The transition from the Income-tax Act, 1961 to the Income-tax Act, 2025 has raised several practical questions for taxpayers, tax professionals and income-tax authorities, particularly in relation to proceedings that straddle the two legislative regimes.
To address these concerns, the Central Board of Direct Taxes (CBDT), through its TPL Division, has issued clarificatory Frequently Asked Questions (FAQs) dealing with the transition provisions contained in Section 536 of the Income-tax Act, 2025 (Repeals and Savings).
The FAQs were issued following representations seeking clarity on how various proceedings and applications should be handled after the new Act came into force on April 1, 2026.
The clarification covers a wide range of practical issues, including summons, search and post-search proceedings, information requests, jurisdiction transfers, recovery, penalties, tax clearance certificates, prosecution, exemptions, 12AB/80G applications and lower or nil deduction certificates.
Why Section 536 Matters
Section 536 provides the transition framework for moving from the Income-tax Act, 1961 to the Income-tax Act, 2025. In simple terms, the treatment of a matter depends substantially on when the relevant proceeding arose and which tax year or period it relates to.
The CBDT FAQs make it clear that the repeal of the 1961 Act does not mean that every ongoing or past matter automatically shifts to the new law. Several proceedings relating to periods before April 1, 2026 continue to be governed by the provisions and procedures of the repealed Act.
1. Summons and Notices: Which Act Applies?
One of the key clarifications concerns the issuance of summons after April 1, 2026.
The CBDT has clarified that a summons is issued by way of a notice and therefore falls within the transition provisions.
Where an assessment or matter arising from TEP, STR, CRS, FATCA or similar proceedings relates only to a period before April 1, 2026, the powers under the Income-tax Act, 1961 can continue to be used under Section 536(2)(c) of the new Act.
On the other hand, where the matter does not specifically relate to a period before April 1, 2026, or where it is difficult to assign a specific period, the CBDT considers it appropriate to use the powers under Section 246 of the Income-tax Act, 2025 for issuing summons.
However, proceedings arising from such summons relating to Tax Year 2025-26 and earlier continue to be initiated under the Income-tax Act, 1961.
For assessments relating to Tax Year 2026-27 onwards, summons are to be issued using Section 246 of the Income-tax Act, 2025.
2. Search and Post-Search Proceedings
The FAQs also draw a clear distinction based on the date on which a search or requisition was initiated.
If a search was initiated or a requisition was made before April 1, 2026, the provisions of the Income-tax Act, 1961 continue to apply to proceedings connected with that search or requisition. Accordingly, Section 131(1) of the 1961 Act may be used for post-search inquiries and assessment wherever required.
For searches initiated or requisitions made on or after April 1, 2026, Section 536(2)(v) does not apply. In such cases, the powers under Section 246 of the Income-tax Act, 2025 are to be exercised for post-search inquiries and assessment.
3. Power to Call for Information
The same transition principles apply to requests for information.
The CBDT has stated that the principles applicable to summons under Questions 1 to 7 also apply to the exercise of powers under Section 133(6) of the Income-tax Act, 1961 and Section 252 of the Income-tax Act, 2025.
This provides an important practical framework for determining which statutory provision should be relied upon when information is sought after the new Act has come into force.
4. PAN Migration and Transfer of Jurisdiction
The FAQs clarify that transfer of jurisdiction is not linked to a particular assessment year or tax year.
Once jurisdiction is transferred, matters relating to all years stand transferred to the new Assessing Officer.
Where notices under Section 127(2) of the Income-tax Act, 1961 had already been issued before April 1, 2026, the transfer order can continue to be passed under Section 127 of the 1961 Act read with the relevant transition provisions.
However, where transfer of jurisdiction or PAN migration is initiated on or after April 1, 2026, the case can be transferred through a final order under Section 243 of the Income-tax Act, 2025.
5. Provisional Attachment and Recovery of Tax Demand
The treatment of provisional attachment depends on the tax year involved.
For an assessment relating to a tax year before April 1, 2026, provisional attachment may be carried out under Section 281B of the Income-tax Act, 1961.
