Income-tax Act, 2025: CBDT’s 23 FAQs on Notices and Recovery

A tax law may change overnight, but tax proceedings rarely do.

That is the real lesson from the CBDT’s latest 23 FAQs on the move from the Income-tax Act, 1961 to the Income-tax Act, 2025. For taxpayers, businesses, charitable institutions, directors, tax teams and professionals, the immediate concern is not merely a new direct tax law in India. The harder question is much more practical. If an issue relates to an old year, but the notice, summons, recovery, application or certificate is handled after 1 April 2026, which Act applies?

This is not a theoretical problem. A company may get a summons in July 2026 about information for FY 2024-25. A private company’s old tax demand may become irrecoverable, raising the question of director liability. A trust may have filed its 12AB or 80G application before 31 March 2026. The application may still be pending after the new law begins. A taxpayer may have applied for a lower deduction certificate before the cut-off date. The certificate may still be needed for Tax Year 2026-27. In every such case, the taxpayer is not asking an abstract question about repeal. The taxpayer needs to know which section applies, which form or procedure to use, and whether the old position survives.

The CBDT’s FAQs answer precisely that. They turn the broad repeal-and-savings language of section 536 of the Income-tax Act, 2025 into usable guidance. The larger message is clear. The 1961 Act has been repealed, but it has not vanished from taxpayer life. For several years, Indian tax administration will run in a two-Act world.

The Transition Problem: Repeal Does Not Mean a Clean Break

The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961. In ordinary speech, repeal sounds final. It suggests that one law has ended and another has replaced it.

Tax law is not that simple.

Income earned before 1 April 2026, proceedings already pending, old searches, old demands, pending applications, old defaults, past exemptions, carried-forward losses and earlier approvals cannot simply be erased. They need continuity. Without transition rules, taxpayers would face uncertainty, and the Department would struggle to run old-year cases.

That is why section 536, the repeal-and-savings provision, is central to the new regime. It keeps the old Act alive for set situations even after repeal. The CBDT’s FAQs matter because they show how that saving works in practice.

For business readers, the best way to see the framework is this. The 2025 Act is the new highway, but many vehicles still carry old-year cargo. The law must decide whether they continue on the old route or merge into the new one.

The Core Principle: Look at the Period, the Proceeding and the Trigger

The FAQs reveal a practical three-part test.

First, fix the period the matter relates to. If the matter relates only to a period before 1 April 2026, the old Act usually remains relevant. If the matter relates to Tax Year 2026-27 onwards, the 2025 Act generally applies.

Second, fix the nature of the action. Is it a summons, assessment, search, recovery, provisional attachment, penalty, prosecution, tax clearance certificate, application, registration or lower deduction certificate? Each has its own procedure.

Third, fix the trigger date. Did the search start before or after 1 April 2026? Was the application filed before 31 March 2026 or after 1 April 2026? Was the approval already granted, pending, or sought for a future tax year?

This matters because the same taxpayer may have different matters governed by different Acts at the same time. A company could file its FY 2025-26 return under the old framework and respond to a post-2026 notice for an old-year issue under the 1961 Act. It could apply for a new lower deduction certificate under the 2025 Act while facing recovery for an old demand under either enabling provision.

That is the new compliance reality.

Summons and Notices: Old-Year Matters Stay With the Old Act

The first set of FAQs deals with summons and notices. The CBDT confirms that a summons counts as a notice for section 536(2)(c). This matters more than it may appear.

If a summons is issued after 1 April 2026 but relates only to a period before that date, the Department may use the powers under section 131 of the Income-tax Act, 1961. This applies even where the matter flows from tax evasion petitions, suspicious transaction reports, CRS/FATCA information or similar intelligence sources. The condition is that the matter itself relates only to a pre-2026 period.

For taxpayers, the practical point is simple. Do not assume that a notice issued after 1 April 2026 must be under the 2025 Act. The date of issue is not the only factor. The period and the subject matter count just as much.

Where the information or proceeding does not clearly relate to a pre-2026 period, the Department should use the matching powers under the 2025 Act. That also holds where the matter concerns Tax Year 2026-27 onwards. For summons, the FAQ points to section 246 of the Income-tax Act, 2025.

This distinction may matter in real cases. Suppose a business receives a summons in September 2026 asking for documents on transactions during FY 2024-25. The summons may properly use the 1961 Act route. But if the summons concerns current transactions in FY 2026-27, the 2025 Act should generally apply.

Tax teams should therefore review every notice by asking three questions. What period does it relate to? What power has been invoked? Is the section reference aligned with section 536?

Search Cases: The Cut-Off Date Is Decisive

The FAQs draw a sharp line for search and requisition cases.

A search may have begun under section 132, or a requisition may have been made under section 132A, before 1 April 2026. Proceedings linked to that search then continue under the repealed 1961 Act, as if the new Act had not been enacted. This includes post-search inquiries and assessment.

Where the search or requisition starts on or after 1 April 2026, the matching powers under the 2025 Act apply.

