The document explains miscellaneous transitional and continuity provisions under the Income Tax Act, 2025. It confirms that the new tax regime continues as the default system, with earlier options exercised under the old Act automatically carried forward under corresponding provisions. The introduction of the “tax year” does not require changes in accounting periods, as it aligns with the financial year. Presumptive taxation provisions have been consolidated without substantive changes. The framework ensures continuity by preserving validity of existing approvals, registrations, circulars, and agreements such as APAs, provided they are not inconsistent with the new law. It also clarifies that pending applications, rectifications, searches, and judicial proceedings relating to earlier tax years will continue under the Income-tax Act, 1961. Further, existing choices relating to accounting methods and tax options continue where corresponding provisions exist. Overall, the provisions aim to ensure seamless transition, administrative continuity, and legal certainty without disrupting existing rights and obligations.
MISCELLANEOUS
Q10.1 The Section 115BAC of the Income-tax Act, 1961 provides the new tax regime for Individuals and HUFs. Does the said new tax regime continue in the Income-tax Act, 2025?
Ans: Yes. In the Income-tax Act, 2025 the new tax regime is provided under section 202 and is available for Individuals, HUF, Association of Persons (other than a cooperative society), Body of Individuals, whether incorporated or not and Artificial Juridical Person referred to in section 2(77)(g). In the new Act also, the new regime is the default tax regime and the option for opting out of the new tax regime has been made available to the taxpayers.
Q10.2 I have opted for new tax regime under the Income-tax Act, 1961. Do I have to opt for it again in the new Income-tax Act, 2025?
Ans: No. An option exercised under a provision of the old Act as was in force immediately before the commencement of new Act, is treated as if it was made under the equivalent provision of the new Act.
Q10.3 Is there a need to change the accounting periods of businesses due to the introduction of ‘Tax Year’ concept?
Ans: No, since the Tax Year is aligned with the Financial Year i.e., is a year starting from 1st April and ending on 31st March, no change in accounting year or financial statements is required for businesses or other taxpayers.
Q10.4 What has changed in provisions relating to presumptive taxation of residents in the new Income-tax Act, 2025?
Ans: Under the provisions of the Income-tax Act, 1961 residents earning income from business (Section 44AD), profession (Section 44ADA), and the business of plying, hiring, or leasing goods carriages (Section 44AE) are allowed a simplified taxation regime. In the Income-tax Act, 2025, all these presumptive taxation schemes have been consolidated into one section (section 58) in a tabular format, while adopting simplified language.
Q10.5 If a person had chosen a particular tax option under the old Act (like opting for a special tax scheme), does that choice carry over to the new Act automatically?
Ans: Yes. The clause (f) of Section 536(2) of the new Act specifically provides that an option exercised under a provision of the old Act as was in force immediately before the commencement of new Act, is treated as if it was made under the equivalent provision of the new Act.
Q10.6 Are old approvals, registrations, and recognitions still valid under the new Income-tax Act?
Ans: Yes, if such approvals are not inconsistent with the new Act, they are treated as if granted under the new Act.
For example, a charitable trust recognized under the old Act will be treated as recognized under the corresponding provision of the new Act, unless there is a conflict with the provisions in the new Act.
Q10.7 Do old circulars, instructions and notifications issued by the Income tax department continue even after the new Act comes into force?
Ans: Yes. As per the provisions of section 536(2)(j) of the Income-tax Act, 2025, circulars, notifications, instructions, approvals, etc, issued under the old Act will continue, provided they are not inconsistent with the provisions of the new Act.
Q10.8 If an assessing officer wants to rectify an assessment order passed before 1st April 2026, can this still be done under the old Act after the new Act has come into force?
Ans: Yes. Rectification proceedings under section 154 of the Income Tax Act 1961 relating to assessment years governed by that Act may be initiated and concluded in accordance with the said provisions, notwithstanding the repeal of the Income-tax Act 1961.
For example, if a mistake apparent from record in the assessment order for AY 202324 is found in FY 2027-28, the officer can rectify it as per the provisions of the old Act.
Q10.9 If an assessee had chosen a particular method of accounting or depreciation under the old Act, does this choice automatically continue under the new Act?
Ans: Yes, if the new Act has a corresponding provision and there is no inconsistency, the earlier choice is treated as if it is made under the new Act.
Q10.10 What happens to applications (such as rectification or revision requests) that were already filed before 1st April 2026?
Ans. If your application relates to a tax year starting before 1st April 2026, it will continue to be processed under the Income-tax Act, 1961. You do not need to file it again.
Q10.11 If a search was initiated on a person under section 132 of the old Act before the new law came into effect, which law applies to the connected proceedings?
Ans: All proceedings connected with such a search continue to be governed by the old Act as if the new Act had not been enacted.
For example, if a search on Mr. A is initiated in the month of January 2026, assessments and all other proceedings connected with the search will be under the provisions of the old Act.
Q10.12 If an assessee had signed an APA (Advance Pricing Agreement) under the old Act, does it still bind the assessee and the department under the new Act?
Ans: Yes. The agreement continues to apply as long as it is not inconsistent with the corresponding provisions of the new Act.
For instance, an APA signed by Company ABC in FY 2024-25 on a specific international transaction will still guide the tax treatment under the new Act if the same rules exist in the new Act.
Q10.13 If a case is pending in a High Court or the Supreme Court concerning an issue under the old Act, will the final decision affect tax liability even after the new Act has come into force?
Ans: Yes. The final judgment will apply to that old period as per the old Act, and any tax payable or refundable as a result will be dealt with accordingly.
For example, Company XYZ’s dispute for AY 2018-19 decided in FY 2027-28 will still be implemented using old Act principles.
Q10.14 Do General Anti-Avoidance Rules (`GAAR’) continue under the ITA 2025?
Ans: Yes, GAAR provisions are retained as it is. Thresholds, approval mechanisms and procedural safeguards remain unchanged.
