The Finance Act 2026 introduces important changes to income tax refund rules effective from April 1, 2026. Under the new provisions, interest on tax refunds and defaults for the Tax Year 2025-26 and prior will continue to be computed under the Income Tax Act of 1961. However, the interest rate applicable from April 1, 2026, will be governed by the Income Tax Act of 2025. This amendment aims to eliminate confusion by avoiding the need for dual referencing of both tax acts. Additionally, taxpayers will benefit from the ability to set off tax refunds against outstanding amounts under either the Income Tax Act of 1961 or the Income Tax Act of 2025, improving administrative efficiency and reducing taxpayer hardship. The Finance Bill was introduced in the Lok Sabha on February 1, 2026, and passed with over 30 amendments on March 25, 2026, before receiving presidential assent on March 30, 2026.