Tax Year

What it means

Tax year is the term used in the Income-tax Act, 2025 for the 12-month period from 1 April to 31 March in which income is earned and on which tax is charged. It replaces the older pair of terms, “previous year” (the year income was earned) and “assessment year” (the following year in which it was assessed), from 1 April 2026. One single year label now does the job of both.

How it works

• Tax year 2026-27 covers income earned from 1 April 2026 to 31 March 2027. Under the old system, the same period would have been called previous year 2026-27 and assessment year 2027-28.

• For a business or profession newly set up during a year, the first tax year starts on the date it was set up and ends on 31 March.

• Income earned up to 31 March 2026 (FY 2025-26) is still taxed under the Income-tax Act, 1961 and filed as assessment year 2026-27.

• Forms are renamed under the new Act. Form 16 is now Form 130 and Form 12BB is now Form 124.

• Familiar due dates continue. Advance tax for tax year 2026-27 is payable by 15 June 2026, 15 September 2026, 15 December 2026 and 15 March 2027.

Example

Kavita, a salaried professional, wants to understand which year is which.

1. Salary for April 2025 to March 2026: this is FY 2025-26, assessment year 2026-27, under the old Act. She files her return in 2026 using the old terms.

2. Salary for April 2026 to March 2027: this is tax year 2026-27 under the new Act. She will file her return for it in 2027.

3. If her salary for tax year 2026-27 is ₹14,75,000 under the new regime, taxable income after the ₹75,000 standard deduction is ₹14,00,000.

4. Tax: ₹20,000 (4 to 8 lakh) + ₹40,000 (8 to 12 lakh) + ₹30,000 (₹2 lakh at 15%) = ₹90,000, plus 4% cess of ₹3,600, a total of ₹93,600 for tax year 2026-27.

Key points to remember

• Do not mix up the labels. “Tax year 2026-27” is not the same as the old “assessment year 2026-27”.

• When paying tax by challan, select the year carefully. A wrong year is a very common mistake.

• Section names like 80C, 87A and 44AB are still widely used to describe rules, even though the new Act renumbers them.

• Notices and returns for years up to FY 2025-26 continue under the old Act and its terminology.

• Your employer’s Form 130 will refer to the tax year, not the assessment year.