The first filing season after the rollout of the Income-tax Act, 2025 has left many taxpayers puzzled. With the new law replacing “Assessment Year” with “Tax Year” from 1 April 2026, some are wondering whether they will need to file two income tax returns, one for AY 2026-27 and another for Tax Year 2026-27.
The Income Tax Department has now clarified that taxpayers will not have to file two returns for the same income. While the new law introduces a new terminology, the return filing process for income earned during FY 2025-26 remains under the existing framework.
No need to file two returns
Addressing concerns about the transition year, the Income Tax Department has stated that the obligation to file a return for Tax Year 2026-27 will arise only after the end of that tax year.
As a result, taxpayers earning income between 1 April 2025 and 31 March 2026 will file only one return, under Assessment Year (AY) 2026-27.
The department has clarified that income earned during FY 2025-26 will continue to be reported under AY 2026-27 and will follow the applicable return filing deadlines for different categories of taxpayers.
In simple terms, taxpayers do not need to file an additional return merely because the Tax Year framework has come into effect.
Which law applies to FY 2025-26 income?
Another question that has emerged following the introduction of the new law is whether income earned during FY 2025-26 will be governed by the Income-tax Act, 1961 or the Income-tax Act, 2025.
According to the Income Tax Department, the return for income earned between 1 April 2025 and 31 March 2026 will be filed for Assessment Year 2026-27 under the provisions of the Income-tax Act, 1961.
The department has clarified that this remains the case even though the return is typically filed after 1 April 2026, when the new law has already come into force. Since the return relates to a tax period that began before the commencement of the Income-tax Act, 2025, it continues to be governed by the earlier law.
Understanding the shift to Tax Year
One of the key changes introduced by the Income-tax Act, 2025 is the replacement of the concepts of “Previous Year” and “Assessment Year” with a single concept called “Tax Year”.
The department has explained that the use of Previous Year and Assessment Year often caused confusion because they referred to two different financial years. Under the old system, income was earned in one year and assessed in the following year.
For example, income earned during FY 2025-26 is reported in AY 2026-27, even though the income relates to the previous financial year.
To simplify this framework, the new law introduces Tax Year as the reference period for income.
A Tax Year generally means a 12-month period beginning on 1 April and ending on 31 March.
When will the first Tax Year return be filed?
The Tax Year framework applies to income earned from 1 April 2026 onwards.
This means income earned between 1 April 2026 and 31 March 2027 will fall under Tax Year 2026-27.
However, the Income Tax Department has clarified that the obligation to file a return arises only after the end of the relevant Tax Year. Therefore, the first return under the Tax Year framework will be filed only after 31 March 2027, subject to the applicable due dates.
The transition can be understood as follows:
| Income period | Return reference |
| 1 April 2025 – 31 March 2026 | AY 2026-27 |
| 1 April 2026 – 31 March 2027 | Tax Year 2026-27 |
The department has also noted that while taxpayers are filing returns for AY 2026-27 under the Income-tax Act, 1961, advance tax obligations for income earned from 1 April 2026 onwards are already being governed by the provisions of the Income-tax Act, 2025.
For taxpayers, the immediate takeaway is clear. If you are filing a return for income earned during FY 2025-26, you need to file only one return under AY 2026-27 and under the provisions of the Income-tax Act, 1961. The new Tax Year framework will apply to income earned from 1 April 2026 onwards, with the first such return becoming due only after the end of Tax Year 2026-27.