New Income Tax Act: CBDT issues FAQs on pending tax cases, TDS and transition rules
India is transitioning from the Income Tax Act, 1961, to the new Income Tax Act, 2025, a move that has raised several questions among taxpayers, businesses, and tax professionals regarding pending assessments, procedural matters, and ongoing applications.
To address these concerns, the Central Board of Direct Taxes (CBDT) has issued a detailed set of Frequently Asked Questions (FAQs) that explains how pending cases and various tax proceedings will be handled once the new law comes into effect on 1 April 2026.
Issued through an official memorandum dated 6 July 2026, the FAQs clarify the transition provisions under Section 536 of the Income Tax Act, 2025.
The guidance covers a wide range of issues, including pending assessments, Lower Deduction Certificates (LDCs), No Deduction Certificates (NDCs), search cases, tax recovery proceedings, prosecutions, registrations and other procedural matters.
Pending tax proceedings to continue under the old law
The CBDT has clarified that all proceedings relating to tax years beginning before 1 April 2026 will continue to be governed by the Income Tax Act, 1961, even after the new law comes into force.
In other words, the Income Tax Act, 2025, will not apply to events or tax years preceding 1 April 2026. This means that pending proceedings will continue under the old law until they are concluded, providing greater certainty and continuity for taxpayers during the transition.
This also means that even if certain proceedings are pending when the new law comes into effect, they will still follow the procedures prescribed in the earlier legislation.
CBDT also explained that the provisions of the repealed Income Tax Act will continue to apply to proceedings pending on the commencement date, as well as to proceedings initiated post 1 April, 2026, if they relate to a tax year starting before that date. For complete clarity on the same, the details are explained below:
|
Legal Aspect/ Area |
What CBDT has clarified |
|---|---|
| Pending assessments | Continue under the Income-tax Act, 1961 if related to earlier tax years. |
| Proceedings initiated after April 1, 2026 for old tax years | Old laws and procedures will continue to apply |
| LDC/NDC applications pending on April 1, 2026 | May be treated under the corresponding provisions of the Income-tax Act, 2025 |
| Fresh LDC/NDC applications after April 1, 2026 | Will be processed fully under the Income-tax Act, 2025 |
Clarity on lower TDS certificate applications
For all applications and pleas pending under Section 197 of the Income Tax Act, 1961, which permits taxpayers to seek a lower or nil deduction of tax at source (TDS), the CBDT has also sought to address this issue to bring transparency.
In this regard, applications filed on or before 31 March 2026 that remain pending on 1 April 2026 and for which approval is mandatory for Tax Year 2026-27 onwards, may be administratively considered under the corresponding provisions of the Income Tax Act, 2025.
Still, applications for ‘Lower Deduction Certificates’ or ‘No Deduction Certificates’ filed from 1 April 2026 onwards will be covered entirely by the provisions of the new law, i.e., the Income Tax Act, 2025.
This comprehensive clarification from CBDT aims to ensure a seamless transition between the two tax regimes and provides much-needed guidance for taxpayers, tax professionals, and businesses facing ongoing issues during the current transition period.
