CBDT issued Comprehensive FAQs on the Interplay and Transitional Framework from the Income-tax Act, 1961 to the Income-tax Act, 2025

The Central Board of Direct Taxes (CBDT) has released a comprehensive set of Frequently Asked Questions (FAQs) dated March 20, 2026 to facilitate a smooth transition from the Income-tax Act, 1961 to the newly enacted Income-tax Act, 2025, which will come into force from 1st April 2026. This initiative marks a significant milestone in India’s direct tax reforms aimed at simplifying the tax framework, enhancing transparency, and improving taxpayer convenience. The new legislation does not introduce any additional tax burden but focuses on rationalising and consolidating provisions, reducing complexity, and aligning the tax system with global best practices.

The transition framework ensures continuity and legal certainty by safeguarding all rights, obligations, and proceedings initiated under the Income-tax Act, 1961. Pending assessments, appeals, reassessments, and refund claims relating to earlier years will continue under the old Act, thereby preventing disruption. At the same time, the new Act introduces structural simplification by reducing the number of sections, streamlining provisions, and adopting clearer legislative drafting, including the use of tables and formulas to improve readability.

A key reform under the new Act is the introduction of the concept of “Tax Year,” replacing the earlier dual system of “previous year” and “assessment year.” This change eliminates confusion and aligns taxation with the financial year, making compliance more intuitive for taxpayers. Importantly, there will be no overlap or gap during the transition, as income up to 31st March 2026 will continue to be governed by the old Act, while income from 1st April 2026 onwards will fall under the new regime.

The Government has ensured that core compliance mechanisms such as Tax Deducted at Source (TDS), advance tax, and self-assessment tax remain largely unchanged in policy terms, though presented in a simplified and consolidated format. Similarly, return filing obligations, audit requirements, and timelines continue broadly on existing lines, ensuring minimal disruption for taxpayers and businesses. The e-filing portal will support parallel compliance under both Acts during the transition period, enabling seamless filing and processing.

The FAQs also address sector-specific and practical issues, including treatment of carry-forward losses, dispute resolution, TDS compliance, and provisions relating to Non-Resident Indians (NRIs). Special emphasis has been placed on ensuring clarity in transitional provisions, particularly in areas where tax proceedings span multiple years. The new Act also continues existing administrative systems such as PAN, TAN, and faceless assessment mechanisms, thereby maintaining institutional continuity.

Overall, the release of these FAQs reflects the Government’s commitment to a taxpayer-centric approach by providing clarity, reducing ambiguity, and facilitating informed compliance. The transition to the Income-tax Act, 2025 is designed to be smooth, predictable, and efficient, reinforcing India’s objective of creating a modern, transparent, and globally competitive tax system.

The complete FAQs on the Interplay and Transitional can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/03/FAQs-on-Interplay-and-Transition.pdf