Summary of FAQs-on-Interplay-&-Transition from Income Tax Act, 1961 to 2025

The Income-tax Act, 2025 introduces a simplified, reorganized framework without altering core tax policies of the Income-tax Act, 1961. It reduces complexity by consolidating provisions, forms, and rules while maintaining continuity through detailed transitional provisions under Section 536. Existing rights, obligations, approvals, and pending proceedings continue under the old Act, ensuring no disruption. Key areas such as TDS, TCS, advance tax, return filing, reassessment, appeals, and loss carry-forward remain largely unchanged in substance, though presented in a clearer structure. The appellate hierarchy and compliance timelines are preserved, and no new taxes are introduced. Updated forms and digital reporting aim to reduce compliance burden. Anti-avoidance provisions like GAAR and NRI taxation rules remain intact. Overall, the reform focuses on clarity, ease of compliance, and administrative efficiency while safeguarding continuity, ensuring taxpayers transition smoothly without affecting ongoing matters or established tax positions.

I. Philosophy

• New Act aims to present same tax policy in a more logical, accessible and reader friendly format.
• Old Act repealed. However, transitional provisions specify continuation of proceedings under the old Act.
• New Income Tax Act 2025 doesn’t impose any new tax.
• New Act contains 536 Sections and 16 Schedules whereas Old Act contains 819 Sections and 14 Schedules.
• New Income Tax Rules 2026 contains 333 Rules and 190 Forms whereas Old Income Tax Rules 1962 contains 511 Rules and 399 Forms.
• Structure of Chapters reorganized in more logical sequence.
• Concluded proceedings in earlier Act valid. Pending proceedings would continue as per relevant transitional provisions.
• Charge of Income Tax is on Total Income of Tax Year.
• Tax year can be less than a financial year.
• Section 536 – Repeal and Savings clause – contains 22 sub clauses – various transitional situations
• Right, benefits, obligations, liability arose under the old Act continue to exist.
• Old approvals, Registrations and recognitions would be valid if they are not inconsistent with the provisions of the new Act.
• Old circulars, instances and notifications are valid as long as they don’t conflict with new Act.

II. Tax payments. Collection and Refunds

• New Act doesn’t modify the framework governing the manner of tax payments – TDS/ TCS / Advance Tax / Self-Asse. Tax
• Modes of remittance of taxes remain unchanged.
• No change in policy w.r.t. TDS provisions. Only present TDS provisions in a simple and tabular manner.
• Any sum paid or credited on or before 31st March, 2026 shall be governed by old Act and thereafter new Act.
• New section should be quoted for TDS/TCS made after 01st April 2026
• Applicable section for contracts or services spanning over the period of March–April 2026 would depends on the mechanism of “event earlier of credit or payment”
• Due date of payment to the Government account retain the same timelines without any policy change.
• If tax is deducted under the 1961 Act prior to the transition date, deposit obligations will continue under the 1961 Act. Thus, existing challans and payment codes linked to old Act continue.
• The interest rates applicable for defaults in deducting or depositing TDS/TCS remain unchanged.
• No policy changes regarding the provisions related to payment of Advance Tax under new Act. The quarterly instalment dates and quantum remain unchanged.
• threshold for payment of advance tax unchanged i.e. tax payable Rs.10,000 or more
• The interest rates applicable for defaults in payment of Advance tax remain unchanged
• Annual Information Statement (AIS) will continue. It will stand replaced by Form No. 168
• Any unutilized credit for MAT/AMT allowed to be carried forward
• If a tax deductor was entitled to claim a refund under the old Act for any tax year prior to the commencement of the new Act, he still remains entitled to that refund even after the new Act comes into force subject to the condition that the refund claim is filed within stipulated time of 2 years from the end of the financial year in which tax was deductible. This claim is required to be filed in Form No. 26B of Income Tax Rules, 1962.

