Section 3 codifies the new 'TAX YEAR' concept — landmark structural reform. Earlier 1961 Act used dual concepts: 'previous year' (income earned) + 'assessment year' (income assessed and taxed). Confusing for taxpayers and aligned with…
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ITA 2025 · Section 3
Section 3 — Section 3 — Tax Year — Definition and Application
Section 3 codifies the new 'TAX YEAR' concept — landmark structural reform. Earlier 1961 Act used dual concepts: 'previous year' (income earned) + 'assessment year' (income assessed and taxed). Confusing for taxpayers and aligned with international practice now.
SINGLE-YEAR FRAMEWORK. Tax year = 1 April to 31 March. Income earned during TY 2025-26 is taxed during the same TY 2025-26 — return filed July / October 2026; tax payable during TY 2025-26 + assessment year ends together. Significantly clearer.
TRANSITION FROM 1961 ACT. Income earned during AY 2025-26 (corresponding to FY 2024-25 under 1961 Act) — last year under 1961 Act 'previous year' framework. Income earned during TY 2025-26 (FY 2025-26) — first year under 2025 Act 'tax year' framework.
ADVANCE TAX UNDER 'TAX YEAR' CONCEPT. Section 144 advance tax instalments now align with tax year — 15 June / 15 September / 15 December / 15 March of the SAME tax year (rather than referring to subsequent assessment year as in 1961 Act).
ITR FILING DUE DATE. For TY 2025-26 — 31 July 2026 (general) / 31 October 2026 (audit cases). Aligned with tax year end + filing window.
NEWLY-INCORPORATED. Tax year commences from incorporation / commencement; ends on immediately following 31 March. Hence company incorporated 1 January 2026 has first tax year = 1 January 2026 to 31 March 2026 (3 months). Subsequent tax years are full April-March.
ACCOUNTS-OTHER-THAN-MARCH. Companies / LLPs whose accounts are made up to a date other than 31 March (e.g., year-end June for some MNCs) — must STILL compute tax-year income on April-March basis for tax purposes. Books of account remain on chosen accounting year; tax computation reconciled.
RULE CROSS-REFERENCES. Rule 3 / 3A (period of holding for various assets); Rule 12 (ITR forms with tax year reference).
INTERSECTION WITH ALL SECTIONS. 'Tax year' replaces 'previous year' / 'assessment year' in every section reference. Practitioner reading 1961-vintage materials needs translation.