Income-tax Act 2025, Section 4: How the rules for charging income tax differ from the 1961 Act

Every income-tax notice, intimation and refund order issued in the current financial year describes your earnings in a new vocabulary. This is because the phrases "assessment year" and "previous year", which framed every return filed since 1962, have given way to a single term: "tax year".

Interestingly, there is no change in the numbering of the section. It remains Section 4 under both the Income-tax Act 2025 and Income-tax Act 1961.

The new Act took effect on April 1, 2026.

For taxpayers, there is no change under Section 4 of the new Act that could impact their finances.

The person charged, the income charged and the base of the charge are exactly as they were under Section 4 of the Income-tax Act, 1961. But because this is the section from which every demand, refund and penalty draws its authority, the change in its drafting has surfaced in the paperwork individuals actually handle.

Section 4(1) of the 1961 Act charged tax "for any assessment year at any rate or rates" on "the total income of the previous year of every person", subject to the Act's provisions, "including provisions for the levy of additional income-tax".

Section 4(2) of the old Act required the tax to be "deducted at the source or paid in advance" wherever the Act so provided.

The 2025 Act spreads the same idea across five sub-sections.

Section 4(1) charges tax "for any tax year".

Section 4(2) places the charge on "the total income of the tax year of every person as per the provisions of this Act". Section 3 of the new Act defines "tax year" as the 12-month period of the financial year beginning April 1, ending the old two-step arrangement in which the "previous year" under Section 3 of the 1961 Act was the year of earning and the assessment year the year of assessment.

Three further shifts sit inside the section. Additional income-tax, tucked into a parenthesis in Section 4(1) of the 1961 Act, now has a sub-section of its own, Section 4(3), which says income-tax "shall also include any additional income-tax, by whatever name called".

The rule for charging tax on income of a period other than the standard year, earlier a proviso, has become Section 4(4).

And tax collected at source, which was never named in the 1961 charging section, appears expressly in Section 4(5), which speaks of tax "deducted or collected at source or paid in advance".

For taxpayers, including salaried employees, senior citizens, non-resident Indians, stock market investors and traders, mutual fund investors and freelancers, there is not even a rupee of difference in their liability under Section 4, as it is just a provision that enables charging of income-tax.