The introduction of the Income-tax Act, 2025 has sparked a common question among taxpayers this filing season: Will the new Tax Year system require filing two Income Tax Returns (ITRs)?
The confusion stems from the government’s decision to replace the familiar Assessment Year (AY) terminology with Tax Year from 1 April 2026. Many taxpayers assumed this meant an additional return would have to be filed during the transition.
The Income Tax Department has now clarified that this is not the case.
What’s Happening?
Until now, the tax system worked using two different terms. Income was earned during a Financial Year (or Previous Year) and reported in the following Assessment Year. For many taxpayers, this often created confusion because the year in which income was earned and the year mentioned in the return were different.
To simplify the framework, the Income-tax Act, 2025 replaces these concepts with a single Tax Year, making it easier to identify the period for which income is being reported.
While the terminology has changed, the current filing process has not.
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So, How Many ITRs Do You Need to File?
Only one.
If your income was earned between 1 April 2025 and 31 March 2026, you need to file a single return under Assessment Year (AY) 2026-27.
There is no requirement to file another return under the new Tax Year system for the same income.
The Income Tax Department has clarified that the current filing season will continue under the existing framework despite the new law coming into force.
Which Income Tax Act Applies This Year?
Another area of confusion is whether taxpayers should follow the Income-tax Act, 1961 or the Income-tax Act, 2025 while filing their returns.
The answer depends on when the income was earned, not when the return is filed.
Since the current return relates to income earned during FY 2025-26, it will continue to be governed by the Income-tax Act, 1961. The fact that the new legislation became effective from 1 April 2026 does not change the law applicable to this income period.
When Will the New Tax Year Actually Matter?
The new Tax Year framework becomes relevant for income earned from 1 April 2026 onwards.
Here’s how the transition works:
- Income earned between 1 April 2025 and 31 March 2026: File one ITR under AY 2026-27.
- Income earned from 1 April 2026 onwards: Falls under Tax Year 2026-27.
- First return under the Tax Year system: Will be filed after 31 March 2027, as per the applicable due dates.
What Does This Mean for Taxpayers?
For most taxpayers, nothing changes this filing season.
Continue filing your return as you normally would, using the applicable ITR form and within the prescribed due date. The introduction of the Tax Year is primarily an administrative change designed to simplify tax terminology rather than increase compliance.
What’s Next?
The new Tax Year framework is intended to make India’s tax system easier to understand by replacing multiple year references with a single, straightforward concept.
For now, taxpayers should focus on filing one ITR for AY 2026-27. The new Tax Year filing process will begin only for income earned from 1 April 2026, with the first such return becoming due after the close of that Tax Year.
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