Top 7 Confusing Tax Terms Explained: Old Act vs New Act 2026
Every few weeks I get a message from a reader who has spotted a new section number or form name somewhere and wants to know if their filing has changed overnight. I put together this list of the top 7 confusing tax terms between the old Income Tax Act 1961 and the new Income Tax Act 2025, the exact handful that come up most in my consultations, and I am explaining each one here in plain language, with a clear answer on which version actually applies to your July 2026 filing.
One number puts the scale of this change in perspective. Per the Income Tax Department’s own FAQs, the new Act runs to 536 sections and 16 schedules, down from 819 sections and 14 schedules in the old Act. That is a genuine simplification on paper, but it also means a lot of familiar numbers have moved. Before we get into the list, remember one rule that solves most of the confusion by itself. If you are filing your return in July 2026 for income earned in FY 2025-26, you are filing under the Income Tax Act 1961, full stop. Everything below that mentions a new section or form applies only from Tax Year 2026-27 onwards. I cover this transition in more depth in my comparison of the Income Tax Act 2025 versus the Income Tax Act 1961, but keep that one rule in mind as you read the rest of this list.
1. Financial Year and Assessment Year Become Tax Year
Under the old Act, income was earned in a Financial Year and assessed the following year, called the Assessment Year. Income earned between April 2025 and March 2026 is Financial Year 2025-26, assessed in Assessment Year 2026-27. The new Act drops this two-label system and replaces it with a single term, Tax Year. There is no more separate assessment year running one step behind. The Income Tax Department’s own transition FAQs confirm that Tax Year simply corresponds to what the old Act called Previous Year, and the concept only becomes relevant for income earned from April 2026 onwards, meaning your current FY 2025-26 return still runs on the old FY and AY labels.
2. Section 80C Becomes Section 123
This is the one every salaried employee has memorised at some point. The Rs. 1.5 lakh deduction for PPF, ELSS, life insurance premiums, and other eligible investments does not disappear, it simply moves. Under the new Act, Section 80C becomes Section 123, with the same limit and the same list of eligible instruments. This only applies once the new Act governs your return, so for FY 2025-26 you still cite Section 80C.
3. Section 80D Becomes Section 126
Health insurance premium deductions follow the same pattern. Section 80D becomes Section 126 under the new Act, and the Rs. 25,000 limit for individuals and Rs. 50,000 for senior citizen parents carries forward unchanged. I want to flag this one specifically because I have seen it misquoted online as Section 124. Section 124 is a different provision entirely. The correct new number for the health insurance deduction is Section 126.
4. Section 10 Exemptions Move to Schedule II
This one trips people up more than a simple renumbering, because it is not a renumbering at all. Under the old Act, Section 10 listed all the major income exemptions, including HRA, gratuity, and leave encashment. Under the new Act, these provisions have been taken out of the main body of sections entirely and moved into Schedule II. The exemptions themselves are preserved in substance, only the citation changes from a section number to a schedule reference.
5. Over 60 TDS Sections Collapse Into Two
Under the old Act, TDS was scattered across more than sixty sections, Section 192 for salary, 194C for contractors, 194J for professional fees, and so on, each with its own rate and threshold. The new Act consolidates almost all of this into two sections. Section 392 covers TDS on salary. Section 393 covers every other type of payment, contractors, professionals, rent, commission, and more, using payment codes inside a single section instead of separate ones.
I saw this confusion play out with Sunita, a reader who works in HR and noticed her company’s payroll system started referencing Section 392 on internal documents from April 2026 onward. She assumed her own FY 2025-26 filing in July had somehow shifted to the new numbering. It had not. Her employer’s system was simply getting ready for Tax Year 2026-27 payroll, which the new Act already governs from April 2026, while her actual ITR for FY 2025-26 still cites the old Section 192. The rates have not changed either way, only which section you quote.
