When I first wrote about this topic the new Income-tax Act, 2025 was still a few months away. It is now mid-October 2026 and the Act has been in force for more than six months. That means we no longer have to guess what the transition will feel like. This update looks at what actually changed and what stayed the same. It also covers what HR and payroll teams should be doing right now.
Where We Stand Today
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. The Central Board of Direct Taxes notified the Income-tax Rules, 2026 in March 2026 along with a new set of forms. The Act applies to income earned from Tax Year 2026-27 onwards. Anything that relates to earlier periods continues under the 1961 Act through the transitional provisions. In plain terms, the year you are living through now is Tax Year 2026-27 and it runs under the new law.
The Act does not introduce new taxes or change tax rates. Its purpose is structural: simpler language and fewer cross-references and a more organized framework with the process moving further online. For most salaried people, the tax they pay did not change because of the new Act itself.
What Has Changed in Practice
The year is now one concept. The old pairing of previous year and assessment year has gone. Income earned between 1 April 2026 and 31 March 2027 is simply Tax Year 2026-27. Our post on The End of Assessment Year Confusion explains the idea. One point is easy to miss. Income from FY 2025-26 still belongs to the old Act. Returns for that year were filed as Assessment Year 2026-27 under the 1961 Act and the new terminology applies only to the year that began on 1 April 2026.
Forms have been renumbered. Form 16 becomes Form 130 and the quarterly TDS return that was known as Form 24Q has a new number under the new rules. Published payroll guides describe it as Form 138 so verify the number on the TRACES or income tax portal before you rely on it. The renumbering is mainly about structure and the filing logic stays familiar.
The timing of Form 130 confuses people. Here is how it works. Salary for FY 2025-26 falls under the old Act so employees received the familiar Form 16 by 15 June 2026. Form 130 is for Tax Year 2026-27 and its first issue is due by 15 June 2027. A few sources suggested employers might need to switch immediately but the safer reading is that your next annual certificate will be Form 130. If you have not yet checked that your payroll software can generate it start now.
The process is more digital. Pre-filled returns and online verification and automated processing continue to expand. That means less paperwork but it does not remove your responsibility to check salary and TDS and deductions carefully before you file.
What Did Not Change
The choice between the old and the new tax regime still comes down to your own numbers. The new regime remains the default and employees who prefer the old one need to say so in writing through the employer's declaration process. The Act did not decide the choice for anyone. Compare both regimes with your salary and your deductions and your housing loan benefit and your HRA and your investments. Do it afresh each year and not out of habit. Our post Old vs New Tax Regime: The Final Answer for Salaried Employees in 2026 walks through the comparison.
Record keeping did not change either. Investment proofs and home loan interest certificates and rent receipts and insurance premiums and tuition receipts and donation receipts and bank interest certificates are all still worth keeping in order.
What HR and Payroll Should Do Now
The second quarterly TDS return for July to September is due on 31 October 2026 so that deadline is close. Check that deductions and deposits for the quarter match your payroll and that the return uses the correct form. Confirm that your payroll software has been updated for the new rules and that it will generate Form 130 when the time comes.
Brief employees before the declaration season begins. Many will come to HR first with tax questions and a short note explaining the default regime and the Form 16 to Form 130 change will save a lot of repeat questions. Plan to collect investment declarations and proofs early in the second half of the year so that year-end TDS is not a shock. If your organization uses the perquisite valuation changes explained in The 2026 Income Tax Overhaul and The Great Tax Reset review your salary structures against them as well. For the month by month dates see the HR Compliance Calendar 2026: Month Wise Statutory Due Dates Every HR Professional Should Know.
For Employees
Check your monthly TDS against your payslip and make sure PAN and Aadhaar are linked. Review your Annual Information Statement from time to time and keep your investment documents organized. Get professional advice if you have several income sources. And rely on official notifications and the department's own communication and not on forwarded messages or social media rumors.
The Bottom Line
Six months in the new Act has turned out to be mostly a change of structure and language and forms. The day-to-day tax most people pay did not change and the Form 16 to Form 130 switch will not be felt until June 2027. The steadiest approach is the one I suggested before: stay informed and keep your records current and check dates on the official portals. The official sources are the Income Tax Department e-filing portal and the Income Tax India website of the CBDT.
This update reflects the position as of mid-October 2026 as I understand it from the department's announcements and published payroll guidance. Form numbers and dates can change so verify them on the official portals and consult a tax professional for your own situation.
By HR MIT - An HR Professional
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