Section 536 — Repeal and savings

(1) The Income-tax Act, 1961 (43 of 1961) is hereby repealed.
(2) Irrespective of the repeal of the Income-tax Act, 1961 (43 of 1961) (herein referred
to as the repealed Income-tax Act), and subject to 33[sub-section (4)]—
( a) nothing shall affect the previous operation of the repealed Income-tax
Act and orders or anything duly done or suffered thereunder; or
33. Substituted for “sub-section (3)” by the Finance Act, 2026, w.e.f. 1-4-2026.
( b) nothing shall affect any right, privilege, obligation or liability acquired,
accrued or incurred under the repealed Income-tax Act or orders under
such repealed Act;
( c) the provisions of the repealed Income-tax Act shall continue to apply to
any proceeding pending on the date of commencement of this Act and
to any proceedings initiated on or after the 1st April, 2026 (including
notices, assessment, reassessment, recomputation, rectification, penal-
ty, reference, revision and appeals) in respect of any tax year beginning
before the 1st April, 2026 and such proceedings shall be carried out as
per the procedure specified in the repealed Income-tax Act;
( d) any proceeding for the imposition of a penalty in respect of any tax
year beginning before the 1st April, 2026, may be initiated and any such
penalty may be imposed under the repealed Income-tax Act, as if this
Act had not been enacted;
( e) any proceeding pending on the commencement of this Act before any
income-tax authority or any other authority constituted under the repealed
Income-tax Act, Appellate Tribunal, or any court, by way of application,
appeal, reference or revision or by any other means, shall be continued
and disposed of as if this Act had not been enacted;
( f) any election or declaration made, or option exercised, by an assessee
under any provision of the repealed Income-tax Act and in force imme-
diately before the commencement of this Act shall be deemed to have
been an election or declaration made, or option exercised, under the
corresponding provision of this Act;
34[(g) where in respect of any proceeding relating to any tax year beginning before
the 1st April, 2026,—
( i) a refund falls due on or after such date; or
( ii) default is made on or after such date, in the payment of any sum due
under such proceeding,
the provisions of the repealed Income-tax Act, relating to the interest pay-
able by the Central Government on refunds or the interest payable by the
assessee for default, shall apply for the period on or after such date, subject
to the effect that—
34. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause (g) read
as under :
“( g) where in respect of any proceeding relating to any tax year beginning before the 1st
April, 2026,—
( i) a refund falls due after commencement of this Act; or
( ii) default is made after such commencement in the payment of any sum due
under such proceeding,
the provisions of this Act, relating to interest payable by the Central Government on
refunds and interest payable by the assessee for default, shall apply for the period
after the commencement of this Act;”
( A) the rate of interest on refund or on the default, as the case may be, as
provided in the repealed Income-tax Act has been substituted with
the rate as provided in the corresponding provisions of this Act; and
( B) such substitution shall apply from the date on which such rate has
been modified under this Act;]
35[(h) where any sum has been allowed as a deduction or has not been included
in the total income of any person, either on account of fulfilment of certain
conditions or for any other reason, for any tax year beginning before the 1st
April, 2026, and such sum was required to be included in the total income
of any subsequent tax year including beginning on or after the 1st April,
2026 under the repealed Income-tax Act, if it had not been so repealed, on
account of violation of such conditions or for any other reason, then such
sum shall be––
(i) deemed to be the income of such subsequent tax year; and
( ii) included in the total income of the said person under the same head of
income as it would have been included under the repealed Income-tax
Act;]
( i) any sum payable under the repealed Income-tax Act may be recovered
under this Act without prejudice to any action already taken for the
