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E-filing portal to facilitate compliance under both tax laws during transition: I-T Dept

March 23, 2026 5 min read Economics Polity & Governance GS2 (Government Policies Statutory Bodies) GS3 (Indian Economy Taxation)
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What Happened

  • The Income Tax Department issued a detailed FAQ clarifying how the transition from the Income Tax Act, 1961 to the new Income Tax Act, 2025, will be managed when the latter comes into force on April 1, 2026.
  • The e-filing portal (incometax.gov.in) will facilitate compliance under both Acts simultaneously during the transition period — assessments, appeals, and proceedings for years prior to April 1, 2026 will continue under the old Act.
  • Taxpayers filing returns for Assessment Year (AY) 2026-27 (relating to the financial year governed by the old Act) will use forms prescribed under the 1961 Act, filed in July 2026.
  • Advance tax payments for Tax Year 2026-27, starting from June 2026, will be made under the new Act's framework.
  • The new Act introduces a single "Tax Year" concept (replacing the dual "Assessment Year" and "Previous Year" system) and allows TDS refund claims even for ITRs filed after deadlines without penal charges.
  • The Income Tax Act, 2025 was passed by Parliament on August 21, 2025 and has 536 sections across 23 chapters and 16 schedules — down from 819 sections and 47 chapters in the 1961 Act.

Static Topic Bridges

Income Tax Act, 2025 — A Landmark Simplification

The Income Tax Act, 2025 replaces the Income Tax Act, 1961, which had been in operation for over six decades. The 1961 Act had grown to over 819 sections, 47 chapters, and numerous provisos and explanations added piecemeal over time — making it notoriously complex and litigation-prone. The 2025 Act was introduced as a revenue-neutral simplification exercise: it does not change tax rates or the substantive tax burden but restructures provisions in plain language, eliminates redundancies, and introduces digital-first administration. It was passed by Parliament on August 21, 2025 after being introduced as the Income-Tax (No.2) Bill, 2025.

  • New Act: 536 sections, 23 chapters, 16 schedules (vs. 1961 Act's 819 sections, 47 chapters).
  • Effective date: April 1, 2026 (Tax Year 2026-27 onwards).
  • Key structural change: Replaces "Assessment Year" (AY) + "Previous Year" (PY) with a single "Tax Year" aligned to the financial year (April 1–March 31).
  • Tax rates remain unchanged — the new regime (lower slab rates, no deductions) and old regime (higher slabs, with deductions) coexist under the new Act as well.
  • Faceless assessments (introduced earlier under the Faceless Assessment Scheme, 2020) are now codified and extended to more processes.

Connection to this news: The IT Department's FAQ addresses the transitional complexity that arises precisely because the 2025 Act supersedes the 1961 Act prospectively — proceedings for earlier years must continue under the law that governed those years.

India's Direct Tax Administration — Key Institutions

Direct taxes in India — primarily income tax and corporate tax — are administered by the Central Board of Direct Taxes (CBDT), a statutory authority under the Ministry of Finance, established under the Central Board of Revenue Act, 1963. The CBDT is responsible for framing rules, issuing circulars, and supervising the Income Tax Department. Tax collected flows to the Consolidated Fund of India under Article 266 of the Constitution. Direct taxes account for approximately 56% of India's gross tax revenue (FY2024-25 estimates), with personal income tax and corporate tax being the two main components.

  • CBDT functions under the Ministry of Finance's Department of Revenue.
  • Income Tax Department has a network of ~750 offices across India.
  • Gross direct tax collection FY2024-25: approximately ₹22.3 lakh crore (record high).
  • The e-filing portal (incometax.gov.in) processes over 7 crore ITR filings annually.
  • The Goods and Services Tax (GST) framework handles indirect taxes separately — CGST, SGST, IGST under GST Council.

Connection to this news: The e-filing portal's dual-compliance capability is a CBDT-managed technological upgrade — the department must ensure its IT infrastructure can simultaneously apply two sets of rules to different tax years, representing a significant administrative challenge.

Tax Year Concept — Assessment Year vs. Tax Year

Under the Income Tax Act, 1961, the tax system used two distinct concepts: (1) "Previous Year" — the financial year in which income was earned (e.g., April 2025–March 2026), and (2) "Assessment Year" — the year in which the return is filed and assessed (e.g., April 2026–March 2027, designated AY 2026-27). This two-year nomenclature was a persistent source of taxpayer confusion. The Income Tax Act, 2025 abolishes this distinction and introduces a single "Tax Year" defined as the twelve-month period starting April 1, which simultaneously serves as the year of earning and the year of reference for compliance obligations. This aligns India's system more closely with global practices.

  • Under the old system: income earned in FY2025-26 → filed as AY 2026-27.
  • Under the new system: same income covered under "Tax Year 2025-26" or "Tax Year 2026-27" depending on interpretation — detailed rules in transition provisions.
  • The transition provisions are in Section of the 2025 Act itself, specifying that the old Act governs all tax years beginning before April 1, 2026.
  • Pending assessments, appeals, and litigation for prior years continue under 1961 Act provisions until final resolution.

Connection to this news: The IT Department's FAQ specifically addresses this nomenclature transition — clarifying that AY 2026-27 returns (filed in July 2026) still use old Act forms because the underlying income was earned before April 1, 2026.

Key Facts & Data

  • Income Tax Act, 2025: passed August 21, 2025; effective April 1, 2026
  • Structural reduction: 819 sections → 536 sections; 47 chapters → 23 chapters
  • Revenue-neutral: no change in tax rates or tax burden
  • Key innovation: Single "Tax Year" replaces dual "Assessment Year + Previous Year"
  • Transition principle: 1961 Act governs all proceedings for years prior to April 1, 2026
  • AY 2026-27 returns (income of FY2025-26): filed under 1961 Act forms, due July 2026
  • Advance tax for Tax Year 2026-27: under new Act, starting June 2026
  • Gross direct tax collection FY2024-25: ~₹22.3 lakh crore (record)
  • E-filing portal: processes >7 crore ITR filings annually
  • CBDT: statutory authority under Central Board of Revenue Act, 1963