With the new Income Tax Act 2025 being implemented from April 1, the transition from the old Act of 1961 to the new Act will have some practical challenges and confusions. From the overlapping period during which both the new and old Acts will be effective to the selection of sections, taxpayers may face teething troubles.
"The transition will not be immediate. Instead, both the old Income Tax Act, 1961 and the new Act will operate simultaneously for some time. The taxability depends on the financial year in which the income is earned — not when the return is filed," said Nitin Mohan Kashyap, director, Coopers Tax Consulting.
For instance, income earned for the financial year ending March 31, 2026 (FY26) will continue to be governed by the Income Tax Act, 1961. Even though the return for this period will be filed later (in July 2026), and the new law may already be in force by then, the applicable law will still be the old one.
According to Kashyap, this overlap could extend beyond just a couple of years. For example, the tax department has the authority to reopen past assessments for up to 4-6 years. Even if such reassessment happens under the new regime timeline, the applicable law will still be the old Act of 1961 if the income pertains to earlier years.
Certain practical uncertainties can also arise around procedural forms to be used, flagged tax experts. For example, Form 13 is currently used to obtain a lower withholding tax certificate under Section 195 (existing Income Tax Act, 1961). Corresponding provisions under the new law will carry different section references and the updated forms are yet to be notified. Existing forms refer to the current provisions. Thus, old forms are used for certificates for 2026-27 as well.
"With new withholding tax statement formats and utilities expected to be introduced shortly, it becomes important for the tax department to ensure that certificates issued for 2026-27 appropriately reflect or are read in conjunction with the corresponding provisions under the new law. The new system should also recognise the certificates being issued," said Gaurav Makhijani, partner at Makhijani Gera & Associates LLP.
Similarly, Form 26 replaces Forms 3CA/3CB/3CD under the new Income Tax framework, introducing stricter, clause-wise reporting with mandatory Yes/No responses. It requires disclosure of server location and backups in India, detailed audit qualifications, TDS/TCS reporting gaps, and categorised auditor remarks, significantly enhancing compliance, transparency, and accountability in tax audits.
"Similarly detailed information is required in new form 26 and as all these data will be provided by clients only to the auditor for further submission, they will feel pressure as they are normally not used to such intensive reporting," said Ashish Niraj, partner, ASN & Company, a Chartered Accountancy firm.
Experts suggested that on the compliance front, forms are expected to become more detailed and stringent, with increased disclosures and certifications. This could lead to a higher compliance burden, especially for businesses.
