The Income Tax Act, 2025 came into effect from 1 April 2026, replacing the Income Tax Act, 1961 for the new tax regime. However, this does not mean that all pending income-tax matters automatically move to the new Act. Where income relates to a period before 1 April 2026 and an assessment, reassessment, appeal, rectification or other tax proceeding continues thereafter, the provisions of the Income Tax Act, 1961 may continue to govern that proceeding under the transition and savings provisions.

How Does It Matter to Taxpayers?

For the next few years, taxpayers may therefore deal with both the old and new Income Tax Acts, depending on the tax period involved.

For example, if a taxpayer receives a notice or continues an appeal after 1 April 2026 relating to an earlier assessment year, simply looking at the date of the notice or hearing may not determine which law applies. The relevant tax period, nature of proceeding and applicable transition provisions need to be examined.

Businesses should therefore be particularly careful while responding to old assessments, reassessment notices, rectification proceedings or appeals after 1 April 2026. Applying provisions or section references from the wrong Act could lead to an incorrect understanding of the taxpayer’s rights, obligations and available remedies.

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