The transition is governed by Section 536 of the Income-tax Act, 2025, which contains the repeal and savings provisions. To remove ambiguity, the Central Board of Direct Taxes (CBDT) has also published a detailed set of Frequently Asked Questions (FAQs) explaining how pending notices, assessments, searches, applications and other proceedings are to be handled.
In most cases, proceedings relating to tax years before April 1, 2026 will continue under the Income-tax Act, 1961, while matters relating to tax year 2026-27 onwards will be governed by the Income-tax Act, 2025.
Pending proceedings continue under the old law
According to the CBDT’s clarification, notices, summons, assessments, reassessments, rectifications, penalties, appeals and other proceedings relating to tax years before April 1, 2026 will continue under the Income-tax Act, 1961, even if they are initiated after the new law came into force.
However, proceedings concerning tax year 2026-27 onwards will be initiated and completed under the Income-tax Act, 2025.
What happens to search cases?
The transition rules also distinguish between searches conducted before and after the new law took effect.
Searches initiated before April 1, 2026, along with post-search inquiries and assessments arising from them, will continue under the Income-tax Act, 1961.
On the other hand, searches initiated on or after April 1, 2026 will be governed by the provisions of the Income-tax Act, 2025.
Power to seek information
The CBDT has clarified that the same principles applicable to summons also apply when the tax department exercises its power to call for information from taxpayers or third parties.
Whether the old or new law applies will depend on the period to which the proceedings relate.
Jurisdiction transfer and PAN migration
Transfer of jurisdiction or PAN migration initiated before April 1, 2026 can be completed under the Income-tax Act, 1961.
Where such proceedings are initiated on or after April 1, 2026, they will be carried out under the provisions of the Income-tax Act, 2025.
Recovery and provisional attachment
Provisional attachment during assessments relating to periods before April 1, 2026 will continue under the Income-tax Act, 1961. Assessments relating to tax year 2026-27 onwards will follow the provisions of the new law.
For outstanding demands relating to periods before April 1, 2026, recovery can be undertaken under either the Income-tax Act, 1961 or the Income-tax Act, 2025, as permitted under the transition provisions.
Penalties and prosecution
The applicable law for penalties and prosecution depends on when the default occurred.
For example, penalties for tax arrears relating to periods before April 1, 2026 will be levied under the Income-tax Act, 1961. Defaults occurring under the new regime will attract the provisions of the Income-tax Act, 2025.
Similarly, prosecution and retention of books of account will be governed by the law under which the original action or default arose.
How pending applications will be treated
The CBDT has also clarified how applications filed under the repealed law will be processed.
Applications seeking benefits under provisions such as Sections 10, 10(46), 80C, 80G and 11 of the Income-tax Act, 1961, filed on or before March 31, 2026, can continue to be processed under the old law.
For charitable and religious trusts, pending registration or approval applications under Sections 12AB and 80G relating to tax year 2025-26 will continue under the Income-tax Act, 1961.
However, where approval is sought from tax year 2026-27 onwards, pending applications may be treated as having been filed under the corresponding provisions of the Income-tax Act, 2025.
The CBDT has also clarified that registrations and approvals already granted under the Income-tax Act, 1961 remain valid under the new law.
Lower deduction certificates
Lower deduction certificate (LDC) and no deduction certificate (NDC) issued before March 31, 2026 continue to remain valid under the transition provisions.
Applications that were pending as on April 1, 2026 and relate to tax year 2026-27 onwards may be treated as applications under the corresponding provisions of the Income-tax Act, 2025. Applications filed from April 1, 2026 onwards will be processed entirely under the new law.
Overall, the transition framework ensures that proceedings are generally governed by the law applicable to the tax period or default in question, allowing the shift to the Income-tax Act, 2025 without disrupting cases already underway.
