Act governs. Dated 21 July 2026.
• IncorpX, ITR due date extended to 31 August 2026: the 31 August date and related points. Updated 15 October 2026.
• Careerindia, CBDT extends audit and ITR deadlines: the 21 October and 21 November dates. Published 29 September 2026.
• Free Press Journal, Union Budget 2026: the Budget announcements. Published 1 February 2026.

All of these are secondary or commercial sources. We did not open the Income-tax Act, 2025, the Income-tax Rules, 2026, the Finance Act 2026, the CBDT orders or the department's website.

What we could not verify

• The text of Section 58 and its conditions, including the assessee-wise eligibility test and the bar on set-off.
• The section and word counts of the new Act, and the section mapping between the two Acts.
• Whether the Income-tax Rules, 2026 were notified on 20 March 2026 or are still being finalised, since two pages disagree.
• The form numbers, including the 140 versus 141 conflict for TDS returns, and the counts of forms released.
• The CBDT order for the 21 October and 21 November extensions, and what happens if the audit report missed 21 October.
• The 12-month revised return window, the fee for revising after 31 December and the belated return date.
• The late fee amounts under the new Act and whether the old section still applies to FY 2025-26.
• The slabs, rebate and cess for each regime, which we took from one commercial page.
• The advance tax instalment dates and relief for presumptive filers under the new Act.
• The Section 37(2)(g) reference for the micro and small supplier deduction.
• Any change after 24 October 2026.