For other cases, the corresponding power is available under Section 500 of the Income-tax Act, 2025.
The CBDT has also clarified that recovery of a demand pertaining to a period before April 1, 2026 can be undertaken under the Income-tax Act, 1961 as well as under the Income-tax Act, 2025, in accordance with the relevant provisions of Section 536.
6. Penalty for Default in Payment of Tax
The applicable penalty provision is determined by the period to which the tax demand relates.
Where the demand concerns a period before April 1, 2026, penalty for default in payment of tax arrears is to be levied under Section 221 of the Income-tax Act, 1961.
For demands relating to the period on or after April 1, 2026, the corresponding penalty is to be levied under Section 412 of the Income-tax Act, 2025.
7. Tax Clearance Certificates
The FAQs also address Tax Clearance Certificates (TCC).
If an application for TCC was received before April 1, 2026, the certificate is to 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 relates to the period up to March 31, 2026 or the period thereafter.
Where the application is received on or after April 1, 2026, the TCC is to be issued under Section 420 of the Income-tax Act, 2025.
8. Prosecution and Retention of Books
For prosecution, the first step is to identify the statutory provision under which the default occurred.
The CBDT has clarified that prosecution action should then be taken in accordance with the transition provisions. For instance, defaults under provisions of the Income-tax Act, 1961 continue to attract prosecution under the corresponding provisions of that Act, while defaults under the Income-tax Act, 2025 are dealt with under the new Act.
A similar approach applies to retention or impounding of books of account. The applicable provision depends on the section under which the search, survey or other action was initiated.
9. Pending Applications for Tax Benefits Under the 1961 Act
Applications seeking benefits under provisions such as Sections 10(46), 10(46A), 80C(2), 80G(2) and 11(1)(c) of the Income-tax Act, 1961, which were filed on or before March 31, 2026 and remain pending, may be disposed of by applying the relevant transition provisions along with the corresponding provisions of the 1961 Act.
This is particularly relevant for taxpayers and entities whose applications were already in the system when the new legislation came into force.
10. 12AB and 80G Applications
The CBDT has provided specific guidance for pending registration or approval applications under Sections 12AB and 80G.
Where an application was filed on or before March 31, 2026, remained pending on April 1, 2026 and approval was sought for Tax Year 2025-26 or earlier relevant periods, the proceedings may continue under the Income-tax Act, 1961 by virtue of the transition provisions.
Importantly, registrations or approvals already granted under the Income-tax Act, 1961 remain valid and are protected under the savings provisions of Section 536.
For applications relating to exemptions or deductions for Tax Year 2026-27, the Income-tax Act, 2025 applies. Pending applications filed under the 1961 Act may be administratively treated as applications under the corresponding provisions of the new Act and processed accordingly.
11. Lower and No Deduction Certificates
The FAQs also settle the position regarding Lower Deduction Certificates (LDC) and No Deduction Certificates (NDC).
Applications filed and disposed of on or before March 31, 2026 are protected under the transition provisions.
Where an application under Section 197 of the Income-tax Act, 1961 was filed before April 1, 2026 but remained pending and relates to Tax Year 2026-27 onwards, it may be administratively treated as having been filed under the corresponding provisions of the Income-tax Act, 2025.
Applications filed on or after April 1, 2026 will be dealt with entirely under the Income-tax Act, 2025.
Key Takeaway for Taxpayers and Professionals
The CBDT's FAQs provide much-needed operational clarity on the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025.
The broad takeaway is that the date of the proceeding, the period or tax year to which the matter relates, and the statutory provision under which the original action was taken are critical in determining which Act will govern the matter.
For tax professionals handling legacy assessments, search cases, pending applications, recovery proceedings, exemptions, TCCs or withholding certificates, these clarifications offer a practical roadmap for navigating the transition framework under Section 536.
The FAQs therefore serve as an important reference point during the initial implementation phase of the Income-tax Act, 2025, particularly for cases that cross the April 1, 2026 transition date.
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