India Income Tax Department outlines 2025 Act and tax regime rules

The Income Tax Department has provided guidance regarding the Income Tax Act 2025 and the comparative structures of the Old and New Tax Regimes for Assessment Year 2026-27.

Under the 2025 Act, taxpayers can manage financial losses through intra-head adjustments, where losses from one source are offset against income from another within the same category, or inter-head adjustments across different categories. Specific restrictions apply; for example, speculative business losses generally cannot be offset against non-speculative income, and long-term capital losses can only be adjusted against long-term capital gains. Unadjusted losses may be carried forward to future years subject to specific time limits and conditions.

Taxpayers in India can choose between two regimes. The New Tax Regime is the default option, offering lower tax rates and a ₹75,000 standard deduction for FY 2025-26. The Old Tax Regime features higher rates but allows for various deductions and exemptions, such as Sections 80C, 80D, and 80G, along with a ₹50,000 standard deduction. While salaried individuals may switch between regimes annually, those with business income are restricted to opting for the Old Tax Regime only once, subject to filing Form 10-IEA.