III. Furnishing of Income Tax Returns (ITR)

• Section 263 of the Income Tax Act, 2025 contains the provisions for original return, belated return, revised return and updated return.
• No change in the obligation to file return of income under the new Act — i.e. which persons must mandatorily file a return.
• The due dates are the same as under the old Act.
• The ITR for income earned during FY 2025-26 will be filed for Assessment Year 2026-27 under the provisions of the Income-tax Act, 1961.
• The revised return for AY 2026-27 will be governed by the Income-tax Act, 1961.
• Taxpayer can file an updated return (ITR-U) for AY 2026-27 under the old Act even after the new Act comes into force.
• Revised/belated return for AY 2025-26 or an earlier assessment year, cannot be filed after 1st April, 2026. However, a taxpayer may still file his updated return (ITR-U), subject to the time limits prescribed under Section 139(8A) of the old Act.
• Updated Return can be filed within 48 months from the end of the financial year succeeding the relevant tax year. It is available whether or not the person has furnished an original, belated, or revised return. The updated return cannot result in a return of enhanced loss, or decrease in total tax liability, or increase in refund. Only one updated return can be filed per tax year.
• If a search is initiated on a person under the old act but notice for filing ROI issued after 01.04.2026 even then ROI is required to be filed under the old act.
• The scrutiny assessment for AY 2026-27 (or any earlier year) will be completed under the provisions of the Income-tax Act, 1961.
• If a taxpayer incurred a loss in FY 2025-26 (AY 2026-27), this loss can be carried forward under the new Act.
• The unabsorbed losses from earlier years that are being carried forward under the old Act will continue to be carried forward under the new Act, subject to the same conditions (type of loss, period of carry-forward, etc.
• There is no substantive change in the manner of verification of the return of income or as regards person who is required to verify the return under the new Act.

IV. Other Forms & Compliance Statements

• The PAN application forms being used in the framework of Income Tax Act, 2025 have been restructured.

• Old single TAN application Form 49B has been split into two forms – Form 134 & Form 135 – Government Entities and other than Government Entities respectively.
• Form No. 97 under the new Act replaces the earlier form number No. 60 (Non PAN holder). However, there is some change in the scope of transactions mentioned in the new Rule 159(2) as against transactions mentioned in Rule 114B and 114BA of IT Rules, 1962.
• Form 15G/15H now combined in one unified Form 121.
• The substantive requirements — furnishing information about the remittance, obtaining CA certificate for amounts exceeding the prescribed threshold, ensuring TDS compliance — remain the same.
• Taxpayers filing Part B of Form 145 (with AO certificate) are not required to obtain Form 146 from a Chartered Accountant. This is a significant reduction in compliance burden and cost for remitters.
• All three erstwhile audit forms (Form No. 3CA, Form No. 3CB and Form No. 3CD) have been consolidated into a single smart, unified new Form no. 26 with structured and standardized reporting.
• A provisional approval granted to a charitable organization under the old Act shall not be invalid merely because the new Act commences on 01.04.2026.
• All applications freshly filed on or after 01.04.2026 shall be governed by the Income Tax 2025.

V. Reassessment of Income escaping Assessment

• The AO shall not make any assessment, reassessment or recomputation under section 279 without issuing a notice under section 280 which is corresponding to section 148 of the Income Tax Act, 1961.
• The provisions of the repealed Act shall continue to apply to any proceeding pending on the date of commencement of the new Act. Therefore, reassessment proceedings already initiated under the old Act will continue to be governed by the provisions of the Income Tax act, 1961.
• Even after 1 April 2026, proceedings such as assessment, reassessment, rectification, penalty, revision, etc. can still be initiated and completed under the old Act for earlier Assessment Years till A.Y.2026-27.
• If a notice under Section 148A (1) of the old Act was issued before 01.04.2026, but the notice under Section 148 is yet to be issued, still it can be issued after 01.04.2026 under the provisions of the old Act.
• Since the assessment proceedings for AY 2026–27 or for any earlier assessment year are governed by the old Act, the approval hierarchy prescribed in Section 151 of the old Act will apply.
• Any proceeding for imposition of penalty for any tax year beginning before 1st April, 2026 may be initiated and the penalty imposed under the old Act, as if the new Act had not been enacted.

VI. TDS Compliance

• The deductor applies the old Act for all payments/credits up to and including 31st March, 2026, and will apply the new Act for payments/credits from 1st April, 2026 onwards. There is no need to amend the contract merely because the new Act is commencing on 1st April, 2026. The deductor is required to apply the applicable TDS provision based on the date of credit or payment, whichever is earlier.
• The TDS rates and monetary thresholds for all categories of payments have been retained as they are under the Income-tax Act, 1961.
• Citing the old section number (for example, Section 194C instead of Section 393(1) [Table: Sl. No. 6(i)]) may lead to processing errors at the time of filing the TDS return. In such cases, the deductor may be required to submit a correction statement to rectify the section reference.
• Correction statements for Q1–Q4 of FY 2025-26 (or earlier) must be filed under the framework of Income Tax Act, 1961.
• For transactions where the event of credit or payment occurred on or after 1st April, 2026, the Challan-cum-TDS statement is required to be filed under the new Act.
• Corrections to TDS returns for periods governed by the old Act can be filed even after the new Act has come into force. Such correction statements can be furnished within a period of two years from the end of the tax year in which the original statement was due.

