The Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, has issued comprehensive Clarificatory Frequently Asked Questions (FAQs) concerning the transition provisions under Section 536 of the Income-tax Act, 2025, dealing with “Repeals and Savings”. The clarifications have been issued through Office Memorandum F. No. 370149/107/2026-TPL dated July 06, 2026, following representations received by the Tax Policy and Legislation (TPL) Division after the Income-tax Act, 2025 came into force with effect from 1 April 2026. The Office Memorandum records that the FAQs have been issued with the approval of Member (Legislation), CBDT.
The FAQs seek to provide administrative and legal clarity regarding the applicable statutory framework during the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025. They address a wide spectrum of issues, including summons and notices, search and post-search proceedings, powers to call for information, jurisdiction and PAN migration, provisional attachment and recovery, directors’ liability, penalties, tax clearance certificates, prosecution, retention of books of account, pending exemption and deduction applications, registrations under sections 12AB and 80G, and applications for Lower Deduction Certificates and No Deduction Certificates.
On the issue of summons and notices, the FAQs clarify that a summons is issued by way of a notice and is therefore treated as a notice for purposes of the transition provisions, including Section 536. Where an assessment or a matter arising from sources such as TEP, STR, CRS or FATCA relates exclusively to a period prior to 1 April 2026, powers under Section 131 of the Income-tax Act, 1961 may be exercised in terms of Section 536(2)(c) of the Income-tax Act, 2025.
Where a TEP, STR or similar matter does not specifically relate to a period before 1 April 2026, or where no particular period can readily be assigned to it, the FAQs state that summons may appropriately be issued by exercising powers under Section 246 of the Income-tax Act, 2025. However, any consequential proceeding concerning Tax Year 2025-26 or an earlier period is required to be initiated under the Income-tax Act, 1961 in accordance with Section 536(2)(c). For assessments pertaining to Tax Year 2026-27 onwards, summons may appropriately be issued under Section 246 of the Income-tax Act, 2025.
The FAQs further clarify that the issuance of a notice results in a “proceeding” within the meaning of Section 536(2)(c). Accordingly, where summons are issued on or after 1 April 2026 in relation to a TEP, STR or similar matter pertaining exclusively to a pre-1 April 2026 period, summons are to be issued under Section 131(1) or Section 131(1A) of the Income-tax Act, 1961, read with Section 536(2)(c) of the Income-tax Act, 2025.
In relation to search, requisition and post-search proceedings, the FAQs draw a clear distinction based on the date of initiation of the search or requisition. Where a search under Section 132 or requisition under Section 132A was initiated before 1 April 2026, the repealed Income-tax Act, 1961 continues to apply to connected proceedings under Section 536(2)(v), including post-search inquiries and assessment, and powers under Section 131(1) of the 1961 Act may be exercised where required.
Conversely, where a search or requisition is initiated on or after 1 April 2026, Section 536(2)(v) does not apply and powers under Section 246 of the Income-tax Act, 2025 are to be exercised, wherever required, for post-search inquiries as well as assessment proceedings.
With regard to the power to call for information, the CBDT has clarified that the same transition principles applicable to summons will govern the exercise of powers under Section 133(6) of the Income-tax Act, 1961 and Section 252 of the Income-tax Act, 2025. The applicable provision will therefore depend upon the nature and period of the underlying matter in accordance with the transition framework.
On jurisdiction transfers and PAN migration, the FAQs clarify that transfer of jurisdiction is not confined to any specific Assessment Year or Tax Year, as transfer of jurisdiction carries all relevant matters to the new Assessing Officer. Where notices under Section 127(2) of the Income-tax Act, 1961 had already been issued before 1 April 2026, the transfer order may be passed under Section 127 of the 1961 Act read with the applicable savings provisions of Section 536. Where transfer of jurisdiction or PAN migration is initiated on or after 1 April 2026, the final order may be passed under Section 243 of the Income-tax Act, 2025.
Regarding provisional attachment, the FAQs state that since provisional attachment is undertaken during the course of assessment, an assessment relating to a tax period prior to 1 April 2026 may attract Section 281B of the Income-tax Act, 1961. In other cases, provisional attachment may be made under Section 500 of the Income-tax Act, 2025.
The CBDT has also clarified the position concerning recovery of tax demand by the Tax Recovery Officer (TRO). Recovery of a demand pertaining to a period prior to 1 April 2026 is enabled under the Income-tax Act, 1961 in accordance with Section 536(2)(c), as well as under the Income-tax Act, 2025 by virtue of Section 536(2)(i). Thus, the FAQs expressly recognise recovery of such pre-transition demands under both statutory frameworks, subject to the applicable provisions.