recovery of such sum under repealed Income-tax Act;
( j) any agreement entered into, appointment made, approval given, rec -
ognition granted, circular, direction, instruction, notification, order or
rule or any scheme framed therein issued under any provision of the
repealed Income-tax Act shall, so far as it is not inconsistent with the
corresponding provisions of this Act, be deemed to have been entered
into, made, granted, given or issued under the corresponding provision
of this Act and shall continue in force accordingly;
( k) where the period provided for any application, appeal, reference or
revision under the repealed Income-tax Act had expired on or before
the commencement of this Act, nothing in this Act shall be construed as
enabling any such application, appeal, reference or revision to be made
under this Act by reason only of the fact that a longer period therefor is
35. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause ( h)
read as under :
“( h) where any deduction has been allowed or any amount has not been included in the
total income of any person, subject to fulfilment of certain conditions for any tax
year beginning before the 1st April, 2026, and in case of violation of such condi -
tions in any tax year beginning on or after 1st April, 2026, any sum (on account of
deduction earlier allowed or amount not included) was required to be included in
the total income of such subsequent tax year under the repealed Income-tax Act if
it had not been so repealed, then such sum shall be—
( i) deemed to be the income of the tax year in which the violation takes place;
and
( ii) included in the total income of the said person under the same head of income
as it would have been included under the repealed Income-tax Act;”
prescribed or provision is made for extension of time in suitable cases
by the appropriate authority;
( l) any amount of credit, in respect of tax paid, allowable to be carried for-
ward in the case of an assessee, under the provisions of section 115JAA
or 115JD of the repealed Income-tax Act for the tax year beginning
before the 1st April, 2026, had the Income-tax Act, 1961 (43 of 1961) not
been repealed,—
36[(i) shall be deemed to be the amount eligible for credit under corresponding
provisions or section 206(3) or (4) of this Act, as the case may be in
the case of said assessee; and
( ii) credit for the tax paid under the repealed Income-tax Act shall be
allowed under this Act for the period for which it would have been
allowed under the repealed Income-tax Act if the assessee otherwise
continues to satisfy the conditions as specified in the corresponding
provisions or section 206(3) or (4) of this Act, as the case may be in
such tax years;]
( m) any amount of loss under the source or head of income specified in
column B of the Table given below and referred to in the section of the
repealed Income-tax Act specified in column C of the said Table, brought
forward for the tax year beginning before the 1st April, 2026 had the
Income-tax Act, 1961 (43 of 1961) not been repealed, shall be set off
and carried forward against the income computed under this Act, in the
manner provided in the respective section of the repealed Income-tax
Act specified in column C of the said table, for the tax years beginning
on or after the 1st April, 2026:
TABLE
Sl.
No.
Source or head of income under the
repealed Income-tax Act
Section of the repealed
Income-tax Act
A B C
1. Income from house property. 71B.
2. Profits and gains of business or
profession.
72.
3. Speculation business. 73.
36. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to their substitution, sub-clauses
(i) and (ii) read as under :
“( i) shall be deemed to be the amount eligible for credit under corresponding provision
of this Act in the case of said assessee; and
( ii) credit for the tax paid under the repealed Income-tax Act shall be allowed under this
Act for the period for which it would have been allowed under the repealed Income-tax
Act if the assessee otherwise continues to satisfy the conditions as specified in the
corresponding provisions of this Act in such tax years;”
Sl.
No.
Source or head of income under the
repealed Income-tax Act
Section of the repealed
Income-tax Act
A B C
4. Specified Business. 73A.
5. Activity of owning and maintaining
race horses.
74A.
