The department described the shift as a significant milestone aimed at creating a tax system that is simpler, more transparent and taxpayer-friendly, while addressing practical and interpretational issues that may arise during the transition.
The FAQs have been structured across multiple themes, including return filing, tax payments, reassessment, dispute resolution and carry forward of losses, to help taxpayers and professionals navigate the change smoothly.
No Additional Tax Burden
A key reassurance for common taxpayers is that the new law does not introduce any new taxes or increase the existing tax burden. The overhaul is primarily aimed at simplifying statutory language, improving clarity and reducing disputes.
Officials say the intent is to make compliance easier and more predictable, especially for individuals who previously relied heavily on expert interpretation due to the complexity of the older law.
Further, the I-T department says, the income tax return (ITR) for income earned during FY25-26 will be filed for AY26-27 under the provisions of the Income-tax Act, 1961. Even though the filing will typically occur after 1 April 2026 (i.e., after the new Act has come into force), the return relates to a tax year beginning before 1 April 2026 and is therefore, governed entirely by the old Act.
In the earlier framework, taxpayers often faced confusion in determining whether to file form15G (resident individual below 60 years of age subject to prescribed income thresholds) or form15H (resident individual aged 60 years) and taxpayers had to determine eligibility and furnish either Form 15G or Form 15H, which sometimes created uncertainty. The revised framework merges both forms into a single unified form121, thereby eliminating ambiguity and simplifying compliance for taxpayers as well as payers.
‘Tax Year’ to Replace ‘Assessment Year’
One of the most notable changes is the introduction of the tax year (TY), replacing the concepts of previous year (PY) and assessment year (AY).
Under the new framework:
• Income will be linked directly to a single financial year, termed as the tax year
• The earlier dual-year system is eliminated to reduce confusion
The I-T department says that income earned during FY26-27 onwards will be referred to as TY26-27 under the new Income Tax Act.
Further, the department clarified that there will be no overlap or missing years during the transition. Income earned up to 31 March 2026 will continue under the old law, while income from 1 April 2026 onwards will fall under the new regime.
Return Filing Remains Largely Unchanged
The FAQs address a major concern among taxpayers — whether they will have to file two returns during the transition year.
The department clarified that no double-filing will be required:
• Income for FY25–26 will be filed under the old law (AY26–27)
• Income for FY26–27 will be filed the following year under the new law (TY26-27)
Importantly, due dates and filing structures remain broadly unchanged, ensuring continuity for salaried individuals and small taxpayers.
Tax Payments and TDS Rules Stay the Same
For everyday compliance, most processes remain unchanged:
• Tax deducted at source (TDS), advance tax and self-assessment tax systems continue as before
• Payment modes remain the same
• Interest rates for delays are unchanged
The only shift is terminological — taxpayers will now refer to the tax year instead of the assessment year.
Pending Cases and Refunds Protected
The department has emphasised that the transition will not affect existing taxpayer rights:
• Pending proceedings, assessments and appeals will continue under the old law
• Refund claims and carried-forward benefits remain valid
• Existing obligations and liabilities will continue
This ensures that taxpayers are not adversely impacted by the legislative change.
Simplified Law, Reduced Complexity
The new Act significantly reduces structural complexity:
• Fewer sections and simplified drafting
• Removal of redundant provisions
• Better use of tables and clearer definitions
The aim is to make the law easier to read and understand, particularly for individuals and small businesses.
Systems and Compliance Framework Continue
Existing infrastructure will remain intact during the transition:
• PAN and TAN systems continue
• Faceless assessment and appeals remain
• The e-filing portal will support both old and new laws simultaneously
This parallel operation is intended to ensure a seamless transition without disruption to taxpayers.
Guidance for Taxpayers
The department has advised taxpayers to:
• Maintain separate records for income before and after April 1, 2026
• Select the correct year while filing returns
• File returns within deadlines to avoid complications
Clarity-focused Transition
Highlighting the purpose of the FAQs, the department says the transition to the new law is a shared, evolving process involving taxpayers, professionals and tax authorities.
The guidance document has been designed to provide clear, structured and accessible information on transitional provisions, helping reduce uncertainty and support informed compliance.
Officials expressed hope that the FAQs will serve as a practical reference tool, enabling a smooth and effective migration to the new tax regime while ensuring consistency in interpretation and implementation.
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