India now runs on a new income-tax law. The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. For a shop owner the good news is that tax rates and most limits did not change. What changed is the language and the section numbers your CA, bank and notices will quote.
Key takeaway: Income earned from 1 April 2026 falls under the new Act. Income for FY 2025-26 (the return you filed in 2026) stays under the 1961 Act. "Previous year" and "assessment year" are replaced by a single tax year. Your next deadline is the 15 December 2026 advance tax instalment.
Proof matrix
| Item | Detail |
|---|---|
| Law | Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026 |
| In force | 1 April 2026 (Section 1) |
| Transition | FY 2025-26 and earlier: 1961 Act. Tax year 2026-27 onwards: 2025 Act |
| New concept | "Tax year" = the 12 months of the financial year starting 1 April (Section 3) |
| Substance | Provisions are restructured and renumbered; rates are set by the yearly Finance Act |
"Tax year" in plain words
Earlier you earned income in the "previous year" 2025-26 and paid tax in "assessment year" 2026-27. That confused almost everyone. Now there is one label: income earned from 1 April 2026 to 31 March 2027 is tax year 2026-27, and your return for it is filed in 2027.
Old vs new section numbers a business owner should know
| Topic | 1961 Act | 2025 Act |
|---|---|---|
| Presumptive tax for small business | 44AD / 44ADA / 44AE | 58 |
| Books of account | 44AA | 62 |
| Tax audit | 44AB | 63 |
| Expenses not deductible (incl. ₹10,000 cash rule) | 40A | 36 |
| Deduction only on actual payment (incl. MSME 45-day rule) | 43B / 43B(h) | 37 / 37(2)(g) |
| Cash receipt limit ₹2 lakh | 269ST | 186 |
| Cash loans/deposits ₹20,000 | 269SS | 185 |
| Advance tax instalments | 211 | 408 |
| Return of income due dates | 139 | 263 |
| TDS provisions | 192–194T (many sections) | Consolidated in a table under 393 |
What stays the same for a small shop
- Presumptive scheme: turnover up to ₹2 crore (₹3 crore if cash receipts are within 5%). Deemed profit 6% on digital receipts, 8% on cash (Sec 58).
- Tax audit: above ₹1 crore turnover, or ₹10 crore if cash receipts and payments are each within 5% (Sec 63).
- Advance tax dates: 15 June (15%), 15 September (45%), 15 December (75%), 15 March (100%). Presumptive taxpayers may pay it all by 15 March (Sec 408).
- Cash limits: ₹2 lakh receipts, ₹20,000 loans, ₹10,000 per-day expenses — unchanged.
- MSME payments: pay micro and small suppliers within 15/45 days or the deduction waits.
Example: advance tax due on 15 December 2026
Your estimated tax for tax year 2026-27 is ₹1,20,000 and you have paid ₹54,000 (45%) by September. By 15 December you need 75%, which is ₹90,000 in total, so pay ₹36,000. Shortfalls attract interest at 1% a month. If you use the presumptive scheme, you can instead pay the whole amount by 15 March 2027.
Before you act: pitfalls
- Quoting old section numbers in new agreements or invoices — use the 2025 Act numbers for tax year 2026-27.
- Filing a belated or revised return for FY 2025-26 under the new Act — it stays under the 1961 Act.
- Assuming tax rates changed because the law changed. Rates come from the Finance Act each year.
- Ignoring notices that quote unfamiliar sections. Ask your CA to map them to the old section.
Playbook
- Ask your CA which tax year each pending return, notice or refund belongs to.
- Estimate profit for April–November 2026 and pay the 15 December advance tax instalment.
- Move all receipts above ₹2 lakh and expenses above ₹10,000 to bank or UPI.
- Keep monthly Profit & Loss and Balance Sheet ready so the year-end return is quick.
Keep tax-ready books in DAM
Steps use DAM's in-app search for reports.
- Open Search and type Profit & Loss to see income and expenses for any period — use it to estimate advance tax.
- Search Balance Sheet for assets, liabilities and equity at year end.
- Search Tally to send bills to Tally if your CA uses TallyPrime.
Books your CA can work with
Profit & Loss, Balance Sheet and Tally export from the bills you already make.
Frequently Asked Questions
When did the Income-tax Act, 2025 come into force?
On 1 April 2026. It applies from tax year 2026-27 onwards.
Is the 1961 Act completely gone?
No. It still governs FY 2025-26 and earlier years, including pending assessments, appeals and notices for those years.
What is Section 44AD called now?
Section 58 of the Income-tax Act, 2025.
Did tax rates change with the new Act?
The new Act restructured the law; rates are set by the annual Finance Act. Check the current slab rates with your CA.
Sources
Content checked on 23 October 2026. Income Tax Department: Act in force from 1 April 2026 · Income-tax Act, 2025 (full text) · Income-tax Act, 2025 — Wikipedia overview.
Disclaimer: This guide is for educational purposes only and does not constitute formal tax, legal or financial advice. Verify with a registered Chartered Accountant (CA) before acting.