6. Form 16 and Form 26AS Get New Numbers
Two of the most familiar documents in Indian tax filing also got renamed. Form 16, the salary TDS certificate, becomes Form 130. Form 26AS, the annual tax credit statement, becomes Form 168. For your FY 2025-26 filing, your employer still issues a Form 16, not a Form 130, and you still cross-check TDS credit against Form 26AS, not Form 168. The new form numbers apply once your income falls under Tax Year 2026-27.
7. Form 15G and Form 15H Merge Into Form 121
If you have ever submitted Form 15G or Form 15H to a bank to avoid TDS on fixed deposit interest, this is the change to know about. The new Act merges both forms into a single Form 121, used by any eligible taxpayer regardless of age, replacing the old age-based split between the two forms.
Rahul, a freelancer I worked with, submitted Form 15G to his bank in April 2025 for FY 2025-26, and that declaration stays valid for the full year, right up to March 31, 2026. He does not need to redo anything for his current filing. But from April 2026 onward, for Tax Year 2026-27, he will need to submit a fresh Form 121 instead of another 15G, since the old forms are discontinued from that point.
Quick Reference: Old Term vs New Term
| Old Act (1961) | New Act (2025) | Applies to your July 2026 filing? |
|---|---|---|
| Financial Year + Assessment Year | Tax Year | No, FY and AY still apply |
| Section 80C | Section 123 | No, cite Section 80C |
| Section 80D | Section 126 | No, cite Section 80D |
| Section 10 exemptions | Schedule II | No, cite Section 10 |
| Section 192 (salary TDS) | Section 392 | No, cite Section 192 |
| Form 16 | Form 130 | No, you still get Form 16 |
| Form 26AS | Form 168 | No, still Form 26AS |
| Form 15G / Form 15H | Form 121 | No, valid 15G/15H stand until March 2026 |
The One Rule That Solves All Seven
If you remember nothing else from this list, remember this: the income tax portal itself runs both Acts side by side right now, with one tab for old Act filings and one for new Act filings, precisely because FY 2025-26 returns and Tax Year 2026-27 compliance are happening in the same calendar months. None of the new terms above change your tax liability. The deduction limits, the TDS rates, the exemption amounts are all identical under both Acts. Only the citation has changed, and only from Tax Year 2026-27 onwards. For a broader look at how the full tax system fits together, my complete income tax guide is a good next stop.
What About Old Notices, Refunds, and Pending Assessments
One question I get often: if a notice or refund related to an earlier year lands in your inbox after April 2026, which Act governs it? Per the Income Tax Department’s own transition FAQs, all assessments, appeals, and proceedings relating to years before April 2026 continue under the old 1961 Act until they are fully resolved, even after the new Act takes effect. A pending refund from AY 2024-25 or a rectification request for an old assessment order does not suddenly switch frameworks. What does change is anything new initiated from April 2026 onward for Tax Year 2026-27 income, which follows the new Act’s provisions and numbering from the start.
Frequently Asked Questions
Do I need to use the new section numbers when filing my ITR for FY 2025-26?
No. Your July 2026 filing for FY 2025-26 is governed entirely by the Income Tax Act 1961, so you continue using Section 80C, Section 80D, Section 192, and every other old-Act reference as before.
Why does my payslip or bank form already show a new section or form number?
Employers, banks, and payroll systems are updating their internal references ahead of Tax Year 2026-27, which the new Act governs from April 2026. This does not mean your current FY 2025-26 filing has changed.
Is Section 80D really Section 126, not Section 124, under the new Act?
Yes, Section 126. This is a genuine point of confusion online, since a few sources incorrectly list it as Section 124, which refers to a different provision entirely.
Will my deductions or TDS rates change because of the new section numbers?
No. Every deduction limit and TDS rate mentioned here carries forward unchanged. Only the section or form reference used to cite them has changed.
A Note Before You File
This article is meant to help you recognise these seven terms when you come across them, not to replace professional advice for your specific filing. Section mappings and effective dates can be clarified further through the official Income Tax Department FAQs, and it is worth cross-checking anything filing-critical with a qualified tax professional before you submit your return.
