The Income Tax Act 2025 Replaces a 65-Year-Old Law
The most historic change of this new financial year: the Income Tax Act, 1961 — which governed India's tax system for 65 years — is officially replaced by the Income Tax Act, 2025, effective today.
The core tax rates and income slabs remain unchanged. What changes is the language, structure, and compliance framework around them.
What's new in the 2025 Act
STT on F&O Derivatives Hiked — Big Hit for Traders
If you trade Futures & Options, this change hits your P&L directly. The Securities Transaction Tax (STT) on derivatives has been increased significantly from April 1, 2026.
| Instrument | Old STT Rate | New STT Rate (April 1, 2026) | Change |
|---|---|---|---|
| Futures contracts | 0.02% of notional value | 0.05% of notional value | +150% |
| Options contracts | 0.1% on premium | Revised upward | Increased |
- SEBI now mandates F&O traders hold at least 50% of total trading collateral in cash or cash equivalents.
- Major brokers including Zerodha are reportedly increasing brokerage fees on select intraday derivative trades.
- With March 31 being a market holiday and April 1 a settlement holiday, intraday/F&O credits are only available from April 2 onwards.
Sovereign Gold Bond (SGB) Tax-Free Status Restricted
Previously, all SGB holders enjoyed tax-free maturity redemption regardless of how they acquired the bonds. From April 1, 2026, that changes.
| Investor Type | Before April 1, 2026 | From April 1, 2026 |
|---|---|---|
| Original subscriber (direct from RBI) | Tax-free at maturity ✓ | Still tax-free ✓ |
| Secondary market buyer | Tax-free at maturity ✓ | Capital gains tax applies ✗ |
Investors who purchased SGBs from the stock exchange or secondary market must now pay capital gains tax on redemption — even if held until maturity. This is a significant change for those who bought SGBs at a discount in the secondary market.
Share Buyback Income Now Taxed as Capital Gains
The tax treatment of share buyback proceeds has been fundamentally restructured. Previously treated as deemed dividends, buyback income is now classified as capital gains.
| Promoter Type | Tax Rate on Buyback Income |
|---|---|
| Corporate promoters | 22% capital gains |
| Non-corporate promoters | 30% capital gains |
This change also removes the ability to deduct interest expenses against dividend or mutual fund income — a deduction that was available under the old Income Tax Act, 1961.
TCS on International Remittances Reduced — Relief for Students & Patients
In a significant relief for middle-class families, the Tax Collected at Source (TCS) rate on specific international expenses under the Liberalised Remittance Scheme (LRS) has been reduced, effective today.
| LRS Purpose | Earlier TCS Rate | New TCS Rate |
|---|---|---|
| Overseas education remittance | 5% | 2% |
| Overseas medical treatment | 5% | 2% |
This applies to qualifying foreign remittances conducted under LRS from April 2026 onwards — a meaningful saving for families sending children abroad for education.
Banking: RBI 2FA Mandate + New ATM & Credit Card Rules
Stronger Digital Payment Security
The RBI has implemented mandatory two-factor authentication (2FA) for all digital payments. Banks that fail to implement this and suffer fraud will be held directly liable. The 2FA options are:
- Dynamic OTP + static PIN
- Real-time biometric + device binding
- Token-based authentication + password
Note: Stricter rules for international transactions are expected by October 1, 2026.
ATM Cash Withdrawal Charges
Some banks (including HDFC and Bandhan Bank) are introducing or revising transaction charges of ₹23–25 per transaction beyond the free monthly limit. Check with your bank for exact revised fee schedules.
PAN Mandatory for Credit Cards
PAN is now mandatory for applying for new credit cards. Existing users may need to link their PAN. Some credit cards may also see changes in cashback structures and lounge access benefits.
FASTag, Railways & LPG: Day-to-Day Cost Changes
Updated ITR Filing Deadlines for FY 2026–27
| ITR Form | Taxpayer Type | Deadline |
|---|---|---|
| ITR-1, ITR-2 | Salaried individuals, HUF (non-audit) | July 31, 2026 |
| ITR-3, ITR-4 | Business/professional (non-audit) | August 31, 2026 |
| Audit cases | Tax audit applicable entities | October 31, 2026 |
Your April 2026 Financial Alignment Checklist
Here is what you should do right now to stay compliant and financially aligned:
- Decide whether to opt for old regime or new tax regime for FY 2026–27
- Update your employer with tax regime choice before April 30 to avoid excess TDS
- Check if your PAN is linked to your credit card and bank account
- Keep Class 10 certificate / passport ready if you need a new PAN
- If you hold SGBs from secondary market, plan for capital gains tax at maturity
- F&O traders: review your cost-per-trade and recalibrate strategy for higher STT
- Note updated ITR deadlines — August 31 is now the new date for ITR-3/ITR-4
- If sending money abroad for education or medical, enjoy the lower 2% TCS
- Update FASTag balance if your annual pass is due for renewal
- Review mutual fund statement for new TER disclosure format
