India's Income-tax Act 2025: What Freelancers Should Know
A plain-English look at what India's new income tax law really changes for self-employed professionals, and what it leaves exactly where it was.
The Delivvo team· June 28, 2026 8 min read
If you freelance in India, you have probably seen the headlines about a new income tax law and wondered whether your filing is about to get harder. Here is the short answer. The Income-tax Act 2025 replaces the Income-tax Act 1961 from 1 April 2026, and for most self-employed professionals the way your income is taxed barely moves. What changes is the wrapper around it: the vocabulary the law uses and the section numbers it hangs the rules on. What stays is the math on your return.
This is a plain walk through what is genuinely new for a freelancer or independent professional, what is the same rule wearing a new number, and how to get your books ready for the first year the new Act governs.
What changes on 1 April 2026, and what does not
The headline is a repeal. The Income-tax Act 1961, which has run India's direct tax system for six decades, is fully repealed and replaced by the Income-tax Act 2025 with effect from 1 April 2026 (Income Tax Department). The new law applies prospectively. It governs income earned from FY 2026-27 onward, which under the old vocabulary would have been assessment year 2027-28 (Mondaq). Anything you earned up to 31 March 2026 stays under the old Act, and any assessment or dispute already running continues exactly as it was (Income Tax Department).
Keep reading
The rewrite is mostly a tidying job, and the numbers show it. The 1961 Act had 819 sections and 14 schedules. The 2025 Act has 536 sections and 16 schedules, with the rules cut from 511 to 333 and the forms from 399 to 190 (Income Tax Department). The chapter count holds at 23, and the page count drops from 823 to 622 (ClearTax). Explanations and provisos that used to sit in scattered sub-clauses have been folded into the main text of each section, and provisions that had gone obsolete were dropped (Income Tax Department).
Here is the part that touches your wallet. The slab rates, the deductions, and the way different kinds of income are taxed were never the target of this exercise. Tax rates still get set each year through the annual Finance Act, capital gains are still taxed under their own provisions, and the popular deductions and exemptions remain, even where their section numbers have moved (Mondaq). The rewrite changes where to look, not how much you owe.
The new "tax year," explained simply
The change you will actually feel is a single word. The 1961 Act made you juggle two timelines: the "previous year," meaning the year you earned the money, and the "assessment year," the year after, when you filed and were assessed. People mixed them up constantly. The 2025 Act drops both and uses one term, the "tax year" (Income Tax Department).
A tax year is a period of twelve months inside a financial year, running 1 April to 31 March (Income Tax Department). Money you earn between 1 April 2026 and 31 March 2027 falls in Tax Year 2026-27, and that is the year you report it. There is no more translating between two year labels on the same return, which is the practical win for anyone who files their own ITR.
There is one wrinkle worth knowing if you are just starting out. For a business or profession set up partway through the year, the first tax year can be shorter than twelve months. The Department's own example: a business set up on 1 December 2026 has a tax year that runs from that date to 31 March 2027 (Income Tax Department). So if you go full-time freelance in the middle of a year, your first tax year is the stub from your start date to the following 31 March.
What the new term does not do is force you to change your accounting. Because the tax year lines up with the financial year you already use, there is no need to redo your books or shift your accounting period (Income Tax Department).
A person signing a paper document with a pen at a desk
What the renumbering does not change about freelance income
It is easy to read "new income tax law" and brace for a return that looks unfamiliar. For a typical freelancer it will not. The money you earn from clients is still business or professional income, taxed at the same slab rates, sorted under the same heads of income, with the same broad logic for what counts as a deductible expense.
A few specifics carry straight over:
The slab rates set for FY 2025-26 continue into FY 2026-27, because rates live in the Finance Act, not in the main Act (Mondaq).
The new tax regime, which used to sit in Section 115BAC, continues as the default regime, now under Section 202 of the 2025 Act (Income Tax Department).
Residential status rules and the TDS and TCS machinery are kept from the old Act (Mondaq).
A choice you made under the old law, such as an accounting method or a depreciation option, is read as if you made it under the matching provision of the new Act, so you do not have to re-elect everything (Income Tax Department).
