Income-Tax Act, 2025 Takes Over in 2026, While Income-Tax Rules, 2026 Keep 1961 Cases Going

(INDIA) — India’s tax administration has put the Income-tax Act, 2025 at the center of the direct-tax system, with the Income-tax Rules, 2026 taking effect from 1 April 2026 and the Central Board of Direct Taxes releasing a provision-mapping utility and transition FAQs to guide taxpayers through the change.

The shift replaces the Income-tax Act, 1961 as the principal statute from 1 April 2026, but it does not end the old law’s role for earlier years. CBDT’s transition guidance makes clear that transitional and saving provisions keep the old Act operating for prior years, pending matters, and continuing rights and liabilities.

For taxpayers, officers, professionals and NRIs, the immediate dividing line is the income period. Income up to FY 2025–26, corresponding to AY 2026–27, remains governed by the Income-tax Act, 1961, while income from 1 April 2026 onward falls under the Income-tax Act, 2025.

That means there is no overlap and no gap between the two regimes. Income earned up to 31 March 2026 stays under the earlier law, and income earned from 1 April 2026 moves to the new statute for the relevant tax year.

CBDT’s guidance also says assessments, reassessments, rectification, revision, penalty, appeal and other proceedings tied to earlier tax years can still be initiated or completed under the Income-tax Act, 1961, subject to the saving clause and the old-law limitation provisions. In practice, repeal does not settle the legal question by itself.

The broader official presentation of the Income-tax Act, 2025 is one of consolidation, simplification, renumbering and restructuring rather than the creation of a fresh tax burden. CBDT says the law aims to improve readability, reduce complexity, reorganize provisions more logically and align the statute with more modern drafting.

That point matters because the new law changes the architecture of the statute on a large scale. The Income-tax Act, 2025 has 536 sections and 16 schedules, compared with 819 sections and 14 schedules in the Income-tax Act, 1961.

Officials released the mapping utility because the new law is not arranged like the earlier one. Section numbers have shifted widely, related concepts have been grouped differently, and the layout has been recast to make the statute shorter and easier to navigate.

Much of that change is structural, but not merely cosmetic. A reorganized law affects how taxpayers read provisions, how advisers locate them, how notices are drafted and how litigation is framed.

The mapping tool, however, is a navigation aid rather than a substitute for reading the statute. A corresponding section in the new law does not by itself prove that the old and new provisions are textually or legally identical.

One of the clearest conceptual changes is the adoption of “tax year” as the basic unit under the new law. The Income-tax Act, 2025 moves away from the familiar “previous year” and “assessment year” framework that shaped practice under the Income-tax Act, 1961.

CBDT says the change is meant to remove confusion created by the older two-year vocabulary. Under the old system, income earned in one financial year was often discussed by reference to a later assessment year, a structure that many taxpayers found hard to follow.

From 1 April 2026, the new regime uses the tax year as the primary frame for post-transition income. Still, earlier years remain readable through transitional rules, which means the previous year and assessment year framework remains relevant for old disputes, pending assessments and appellate matters.

That continued relevance is especially important in litigation. A post-2026 notice can still involve the Income-tax Act, 1961 if it deals with an earlier year preserved by the saving clause.

CBDT’s examples show how the restructuring works in practice. In reassessment, old sections 147, 148, 148A, 149, 150, 151, 152, and 153 map to new sections 279, 280, 281, 282, 283, 284, 285, and 286 respectively.

That renumbering matters because reassessment disputes are often driven by section references. A taxpayer or officer reading a notice after 1 April 2026 cannot assume the familiar old numbers remain the operative guide under the new statute.

At the same time, if the reassessment concerns a pre-2026 tax year, the Income-tax Act, 1961 can still govern the proceeding. In those cases, the old law and the mapping utility may both need to be read together to determine the correct position.

Revision provides another example of continuity with refined drafting. CBDT says the core jurisdictional test continues under the new law: an order must be both erroneous and prejudicial to the interests of the revenue, mirroring the standard associated with old section 263.

The outer limitation period also remains broadly the same. CBDT says revision still carries a limit of two years from the end of the financial year in which the order sought to be revised was passed.

The new law adds one express drafting feature in that area. It introduces a 60-day minimum residual period rule, so if the remaining period after exclusions would otherwise fall below 60 days, it is extended to 60 days.

That change illustrates the character of the Income-tax Act, 2025. In some places, it preserves the old legal principle while spelling out the machinery more directly.

