Section 3
Section 3: definition of "tax year"
Section 3 introduces one of the Income-tax Act, 2025's clearest terminology changes: what the earlier Act called the "previous year" is now simply called the "tax year". Section 3 defines this term and sets out how it works when a business or income source is new.
What Section 3 says
"(1) For the purposes of this Act, 'tax year' means the twelve months period of the financial year commencing on the 1st April."
"(2) In the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with (a) the date of setting up of such business or profession; or (b) the date on which such source of income newly comes into existence, and ending with the said financial year."
What this means in practice
For most taxpayers, the "tax year" is the standard twelve-month period from 1 April to 31 March, the same period that was called the "previous year" under the 1961 Act.
If a business or profession is newly set up during a financial year, or a new source of income first arises during a financial year, the tax year for that business or source starts from the date it was set up (or the date the income source came into existence) and runs until the end of that same financial year - it is not a full twelve months in that first year.
Frequently asked questions
Is 'tax year' the same as the old 'previous year'?
Functionally yes - it is the twelve-month period from 1 April to 31 March. The Income-tax Act, 2025 renames the concept from "previous year" to "tax year".
What is the tax year for a business started partway through the year?
It runs from the date the business or profession was set up (or the date the new income source arose) until the end of that financial year - a shorter-than-twelve-month period for that first year only.
Related sections
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Talk to our tax team about this sectionLast updated 9 September 2026