Taxpayers Won’t Need to File Multiple Returns; Existing Approvals, Loss Benefits and Pending Cases Protected During Transition

The implementation of the New Income Tax Act, 2025 has created several questions among taxpayers regarding income tax returns, tax payments, refunds, TDS procedures and ongoing assessments. Addressing these concerns, the Central Board of Direct Taxes (CBDT) has issued a detailed Frequently Asked Questions (FAQ) document explaining how the transition from the Income Tax Act, 1961 to the new tax framework will be managed.

The tax authority has clarified that taxpayers will not have to file separate income tax returns under both laws during the transition period. The applicability of the law will depend on the financial year in which income is earned, providing clarity for individuals, businesses and professionals.

No Need to File Two Income Tax Returns During Transition

One of the biggest concerns among taxpayers was whether the introduction of the new law would require filing two different income tax returns.

CBDT has clarified that income earned during Financial Year 2025-26 will continue to be reported through the return filed for Assessment Year 2026-27 under the existing Income Tax Act, 1961.

The first return under the Income Tax Act, 2025 will apply to income earned during FY 2026-27, with the filing becoming due in 2027.

This clarification ensures that taxpayers will not face additional compliance burdens during the transition phase.

Old Income Tax Act to Continue for Existing Proceedings

The CBDT has also clarified that the introduction of the new tax law does not mean all ongoing matters will immediately move to the new system.

Several proceedings related to earlier assessment years will continue under the Income Tax Act, 1961, including:

• Original income tax returns

• Revised returns

• Belated returns

• Updated returns (ITR-U)

• Scrutiny assessments

• Defective return notices

• Search and seizure proceedings initiated before April 1, 2026

For taxpayers, this means ongoing assessments and compliance matters will continue under the rules applicable during the relevant assessment year.

Existing Registrations and Tax Approvals Will Remain Valid

CBDT has provided relief to businesses, trusts and institutions by confirming that existing approvals obtained under the old law will continue.

The validity of important approvals, including:

• Section 12AB registrations

• Section 80G approvals

• Lower or nil TDS certificates

• PAN and TAN applications

will not be affected merely because the new Income Tax Act has come into force.

Applications submitted before April 1, 2026, which relate to future tax years, will generally be processed under corresponding provisions of the new tax framework.

Tax Refunds, Loss Carry Forward and MAT Credits Protected

The CBDT has assured taxpayers that benefits accumulated under the previous tax regime will continue.

The clarification covers:

Pending Refunds

Income tax refunds due under the old law will continue to be processed without interruption.

Carry Forward of Losses

Businesses and individuals will continue to carry forward eligible business losses and capital losses calculated under the previous law, subject to existing conditions.

MAT and AMT Credits

Unused Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) credits will remain available for adjustment under the new Income Tax Act.

This ensures continuity and prevents taxpayers from losing accumulated tax benefits.

Taxpayers Need to Select Correct Assessment Year

CBDT has advised taxpayers to be cautious while making tax payments during the transition period.

The applicable year will depend on the period for which the income relates.

For example:

• Tax payments related to FY 2025-26 will continue under AY 2026-27 according to the old law.

• Payments related to FY 2026-27 income will fall under the new Tax Year 2026-27 framework.

Selecting the incorrect assessment year or tax year could create difficulties in matching tax credits and processing returns.

PAN and TAN Numbers Will Continue Without Change

Although the new law introduces revised forms and procedures, taxpayers do not need to apply for fresh PAN or TAN numbers.

Existing identification numbers will remain valid.

The CBDT has introduced certain procedural updates, including:

• A combined Form 121 replacing separate Forms 15G and 15H.

• New Form 97 replacing Form 60 for specified transactions where PAN is unavailable.

• New Form 128 for applications related to lower or nil TDS deductions.

CBDT Issues Compliance Advice for Taxpayers

To ensure a smooth transition, CBDT has recommended that taxpayers follow certain precautions:

• Maintain separate records for FY 2025-26 and FY 2026-27.

• Verify the correct assessment year before making tax payments.

• Reconcile TDS and tax statements separately for both periods.

• Keep track of corresponding provisions under both laws.

• Complete return filing before deadlines to avoid last-minute issues.

New Tax Framework Aims to Simplify Compliance

The New Income Tax Act, 2025 represents one of India's biggest direct tax reforms in decades. While the transition period may create temporary confusion, CBDT’s clarifications indicate that the government aims to ensure a smooth shift without disrupting taxpayer rights and existing benefits.

For investors, businesses and individuals, understanding the difference between the old assessment system and the new tax year structure will be crucial for accurate tax planning and avoiding compliance issues.