Presumptive taxation shows a different form of restructuring. CBDT says the provisions earlier found in sections 44AD, 44ADA, and 44AE have been consolidated into new section 58 in a more streamlined, tabular form.

That move signals a wider drafting method in the new law. Instead of layering amendments onto a statute that has operated for decades, the legislation pulls related concepts into cleaner provisions for easier navigation.

For taxpayers used to locating a benefit by long-familiar section numbers, that will require adjustment. A missing old number does not necessarily mean the underlying concept has disappeared.

The same point appears in the treatment of the “new tax regime.” CBDT says the regime linked to old section 115BAC continues under new section 202.

That is a reminder that relocation is not the same as policy withdrawal. Readers need to check the new section number before concluding that a familiar option or benefit has ended.

The saving clause becomes even more important in legacy proceedings. CBDT says that where a search under section 132 or requisition under section 132A began before the new law started, the full legal chain connected with that event can continue under the Income-tax Act, 1961.

That includes consequential proceedings such as assessment, reassessment, penalty and appeal. Crossing the date of 1 April 2026 does not transform a pre-existing search matter into a new-law case.

The transition guidance also points to continuity in deductions and grandfathered benefits. CBDT gives the example of a housing project eligible under old section 80-IBA, saying a deduction may continue for the remaining period under the new law through the saving and continuation mechanism, subject to the applicable conditions.

That reflects a broader policy signal in the transition structure. Repeal of the Income-tax Act, 1961 does not automatically extinguish rights that arose validly under the earlier regime.

For NRIs, the overlap between old rights and later events may be particularly important. Residential status, concessional regimes, reinvestment exemptions, withholding and cross-border tax effects often stretch across multiple years and therefore across both statutes.

CBDT says the core features of the special NRI regime have largely been carried forward, while old-year rights and liabilities can continue through the saving clause. Its guidance gives an example of an NRI who claimed exemption under old section 115F and then transfers the replacement asset after 1 April 2026 but within the lock-in period.

In that case, CBDT says the claw-back liability still arises under the Income-tax Act, 1961 because that is the law under which the original exemption was granted. Yet the year of taxability for the later transfer is the tax year in which the transfer occurs, which may fall under the Income-tax Act, 2025.

That example captures the transition logic in its clearest form. One question is which statute created the original right or liability, and another is which statute governs the year in which the later event occurs.

CBDT also says continuity remains in the NRI concessional-taxation area, including consequences linked to earlier declarations and elections. That means repeal does not erase positions already validly taken under the earlier law.

The rules sit alongside this statutory transition rather than behind it. CBDT notified the Income-tax Rules, 2026 on 20 March 2026 under section 533 of the Income-tax Act, 2025, and those rules come into force on 1 April 2026.

That matters because the transition is not only about renamed sections. It also affects forms, reporting and compliance architecture, even though CBDT has separated Act mapping from Rules mapping and Forms mapping in its public guidance.

The practical boundary remains straightforward in many common cases. If a return relates to income of FY 2025–26, the governing statute remains the Income-tax Act, 1961, even if the return, scrutiny or appeal proceeds after 1 April 2026.

A notice issued after the commencement date can still fall under the older law if it concerns an earlier year preserved by the transition clause. Likewise, where a taxpayer or NRI claimed a benefit under the old law and a later event after 1 April 2026 triggers a consequence tied to that benefit, the old Act may still govern the source of liability.

What has not changed, CBDT’s material suggests, is as important as what has. The Income-tax Act, 2025 does not amount to a completely unrelated tax code; in many areas it carries forward existing principles in a shorter and more organized structure.

That continuity appears in revision standards, the continued operation of the “new tax regime” under a new section number, the survival of legacy proceedings and the protection of old-year rights and liabilities through the saving clause. The new statute changes the architecture, but it does not restart the tax system from zero.

For post-1 April 2026 income, the starting point is the Income-tax Act, 2025 read with the Income-tax Rules, 2026. For FY 2025–26 / AY 2026–27 and earlier years, the starting point remains the Income-tax Act, 1961.

In transitional situations, taxpayers and advisers will need to read the saving clause, the CBDT transition FAQ and the mapping utility together before reaching a conclusion. For a tax system entering a new statutory era, that may be the clearest message of all: after 1 April 2026, accurate analysis will often depend on reading both laws side by side.