VII. Appeals, Revision and Alternate Dispute Resolution

• There is no structural change in the appellate hierarchy under the Income-tax Act, 2025. The architecture of appellate remedies remains intact and continues in the same sequential manner.

Assessing Officer → JCIT (A)/CIT (A) → ITAT → High Court → Supreme Court

• The limitation period for filing appeal in Income-tax Act, 2025 as against Income-tax Act, 1961 has remains unchanged.
• The pending appeal as on 01.04.2026 shall continue and be disposed of in accordance with the provisions of the Income-tax Act, 1961. No new appeal needs to be filed.
• Where the time for filing an appeal, revision, or reference had already expired before the commencement of the new Act, such right cannot be revived merely because the new Act prescribes a different or extended limitation period.
• If the ITAT remands a case on or after 01.04.2026 in respect of AY 2023–24, the remand proceedings will continue to be governed by the Income-tax Act, 1961.
• No substantive structural change has been made in the Dispute Resolution Committee (DRC) framework.
• No substantive or procedural change has been introduced in the Advance Ruling framework under the Income-tax Act, 2025.
• A pending advance ruling application shall continue before the competent authority as constituted under the law then in force. The Income Tax Act’2025 does not disturb pending advance ruling proceedings.
• A revision application filed under section 264 of the Income-tax Act, 1961 and pending as on 01.04.2026 shall be disposed of under the provisions of the Income-tax Act, 1961.

VIII. Set-off/ carry forward of losses and deductions

• No change in fundamental principle of set off and carry forward of losses under the Income Tax Act, 2025. The core architecture remains the same—losses are first adjusted intra-head i.e., within the same head of income and then inter-head subject to statutory restrictions, after which the balance, if any, is carried forward. The duration for which loss can be carried forward also remain unchanged.
• Losses brought forward for tax years beginning before 1 April 2026 shall continue to be carried forward and set off under the new Act in the manner provided under the corresponding provisions of the repealed Act.
• If an amalgamation took place in FY2024-25 under section 72A of the Income-tax Act, 1961, and the prescribed conditions are violated in FY 26-27 then the amount shall be deemed to be the income of the amalgamated entity in the tax year of violation. Accordingly, the deemed income arising in tax year 2026-27 will be chargeable to tax under the Income-tax Act, 2025.
• The Income-tax Act, 2025 does not reclassify losses determined under the Income-tax Act, 1961 into different heads of income.
• Section 123 of the Income-tax Act, 2025 retains the Rs 1.5 lakh aggregate deduction for specified savings instruments for individuals or HUF, structurally similar to Section 80C read with 80CCE of the Income Tax Act, 1961.
• Where a profit-linked deduction under section 80-IA of the Income-tax Act, 1961 was allowed for certain number of years, then the assessee continue to claim it after 1 April 2026. But only for the remaining period and in manner as provided in the original Income-tax Act, 1961.

IX. Issues concerning Non-Resident Indians (NRIs)

• No change has been made in the basic conditions for determining individual residency.
• The special relaxation continues without any change.
• The rule for Indian citizens or Persons of Indian Origin visiting India has not been modified in the new Act.
• Deemed residency rule has been retained in the Income-tax Act, 2025.
• There is no modification in the “Not Ordinarily Resident’ (NOR) criteria.
• The residency test for a company has not changed under the Income-tax Act, 2025.
• The core features of the special NRI taxation regime remain unchanged.
• The return filing exemption for NRIs under the old Act been continued in Income-tax Act, 2025.
• The Income-tax Act, 2025 retains this elective mechanism allowing the assessee to declare in the return that the special provisions shall not apply. Upon such declaration, taxation shall be under the general provisions of the Act. The voluntary nature of the special regime therefore remains intact.

X. Miscellaneous

• In the Income-tax Act, 2025 the new tax regime is provided under section 202 and is available.
• 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.
• In the Income-tax Act, 2025, all the presumptive taxation schemes have been consolidated into one section (section 58) in a tabular format, while adopting simplified language.
• If a search was initiated on a person under section 132 of the old Act before the new law came into effect, all proceedings connected with such a search continue to be governed by the old Act as if the new Act had not been enacted.
• General Anti-Avoidance Rules (GAAR) provisions are retained as it is. Thresholds, approval mechanisms and procedural safeguards remain unchanged.