From the 1961 Act to the 2025 Act

The change on 1 April 2026

Section 536(1) of the Income-tax Act, 2025 repeals the Income-tax Act, 1961. The 2025 Act applies from 1 April 2026, so tax year 2026-27 is the first year assessed under it. The 2025 Act uses a single "tax year" in place of the old pairing of previous year and assessment year.

The Finance Act, 2026 (Act 4 of 2026), which received assent on 30 March 2026, amended the 2025 Act before it came into force. It is the source of the 20-year deduction and the 15% rate in section 218. The version of section 147 in the 2025 Act as first enacted still provided 10 consecutive years out of 15.

Which Act governs which year

• Tax years beginning before 1 April 2026. The 1961 Act continues to apply to proceedings for those years, including notices, assessments, reassessments, rectifications, penalties, revisions and appeals started after 1 April 2026. They follow the procedure of the 1961 Act (section 536(2)(c) and (d)).
• Pending proceedings. Proceedings pending on commencement before any income-tax authority, the Appellate Tribunal or a court continue as if the 2025 Act had not been enacted (section 536(2)(e)).
• Tax year 2026-27 onwards. The 2025 Act applies, including section 147 as substituted by the Finance Act, 2026.

A dispute about a section 80LA claim for an earlier year is therefore still argued under section 80LA, even if it is heard after April 2026. See tax disputes.

Units that started under section 80LA

Four transitional rules matter to an existing unit:

• Options carry over. An election, declaration or option made under the 1961 Act and in force immediately before commencement is treated as made under the corresponding provision of the 2025 Act (section 536(2)(f)).
• The period is counted from the relevant tax year. Section 147(2) applies "irrespective of anything contained in section 80LA". The 25-year block runs from the tax year in which IFSCA, RBI or SEBI permission or registration was obtained, and that year can fall before April 2026. On this reading an existing unit counts the longer 20-out-of-25 period from its original permission year, not from 2026.
• Offshore Banking Units whose tenth deduction year under section 80LA(1) ended on 31 March 2025 get a further 10 consecutive years from tax year 2026-27 (section 147(2)(a)(ii)).
• Clawback. If a deduction was allowed for a year before 1 April 2026 and its conditions are breached in a later year, the sum that the 1961 Act would have brought back to tax is taxed in the year of the breach, under the same head (section 536(2)(h)).

Credits for minimum alternate tax and alternate minimum tax paid under sections 115JAA and 115JD of the 1961 Act carry over (section 536(2)(l)). The Finance Act, 2026 then changed how minimum alternate tax credit can be used. See Minimum alternate tax for IFSC units.

Notifications, forms and old references

Notifications, approvals, circulars and rules issued under the 1961 Act continue, so far as they are consistent with the 2025 Act, as if issued under the corresponding provision (section 536(2)(j)). For IFSC units, CBDT has reissued the withholding relief under the 2025 Act: Notification 80/2026 and Notification 75/2026 apply from 1 April 2026 and require a declaration of 20 consecutive tax years in Form No. 1(N). See TDS relief for IFSC units.

References to section 80LA, to "assessment year" and to 10 years out of 15 in documents, board papers, investor materials and websites are out of date for tax year 2026-27 onward. That includes some earlier versions of this site. The main changes in reference for IFSC work are:

The table is a guide to finding provisions, not a statement that the wording is unchanged. Check the 2025 text before relying on any carried-over rule.