( n) any amount of loss under the head capital gains, whether related to a
long-term capital asset or a short term capital asset, referred to in sec -
tion 74 of the repealed Income-tax Act, brought forward from the tax
year beginning before the 1st April, 2026 had the Income-tax Act, 1961
(43 of 1961) not been repealed, shall be carried forward and set off, in
accordance with the manner provided in the repealed Income-tax Act,
against the income under the head “Capital gains” computed under this
Act for any tax year beginning on or after the 1st April, 2026 upto eight
financial years immediately succeeding the financial year in which such
loss was first computed under the repealed Income-tax Act;
( o) any set off of loss or allowance for depreciation made in any tax year
beginning before the 1st April, 2026 in the hands of the amalgamated
company, successor company or the successor limited liability partner-
ship, in accordance with the provisions of section 72A of the repealed
Income-tax Act, shall be deemed to be the income of the amalgamated
company, successor company or the successor limited liability partner-
ship, as the case may be, chargeable to tax under this Act for the year in
which any of the conditions specified in that section are not complied
with;
( p) any set off of accumulated loss or unabsorbed depreciation allowed
in any tax year beginning before the 1st April, 2026 to the successor
co-operative bank, in accordance with the provisions of section 72AB
of the repealed Income-tax Act, shall be deemed to be the income of the
successor co-operative bank chargeable to tax under this Act for the year
in which any of the conditions specified in that section are not complied
with;
( q) any amount of profits or gains arising out of transfer of capital asset
not charged under the head “capital gains” by virtue of the provisions
contained in section 47( iv), ( v), ( xiii), ( xiiib) or ( xiv) of the repealed
Income-tax Act in any tax year beginning before the 1st April, 2026 shall
be deemed to be the income chargeable under the head “Capital gains”
under this Act, for the tax year––
( A) in which the transfer took place if any of the conditions laid down
in section 47A(1)(i) or (ii) of the repealed Income-tax Act are sat -
isfied; or
( B) in which any of the conditions laid down in section 47(xiii), (xiiib)
or (xiv) of the repealed Income-tax Act are not complied with,
as the case may be;
( r) where any allowance or part thereof, under section 32(2) or 35(4) of the
repealed Income-tax Act, is to be carried forward to tax year beginning
on the 1st April, 2026, had the Income-tax Act, 1961 (43 of 1961) not
been repealed, then, the allowance or part thereof shall be added to the
amount of capital allowances referred to corresponding provisions of
this Act for the tax year beginning on the 1st April, 2026 and deemed to
be part of that allowance, or if there is no such allowance for that tax
year, be deemed to be allowance for that tax year;
( s) the deduction referred to in sections 35ABA, 35ABB, 35D, 35DD, 35DDA,
35E or the first proviso to section 36(1)( ix) of the repealed Income-tax
Act, shall, on fulfilment of the conditions mentioned in the said provi -
sions, continue to be allowed under this Act for tax year beginning on or
after the 1st April, 2026 had the Income-tax Act, 1961 not been repealed
and such deduction shall be added to the amount of deferred revenue
expenditure allowance referred to corresponding provisions of this Act
for the tax year beginning on or after the 1st April, 2026 and deemed to
be part of that allowance, or if there is no such allowance for a tax year,
be deemed to be that allowance for that tax year;
( t) credit balance in the provision for bad and doubtful debts account made
under section 36(1)(viia) of the repealed Income-tax Act standing on the
last day of the tax year beginning on 1st April, 2025 shall be added to the
amount credited to the provision for bad and doubtful debts accounts
referred to in the corresponding provisions of this Act for the tax year
beginning on the 1st April, 2026 and deemed to be part of amount credited
to the provision for bad and doubtful debts accounts, or if there is no
such amount credited for that tax year, be deemed to be amount credited
for that tax year;
( u) any scheme which has been notified under the provisions of the repealed
Income-tax Act with a view to eliminating the interface with the asses -
see or any other person, the said scheme shall be deemed to have been
made—
( i) under the corresponding provisions of this Act; or
( ii) under section 532 where there is no such corresponding provision,
and shall continue in force accordingly; and
( v) where a search has been initiated under section 132 or requisition is
made under section 132A prior to the commencement of this Act, the
provisions of repealed Income-tax Act, shall continue to apply to any
proceedings connected in respect of such search or requisition, as the
case may be, as if this Act has not been enacted.
(3) Where any reference is made in this Act to any tax year commencing on
the 1st April, 2025 or to any earlier tax year, the same shall be construed as a refer-
ence to the corresponding previous year under the repealed Income-tax Act.
(4) Without prejudice to the provisions of sub-section (2), the provisions of section
6 of the General Clauses Act, 1897 (10 of 1897) shall apply with regard to the effect
of repeal.