NRI Taxation · July 29, 2026 · 6 min read

The Income-tax Act 2025 is now in force: what it changes for NRIs

On 1 April 2026 the Income-tax Act, 2025 came into force and replaced the Income-tax Act, 1961, which had governed direct taxation in India for over six decades. If you are a non-resident who has spent years learning what a handful of section numbers mean, this is the moment that knowledge needs updating. The good news, and it is genuinely good, is that the substance has barely moved. The rates are the same. The slabs are the same. No deduction or exemption has been withdrawn. What has changed is the architecture around all of it, and the references you will encounter in every document from here on.

The old Act had accumulated roughly eight hundred and nineteen sections and several thousand subsections, layered with letters and decimals until a single provision could require you to follow cross-references across five separate places. The new Act consolidates that into around five hundred and thirty six sections across twenty three chapters, grouped by topic. This is a drafting exercise rather than a policy one. The intent was clarity, not revenue.

The most immediately visible change is terminology. The old law ran on two parallel concepts, the previous year in which income was earned and the assessment year in which it was assessed, which is probably the single most common source of confusion among people filing in India from abroad. Both have been replaced by one idea, the tax year, being the year in which the income is earned and taxed. If you have ever stared at a form wondering whether you are meant to be entering 2025-26 or 2026-27, that ambiguity is now gone.

The section renumbering is where the practical friction lies. Almost every number you know has moved. The provisions governing tax deducted at source, which for a non-resident are the ones that matter most, have been consolidated: the old range covering payments to residents and non-residents alike now sits within a single consolidated chapter rather than being scattered across a long series of separately numbered provisions. The default tax regime that most people knew by its old designation has a new number too, and it remains the default. The deduction provisions that ran from the old eighty series have been renumbered into a new range, with all of them retained. A mapping document exists that correlates old provisions to new ones, and it is worth keeping to hand rather than trying to remember the translation.

Now the part that matters most for anyone filing this year, because it is where most of the anxiety is misplaced. The two Acts coexist. The new law applies to income earned from 1 April 2026 onward. Income earned up to 31 March 2026 continues to be governed by the old law, which means the return you file in the middle of 2026 for the financial year 2025-26 still runs on the old Act and the old section numbers. Pending assessments, appeals and notices relating to earlier periods also continue under the previous framework, and the new Act does not apply retrospectively. Returns already filed remain valid and do not need refiling. If you are in the middle of a filing right now, nothing about your position has changed.

For a non-resident specifically, there are a few places where the transition will show up in ordinary life rather than in theory. Any engagement letter, tax opinion or advisory note that quotes section numbers will need reviewing once, because a search and replace across such documents is rarely accurate given that the names of provisions sometimes changed alongside the numbers. Certificates and declarations used to claim treaty relief will carry updated references. Quarterly statements filed by anyone deducting tax on payments to you will need to use new section codes, and older codes will be rejected, which means a buyer of your property or a tenant paying you rent may need reminding. Payroll systems, deduction certificates and accounting software have been updating in the background for months, and the places where that update has not happened are where errors will surface.

What has not changed is worth stating plainly, because the volume of commentary about this transition has left some people assuming their planning has been invalidated. Residential status is still determined by the same day-count logic. The resident but not ordinarily resident category, which is the most valuable planning window available to someone moving back to India, still exists and still works the same way. Treaty relief still operates as it did. The exemptions on reinvestment of capital gains are intact. The tax-free threshold under the default regime is unchanged. If your plan was sound in March, it is sound now.

The practical advice is unglamorous. Do not rewrite anything in a hurry. Identify which law governs the period you are dealing with, which is a question of when the income arose rather than when you are reading about it. Treat any note or article that cites a section number without saying which Act it belongs to as incomplete, because for the next two or three years that ambiguity will be the main source of error in Indian tax commentary aimed at non-residents. And when a professional gives you a section reference, it is entirely reasonable to ask which Act they mean.

If you are working through your India position more broadly, the questions of what to do before and after moving back, how treaty relief prevents the same income being taxed twice and why tax is deducted at source at higher rates for non-residents are the ones that tend to matter more than the renumbering itself.

Rahul Rajgopal · SEBI Registered Investment Adviser · INA000021933 · BASL 2446
Registration granted by SEBI and membership of BASL do not guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Content is for educational purposes only and does not constitute personalised investment advice. This is not legal or tax advice. Tax provisions change and their application depends on individual circumstances. Please consult a qualified tax professional before acting.