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Case law › Income-tax Act 2025 › Chapter I › Section 3
Chapter Iwas s.3

Section 3 of the Income-tax Act, 2025

Section 3 — Definition of "tax year". Successor to s.3 of the 1961 Act.

Where this section sits

Section 3 is in Chapter I — Preliminary, which runs from section 1 to section 3.

← Section 2  ·  Section 4 →

What this section does

Sub-section (1) fixes the meaning of "tax year" for the whole Act: the twelve months period of the financial year commencing on the 1st April. There is no election and no alternative period.

Sub-section (2) provides the one exception. Where a business or profession is newly set up, or a source of income newly comes into existence, in any financial year, the tax year is not a full twelve months: it begins with the date of setting up of the business or profession, or the date on which the source newly comes into existence, and ends with that same financial year.

Why it is there

Every charge, rate, threshold, time limit and filing obligation in the Act is expressed by reference to a tax year, so one definition has to carry all of them, and it is put in the Preliminary chapter for that reason. Sub-section (2) exists because a business set up in the middle of a financial year has no earlier part of that year to account for; without it, the Act would have to speak of a period that did not exist for the assessee.

Who it applies to

The figures, and what each one turns on

Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
WhatFigureThe condition on itWhere
Length of a tax yearTwelve monthsThe financial year commencing on the 1st AprilSub-section (1)
First tax year of a newly set up business or professionThe period from the date of setting up to the end of that financial yearBusiness or profession newly set up in any financial yearSub-section (2)(a)
First tax year of a new source of incomeThe period from the date the source comes into existence to the end of that financial yearA source of income newly coming into existence in any financial yearSub-section (2)(b)

What this means in practice

The tax year is always tied to the financial year beginning 1 April, so a book year or accounting year ending on any other date does not become the tax year, however the assessee keeps its accounts. Where sub-section (2) applies, the first tax year is short at the front end only — it still ends with the financial year, not twelve months after commencement. The section shortens the period; it does not scale down any monetary limit that another section expresses for a tax year, so a threshold tested "in the tax year" is tested on the short period at its full stated amount.

An example

Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.

A firm begins trading on 12 September 2026. Its first tax year is not the twelve months ending 11 September 2027, and not the full year from 1 April 2026; under sub-section (2)(a) it is 12 September 2026 to 31 March 2027. Its second tax year is the ordinary twelve months from 1 April 2027. Any turnover threshold expressed for a tax year is applied to that short first period as it stands.

Where you meet this section

On the face of every return, intimation, notice and assessment order, each of which identifies the period it deals with as a tax year. The short first year under sub-section (2) is what a newly set up business reports in its first return.

The words themselves

"tax year" means the twelve months period of the financial year commencing on the 1st April
Section 3(1), Income-tax Act, 2025.
the tax year shall be the period beginning with— (a) the date of setting up of such business or profession
Section 3(2)(a), Income-tax Act, 2025.

What people get wrong

What this replaced

The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.

See the full 1961 to 2025 concordance.

Circulars of the Board on this section

A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.

See every circular and notification on this section, or the circulars index.

Notifications that reach this section

A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance. We hold 519 in all; the 250 most recent are listed.

See every circular and notification on this section, or the notifications index.

Case law carried across

Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 3. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.