India's new Income‑Tax Act and data‑localisation rule take effect April 2026

The Indian Parliament enacted the Income‑tax Act, 2025 in August 2025, replacing the six‑decade‑old Income‑tax Act, 1961. The new law came into force on 1 April 2026, consolidating sections and retaining core capital‑gains and business‑income provisions while introducing a new numbering scheme that can cause reference errors in transaction documents.

The overhaul directly affects mergers and acquisitions. Due‑diligence practitioners must determine which statute applies to each financial year, revise tax opinions, adjust indemnity provisions and closing mechanics, and ensure data‑room documentation reflects the shift from the 1961 Act (FY 2025‑26 and earlier) to the 2025 Act (FY 2026‑27 onward).

At the same time, Rule 46(8) of the Income‑tax Rules, 2026 requires every taxpayer maintaining electronic books of account to keep a daily backup on servers located within India and to keep the records continuously accessible. The rule mirrors the Ministry of Corporate Affairs’ data‑localisation standards and imposes penalties for non‑compliance.