On the liability of directors of private companies, the FAQs clarify that where an irrecoverable demand of a private company pertains to a particular period and a person was a director during that period, liability is to be determined according to the period to which the underlying demand relates. Accordingly, liability may arise under Section 179 of the Income-tax Act, 1961 or Section 323 of the Income-tax Act, 2025, as applicable.
In respect of penalty for default in payment of tax demand, the FAQs state that where the demand relates to a period prior to 1 April 2026, penalty is to be levied under Section 221 of the Income-tax Act, 1961, having regard to Section 536(2)(d) of the Income-tax Act, 2025. Where the demand relates to a period on or after 1 April 2026, penalty is to be levied under Section 412 of the Income-tax Act, 2025.
As regards Tax Clearance Certificates (TCCs), where the application was received before 1 April 2026, the certificate may be issued under Section 230 of the Income-tax Act, 1961 or Section 420 of the Income-tax Act, 2025, depending on whether the certificate pertains to the period up to 31 March 2026 or to the subsequent period. Applications received on or after 1 April 2026 are to be dealt with under Section 420 of the Income-tax Act, 2025.
For prosecution proceedings, the FAQs prescribe that the first step is to ascertain the statutory provision under which the default occurred. Prosecution action is thereafter to be taken with reference to Section 536(2)(c). Thus, a default under a provision of the Income-tax Act, 1961 may attract prosecution under the corresponding prosecution provision of that Act, while a default under the Income-tax Act, 2025 will be dealt with under the applicable provision of the new Act.
The FAQs apply a similar principle to the retention or impounding of books of account. The governing provision depends upon the law under which the underlying search, survey or assessment action was initiated. For instance, a search initiated under Section 132 of the 1961 Act attracts the corresponding retention provisions of that Act, whereas a search initiated under Section 247 of the 2025 Act is governed by the relevant retention provision under the new Act. Similar principles apply to survey and assessment proceedings.
A significant clarification has also been provided for applications seeking benefits under the Income-tax Act, 1961, including applications under Sections 10(46), 10(46A), 80E, 80C(2), 80G(2) and 11(1)(c). Applications filed on or before 31 March 2026 and remaining pending may be disposed of by applying Section 536(2)(c) or, as applicable, Section 536(2)(e) of the Income-tax Act, 2025 read with the corresponding provisions of the Income-tax Act, 1961.
In relation to pending Section 12AB and Section 80G registration or approval applications, the FAQs clarify that an application filed on or before 31 March 2026, pending as on 1 April 2026, and seeking approval for tax years including Tax Year 2025-26, may continue to be processed under the Income-tax Act, 1961 by virtue of Sections 536(2)(c) and 536(2)(e) of the Income-tax Act, 2025.
The CBDT has further confirmed that any registration or approval already granted under the Income-tax Act, 1961 continues to remain valid and protected under the relevant savings provision of Section 536(2) of the Income-tax Act, 2025. This clarification provides continuity and certainty to eligible institutions and entities holding existing registrations or approvals.
For pending applications under Sections 12AB or 80G seeking approval from Tax Year 2026-27 onwards, the Income-tax Act, 2025 applies to the relevant exemption or deduction matters. Accordingly, applications filed under the 1961 Act on or before 31 March 2026, but pending as on 1 April 2026, may be administratively treated as applications filed under the corresponding provisions of the Income-tax Act, 2025 and processed for approval under the new Act.
The FAQs also address Lower Deduction Certificate (LDC) and No Deduction Certificate (NDC) applications. Certificates arising from applications both filed and disposed of on or before 31 March 2026 remain protected under the relevant savings provisions of Section 536 of the Income-tax Act, 2025.
Where an application under Section 197 of the Income-tax Act, 1961 was filed on or before 31 March 2026, remained pending as on 1 April 2026, and sought relief for Tax Year 2026-27 onwards, it may be administratively treated as having been filed under the corresponding provisions of the Income-tax Act, 2025 and considered or processed accordingly.
All LDC/NDC applications filed on or after 1 April 2026 are to be handled entirely in accordance with the provisions of the Income-tax Act, 2025.
The clarifications are expected to facilitate uniform implementation of the transition framework and provide greater certainty to taxpayers, tax administrators and other stakeholders regarding the law applicable to proceedings, actions, applications and approvals spanning the repeal of the Income-tax Act, 1961 and commencement of the Income-tax Act, 2025.
The Office Memorandum can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/07/FAQs-on-Transition-Provisions.pdf
