Statutory Guides
The Income Tax Act, 2025 came into force on 1 April 2026 and replaced the Income Tax Act, 1961. It brings no new tax. For payroll, the changes are names and numbers: tax on salary is now deducted under Section 392, Form 16 becomes Form 130, Form 24Q becomes Form 138, and the tax year replaces the previous year and the assessment year.
Last updated: . General explainer, not legal or tax advice.
The Income Tax Act, 2025 came into force on 1 April 2026. The Central Board of Direct Taxes said so in a press release that day. The Income Tax Act, 1961 stands repealed from the same date. The Income Tax Rules, 2026, which carry the forms and procedures, were notified on 20 March 2026.
The new Act is shorter. It has 536 sections and 16 schedules, against 819 sections and 14 schedules in the 1961 Act. The tax department's own FAQ says it does not impose any new tax. For an employer running payroll, what changes is the section numbers, the form numbers and a few terms.
These are the references a payroll team meets most often. The left column is what you used until March 2026. The right column is what applies to salary paid from April 2026.
| What it is | Income Tax Act, 1961 | Income Tax Act, 2025 |
|---|---|---|
| Tax deducted from salary | Section 192 | Section 392 |
| Annual TDS certificate for salary | Form 16, Section 203, Rule 31 | Form 130, Section 395(4)(b), Rule 215 |
| Quarterly TDS statement for salary | Form 24Q, Section 200(3), Rule 31A | Form 138, Section 397(3)(b), Rule 219 |
| TDS certificate for payments other than salary | Form 16A | Form 131 |
| Default tax regime for individuals | New regime, Section 115BAC | New regime, Section 202 |
| The year income is taxed in | Previous year, assessed in the assessment year | Tax year |
Form and section mapping as given in the Income Tax Department FAQs on Form 130, Form 138 and certificates under Section 395(4), and the e-filing portal FAQ on the new Act.
A tax year is the twelve months of a financial year, 1 April to 31 March. It takes the place of the term previous year from the 1961 Act, and the term assessment year has been dropped. The year that started on 1 April 2026 is tax year 2026-27, and salary paid in it is taxed as income of tax year 2026-27.
Your accounting year does not change. The department's FAQ says businesses need no change in their accounting year or financial statements. Payslips and salary registers can keep running April to March. If a template you use mentions assessment year, it is worth updating for anything that covers April 2026 onwards.
The 1961 Act. The department's FAQ says the repeal does not disturb anything relating to tax years before 1 April 2026, and that the old Act continues to govern them. Returns for that period, filed in July 2026, used the forms prescribed under the old Act.
For payroll this splits cleanly at 31 March 2026:
The new Act did not bring in a new tax. The CBDT press release says the reform does not alter the underlying tax policy. Rates are still set for each tax year by a Central Act, as the Finance Act did before.
The new regime stays the default. Under the 1961 Act it sat in Section 115BAC. Under the 2025 Act it sits in Section 202, and an employee can still opt out of it. So the monthly TDS working does not change just because the Act changed. Check the slabs for the current tax year on the income tax portal before you revise any employee's deduction.
The yearly rhythm is the same as before. The names and one step at the end are different.
Deduct tax from salary under Section 392 based on each employee's regime and declarations, and deposit it with the government as before.
Form 138 is due by 31 July, 31 October and 31 January for the first three quarters, and by 31 May for the January to March quarter. It replaces Form 24Q.
Once the fourth quarter Form 138 is processed, download Form 130 for each employee from the TRACES portal and give it to them by 15 June 2027. Under Rule 215, the certificate has to be generated and downloaded from the portal. The department's FAQ says a certificate prepared any other way is not a valid Form 130.
Any employee FAQ, email or template that tells staff to expect Form 16 or quotes Section 192 is out of date for 2026-27. Staff will receive Form 130 in June 2027.
For 2025-26 and earlier years, yes. From tax year 2026-27, the certificate is Form 130. The job it does is the same: it tells the employee how much salary was paid and how much tax was deducted and deposited against their PAN.
One difference matters for small employers. Many used to prepare Part B of Form 16 themselves, in Excel or payroll software, and merge it with the Part A they downloaded from TRACES. Form 130 comes from TRACES as a whole, built from the Form 138 statements your CA files. Errors now have to be fixed in Form 138, not on the certificate. The Form 130 guide covers the parts and the steps. The employer's side of the older form is in how to issue Form 16.
Offrd is payroll and HR software for Indian companies with up to 250 employees. It keeps salary, allowances, deductions and each employee's regime choice in one place, so the figures your CA puts into Form 138 come from clean records. Offrd verifies PAN in real time, which matters because the tax credit follows the PAN in the statement.
Offrd does not file Form 138 and does not generate Form 130. Once your CA's Form 138 is processed and you download Form 130 from TRACES, upload the file to Offrd. Offrd emails each employee their own certificate. For 2025-26 and earlier years, the Form 16 module still builds Part B and combines it with Part A.
The monthly side sits in Offrd payroll and the payslip generator. The wider list of employer duties is in the HR statutory compliance guide, and the term pages for TDS on salary and Form 24Q carry the old and new references side by side.
On 1 April 2026. It replaced the Income Tax Act, 1961, which stands repealed from that date. The Income Tax Rules, 2026 were notified on 20 March 2026.
The twelve months of a financial year, 1 April to 31 March. It replaces the term previous year from the 1961 Act, and the term assessment year has been dropped. The year that started on 1 April 2026 is tax year 2026-27.
Yes, from tax year 2026-27. Salary for 2025-26 and earlier years still had Form 16. The first Form 130 certificates, for tax year 2026-27, are due by 15 June 2027.
Form 138. It is the quarterly statement of tax deducted from salary, filed under Section 397(3)(b) of the Income Tax Act, 2025 and Rule 219 of the Income Tax Rules, 2026.
Section 392 of the Income Tax Act, 2025, for salary paid from 1 April 2026. Before that it was Section 192 of the 1961 Act.
The new Act does not impose any new tax, and rates are still set for each tax year by a Central Act. The new regime remains the default, now under Section 202, and an employee can opt out of it.
No. Your CA files Form 138, and Form 130 is downloaded from TRACES. Offrd keeps the payroll data your CA needs, and once you upload the Form 130 file, Offrd emails each employee their own certificate.
The rules and dates on this page come from the official sources below. Forms and dates can change, so check the current version on the source before you act on it.
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