The Income-tax Act, 2025 took effect on 1 April 2026. The Income-tax Rules, 2026, notified on 20 March, and the associated forms operationalise it. The redraft reorganises provisions into a statute with 536 sections, compared with the 819 effective sections counted by the Income Tax Department in the amended 1961 legislation. The structural comparison says little about the tax outcome of a particular transaction. Read the applicable charging provision, Finance Act amendments, rules and transition clauses together.
1. Start with the income period
Tax Year generally follows the financial year, 1 April to 31 March. The first Tax Year under the new Act runs from 1 April 2026 through 31 March 2027. Where a business is newly set up or a source of income newly comes into existence during the financial year, section 3 provides for the relevant part-year beginning on that date and ending on 31 March. Capture that start date in the working papers and retain evidence of when the activity began.
| Income or proceeding | Framework to check first |
|---|---|
| Income for 1 April 2025 to 31 March 2026, reported for AY 2026–27 | Income-tax Act, 1961 and the corresponding old-Act return workflow. |
| Income for 1 April 2026 to 31 March 2027 | Income-tax Act, 2025, as amended, and Income-tax Rules, 2026. |
| A notice issued after commencement for an earlier period | Section 536 savings and the relevant 1961 Act procedure, subject to the statutory exceptions. |
2. Build a section, rule and form crosswalk
Renumbering can break payroll instructions, tax logic in an ERP and references in client templates. Use the Department’s official mapping utilities for the Act, Rules and Forms separately. Maintain the legacy section, new section, applicable date, underlying rule, current form, system owner and evidence of testing. A text substitution is insufficient if a threshold, form field or validation has changed.
For example, if a March vendor invoice is paid in April, record the booking date, payment date and applicable withholding trigger. Apply the law and reporting workflow that correspond to the actual trigger and facts. Tie deductions to challans and the appropriate statement, and preserve the supporting contract and ledger entry. Test salary, rent, professional fees and non-resident payments as separate scenarios.
3. Preserve claims, credits and proceedings
Section 536 preserves specified rights, liabilities and proceedings. A notice received in June 2026 about a pre-commencement period can still require a response under the old Act. Maintain a separate docket for each proceeding, with the underlying period, statutory reference, notice date, response deadline and portal acknowledgement. Track carried-forward losses and eligible tax credits separately, recording origin, utilisation, remaining life and any relevant transition condition. Reconcile balances to filed returns and orders before carrying them into the new year.
4. Set up a transition close for the first Tax Year
- Archive signed returns, financial statements, reconciliations and proceedings under the old numbering.
- Lock the AY 2026–27 close separately from the 2026–27 Tax Year dashboard. Use a separate year-type field in exports and trackers.
- Map each recurring deduction and filing to its current rule, form and review owner. Test quarter-end and year-end cutoffs.
- For each entity, document the applicable tax regime, advance-tax assumptions and positions that depend on later Finance Act changes or notifications.
- At close, compare the tax provision with the return computation and record reasons for any difference before submission.
Official references
- Income-tax Act, 2025, including sections 3 and 536
- Income Tax Department transition FAQs, mapping utilities and forms
- CBDT commencement announcement
- Department comparison of effective section counts
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