The Income Tax Department has clarified that taxation depends on the date of payment, not when the salary is earned. Salary paid by March 31, 2026, will fall under the Income-tax Act, 1961, while payments from April 1, 2026, will be taxed under the new Income Tax Act, 2025, as TDS applies at the time of payment. Tax rules 2026: As India transitions from the Income-tax Act, 1961, to the new Income Tax Act, 2025, from April 1, 2026, salaried employees are likely to see immediate changes in how their salary is taxed. One of the most important—and often misunderstood—aspects of this shift is how Tax Deducted at Source (TDS) will be applied during the transition period.