With the Income Tax Act, 2025 becoming effective from 1 April 2026, businesses and taxpayers may wonder whether options, approvals or registrations obtained under the earlier Income Tax Act, 1961 need to be exercised again.

The Income Tax Department has clarified that an option validly exercised under the old Act will generally continue under the corresponding provision of the new Act, subject to the transitional provisions. Taxpayers therefore do not automatically need to exercise the same option again merely because the governing Income Tax Act has changed.

What About the New Tax Regime?

For individuals and other eligible taxpayers, the new tax regime continues under the Income Tax Act, 2025. The Department has specifically clarified that where a taxpayer had already exercised an option under the old law, the option is treated as having been exercised under the corresponding provision of the new Act.

Similarly, the Department states that existing approvals, registrations and recognitions can continue under the new Act where they are not inconsistent with its provisions.

Do Old CBDT Circulars and Notifications Also Continue?

Yes. This is another important transitional provision.

CBDT circulars, notifications, instructions and approvals issued under the Income Tax Act, 1961 do not automatically become irrelevant from 1 April 2026. The Department clarifies that they continue to operate to the extent they are not inconsistent with the Income Tax Act, 2025.

Why Does This Matter to Businesses?

Businesses should not assume that every tax option, approval or registration needs to be recreated simply because the law has changed.

At the same time, they should review important existing tax elections, approvals, registrations and exemptions to determine the corresponding provision under the new Act and confirm that there is no inconsistency with the new framework.

This is particularly relevant during FY 2026-27 because the old and new Income Tax laws will effectively continue to operate in parallel for different tax periods and proceedings.

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