March vs April salary 2026: Which Income Tax law applies to your paycheck this month? 

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.

Payment date

According to the Income Tax Department, the key factor is not when the salary is earned, but when it is paid.

Salary for March 2026, if paid on or before March 31, 2026, will be governed by the Income-tax Act, 1961
Salary for April 2026, paid on or after April 1, 2026, will fall under the Income Tax Act, 2025

This creates a clear demarcation: even if the salary relates to work done in March, the applicable law depends entirely on the date of payment.

The tax department has clarified that under TDS provisions, tax must be deducted at the time of payment, not accrual. As a result, two different tax laws will apply within a short span, depending on when salaries are disbursed.

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What is Section 392(1)?

Section 392(1) of the Income Tax Act, 2025, effective April 1, 2026, replaces the earlier Section 192(1) and governs Tax Deducted at Source (TDS) on salaries. It mandates that any employer paying salary must deduct TDS at the time of payment, based on the applicable tax rates for the relevant “tax year” and the employee’s estimated annual income.

The provision continues the “pay-as-you-earn” principle, ensuring tax is collected progressively during the year rather than in a lump sum.

A key change under the new law is the introduction of the “tax year”, replacing the earlier concepts of “previous year” and “assessment year,” simplifying compliance.

Section 392 applies to salary payments from FY 2026–27 onward, while salaries paid up to March 31, 2026, remain governed by the old Act. It is part of a broader restructuring that consolidates TDS provisions under a simplified framework.

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Transitional overlap

This shift creates a brief but important overlap period, where:

March-end salary follows the old regime
April salary follows the new regime

For employees, this could lead to visible changes in TDS deductions starting April 2026, even if their salary structure remains unchanged.

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TDS reset from April 2026

Employers will be required to reset TDS calculations from April 1, 2026, in line with the new tax framework. This involves:

Re-estimating annual income for the new tax year
Applying revised provisions under the 2025 Act
Factoring in updated deductions and exemptions

Under the old law, salary TDS was governed by Section 192. From April 2026 onwards, it will be governed by Section 392(1) of the new Act.

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This reset may result in changes in monthly take-home pay, depending on how deductions and projections are recalibrated.

What happens to your investment declarations?

Another key change relates to investment declarations submitted by employees for tax planning.

For the new tax year (2026–27), all declarations must align with the Income Tax Act, 2025. This means:

Old references like Section 80C will no longer apply in the same format
Deductions will be mapped to new sections and schedules under the revised law

Employers will also need to update their payroll systems to reflect these changes, ensuring accurate TDS computation.

April new financial year

The transition to the new tax law is not just a structural shift — it has immediate implications for salaried individuals. The most critical takeaway is simple: your salary’s payment date determines which tax law applies. With March and April salaries falling under different legal frameworks, employees should review their payslips closely and update their tax declarations accordingly.