The one catch is the numbers themselves. If you keep a note that says "claim under Section X," or a proposal template that cites a particular clause, those references may now point somewhere else. The rule is usually identical and only the address changed, but it is worth a quick pass through any saved documents before your first filing under the new Act. For the wider picture of what a self-employed person owes and when, the freelance tax guide for 2026 sits well next to this piece.
Presumptive taxation under Section 44ADA: still here
This is the question most independent professionals ask first, and the answer is reassuring. The presumptive scheme for professionals carries into the 2025 Act (IndiaFilings). If you qualify, you can still declare a flat 50% of your gross receipts as income and pay tax on that, instead of tracking every expense line by line (ClearTax).
The eligibility math is unchanged. The scheme is open to specified professionals, including doctors, lawyers, engineers, architects, accountants, technical consultants, and interior decorators (ClearTax). The receipts limit is Rs 50 lakh, which rises to Rs 75 lakh as long as cash receipts stay at or below 5% of your total gross receipts (ClearTax). For a freelancer paid mostly by bank transfer, UPI, or card, that higher ceiling is the one that applies.
The reasons 44ADA became popular are intact. You are not required to maintain detailed books of account, you skip the audit under Section 44AB at these turnover levels, and there is no five-year lock-in, so you can opt in or out year by year as your numbers shift (ClearTax).
One clarification is worth flagging. Under the new framework the position is spelled out that you declare the higher of the presumptive figure (50% for professionals) or your actual profit, which closes an old gap where someone with thin real costs could under-report (IndiaFilings). In plain terms, if your true margin runs above 50%, presumptive taxation is not a route to a smaller bill. It is a route to a simpler filing. That distinction matters most for high-margin solo work where actual expenses are low, so it is worth doing the comparison once a year rather than assuming the scheme always wins.
How to get your records ready for FY 2026-27
You have until the FY 2026-27 filing to be ready, and the work is the work you should be doing anyway: keeping a clean, client-by-client record of what you billed and what you were paid. The new Act does not raise the bar on bookkeeping. It makes the timeline cleaner, because one tax year now maps to one financial year with no second label to reconcile.
Tax statement forms beside a handwritten log book recording business income and expenses
A short checklist for the changeover:
Keep income records by client and by tax year. Since FY 2026-27 is the first year under the new Act, draw a clean line at 1 April 2026 so nothing straddles the two laws.
Track the cash-versus-digital split of your receipts. To claim the Rs 75 lakh presumptive ceiling you have to show cash receipts at 5% or less (ClearTax), and that is only provable if you logged it through the year.
Decide early whether you are filing presumptive or regular. Regular means you need expense records; presumptive means you need clean gross-receipt totals. Either way, the invoices behind those totals are your evidence.
Update saved templates and notes that cite old section numbers, so your first return under the 2025 Act does not send you hunting for a clause that moved.
Hold on to your old records. Income up to 31 March 2026 stays governed by the 1961 Act (Income Tax Department), so a tidy archive of the pre-changeover years still earns its keep.
If you bill clients abroad, your records also have to capture the currency you were paid in and the rate on the day, which is its own small discipline. Multi-currency invoicing for freelancers covers how to keep that straight, and since the invoice is the document everything else hangs on, what to include on a freelance invoice is worth a read before FY 2026-27 starts.
The bottom line for Indian freelancers
Strip away the headlines and the Income-tax Act 2025 reads as a renovation, not a demolition. The law is shorter and easier to follow, the confusing two-year vocabulary is gone, and your filing from FY 2026-27 onward speaks in tax years. The presumptive scheme you lean on survives, the slab rates carry over, and the deductions are still there under new numbers. The single real homework item is records: a clean, per-client trail of income and receipts that lines up with one tax year.
That trail is where steady admin pays for itself. When your proposals, contracts, deliverables, and invoices already sit in one place, organized by client, the move to the new Act becomes a non-event, because the figures your return needs are already sorted.
Delivvo keeps your client work in one branded portal, with per-client invoice and income records that map cleanly onto the new tax-year filing, while the money runs through your own payment gateway at a 0% platform cut. See how it works →
