Income Tax Act 2025 Transition Rules Clarified by CBDT for Pending Proceedings

The Income-tax Act, 2025 came into effect on April 1, 2026, replacing the Income-tax Act, 1961 after more than 60 years. While the new legislation applies to tax year 2026-27 onwards, several ongoing tax proceedings will continue under the earlier law.

The transition framework is governed by Section 536 of the Income-tax Act, 2025, which contains repeal and savings provisions. To provide greater clarity, the Central Board of Direct Taxes (CBDT) has issued detailed FAQs explaining the treatment of pending matters.

Income Tax Act 2025 Transition Rules Explained

The CBDT has stated that the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025 will depend on the relevant tax year and the nature of the proceeding. In most cases, matters relating to tax years before April 1, 2026 will continue to be governed by the earlier law.

This approach is intended to ensure continuity and avoid disruption in cases that were already underway before the new legislation took effect. Proceedings connected with tax year 2026-27 and subsequent years will generally be dealt with under the new framework.

CBDT Clarification on Pending Tax Notices and Assessments

According to the FAQs issued by the CBDT, notices, summons, assessments, reassessments, rectifications, penalties and appeals linked to tax years before April 1, 2026 will continue under the Income-tax Act, 1961. This position applies even if such proceedings are initiated after the commencement of the Income-tax Act, 2025.

The clarification provides certainty for taxpayers whose earlier tax matters remain unresolved. At the same time, fresh proceedings relating to tax year 2026-27 onwards will be initiated and completed under the provisions of the Income-tax Act, 2025.

Income Tax Search Cases Before and After April 1, 2026

The transition provisions draw a clear distinction between searches conducted before and after April 1, 2026. Searches initiated before that date, together with post-search investigations, inquiries and assessments arising from them, will continue under the Income-tax Act, 1961.

This ensures that an entire search-related proceeding remains under a single legislative framework. In contrast, searches initiated on or after April 1, 2026, will be governed by the provisions and procedures contained in the Income-tax Act, 2025.

PAN Transfer and Jurisdiction Change Under New Tax Law

The CBDT has also clarified the treatment of administrative proceedings such as transfer of jurisdiction and Permanent Account Number (PAN) migration. Where these processes were initiated before April 1, 2026, they may be completed under the provisions of the Income-tax Act, 1961.

This allows pending administrative actions to reach completion without requiring a shift in legal basis midway through the process. However, jurisdiction transfer and PAN migration proceedings initiated on or after April 1, 2026, will be carried out under the Income-tax Act, 2025.

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Conclusion

The CBDT’s guidance provides a clearer roadmap for the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025. The key principle is that proceedings related to tax years before April 1, 2026 generally remain under the earlier law, while matters concerning tax year 2026-27 onwards fall under the new legislation.

The same distinction applies to search actions, administrative transfers and several other tax processes. Through its FAQs and the provisions of Section 536, the CBDT has outlined how ongoing and future proceedings will be handled during the transition period.

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