This makes practical sense. Search proceedings create a chain of actions: seizure, statements, summons, post-search inquiries, assessments, retention of records, penalty and sometimes prosecution. Splitting that chain between two Acts merely because the later steps fall after 1 April 2026 would create needless confusion.

For businesses and promoters, this means the date the search began becomes a key compliance marker. A search started on 30 March 2026 and one started on 2 April 2026 may sit in different legal worlds. That holds even if later steps happen in the same calendar year.

Power to Call for Information: Same Logic, Different Section

The FAQs also address the power to call for information, which was earlier used under section 133(6) of the Income-tax Act, 1961. It is now mapped to section 252 of the Income-tax Act, 2025.

The CBDT confirms that the same principles that apply to summons apply here too. If the information request relates to old-year matters, the old Act may continue to apply. If it relates to the new tax year regime, the 2025 Act applies.

In practice, this will matter for banks, companies, employers, property registrars, online platforms, consultants and other third parties that receive information requests. They should not treat a 1961 Act reference as invalid merely because the request is issued after 1 April 2026. The period and the saving provision must be checked first.

Jurisdiction and PAN Migration: Not Always Year-Specific

Jurisdiction transfer and PAN migration work differently, because they are not tied to one assessment year or tax year. Once jurisdiction moves, all matters for all years go to the new Assessing Officer.

The FAQs confirm that if a notice for transfer of jurisdiction under section 127(2) of the 1961 Act was already issued before 1 April 2026, the final transfer order can still be passed under the 1961 Act, read with section 536. But where the transfer or PAN migration starts on or after 1 April 2026, the order should be passed under section 243 of the 2025 Act.

This matters most in search, survey and centralisation cases, where jurisdiction is often moved to a specialised officer. Taxpayers should distinguish an old process already begun from a fresh post-2026 transfer.

Provisional Attachment and Recovery: Enforcement Continues

The FAQs provide important guidance on enforcement actions.

For provisional attachment, the relevant Act depends on the assessment period. If the assessment relates to a tax year before 1 April 2026, provisional attachment may be made under section 281B of the 1961 Act. Otherwise, section 500 of the 2025 Act may apply.

Recovery is more interesting still. The FAQs state that recovery of demand for a period before 1 April 2026 can be made under the 1961 Act in line with section 536(2)(c). It can also be made under the 2025 Act, under section 536(2)(i). In other words, old demands remain recoverable, and repeal does not create a collection gap.

This has practical effects. Businesses with old demands cannot take comfort from the repeal of the old Act. The liability does not disappear. Recovery tools remain available. The question is not whether the Department can recover old dues. It is which legal route supports the action.

Directors, Penalties and Prosecution: The Default Period Matters

For directors of private companies, the FAQs confirm that liability must be fixed by the period the demand relates to. If the irrecoverable demand relates to a period when the person was a director, that person’s joint and several liability will turn on the old or the new provision.

Similarly, penalty for default in payment of tax demand follows the period of demand. If the demand relates to a period before 1 April 2026, penalty may be levied under section 221 of the 1961 Act. If it relates to a period on or after 1 April 2026, the matching provision of the 2025 Act applies.

The prosecution answer follows a conduct-based approach. First identify the section under which the default occurred, then launch prosecution under the matching framework. For example, if the default occurred under a provision of the 1961 Act, prosecution follows the 1961 Act route. If the default occurred under the 2025 Act, prosecution follows the new Act.

This is a useful reminder for taxpayers and directors. The law looks at when the liability or default arose. Repeal is not a shield against old non-compliance.

Books of Account and Retention: Follow the Original Action

The FAQs adopt the same practical logic for retention of books of account and impounding.

If the search began under the 1961 Act, retention of books is governed by the 1961 Act. If the search began under the 2025 Act, the 2025 Act provision applies. The same logic applies to survey and impounding.

This matters for taxpayers facing search or survey action across the transition date. The retention period, the procedure and follow-up action should be tested against the provision under which the original action was taken.

Pending Applications and Approvals: The Business Continuity Piece

The most commercially useful part of the FAQs relates to pending applications and continuing approvals.

Applications filed on or before 31 March 2026 seeking benefits under the 1961 Act may be disposed of by applying section 536 and the provisions of the old Act. This protects taxpayers who filed valid applications before the transition date and were waiting for a decision.

For charitable and non-profit organisations, the FAQs set out how pending applications under sections 12AB and 80G are handled. Where an application was filed before 31 March 2026 and is still pending on 1 April 2026, the proceedings may continue under the 1961 Act. That applies where approval is sought for years including Tax Year 2025-26. Registrations or approvals already granted under the 1961 Act remain valid.

Where the pending 12AB or 80G application seeks approval for Tax Year 2026-27 onwards, it may be treated as filed under the 2025 Act.

This avoids a major disruption. Without this guidance, trusts and institutions could have been unsure on three questions. Would old applications need refiling? Would existing approvals survive? Could donors still rely on continuing 80G status? The FAQs keep continuity while moving future-year treatment into the new Act.

Lower and Nil Deduction Certificates: Cash-Flow Certainty Preserved

Lower deduction certificates and no deduction certificates are vital for business cash flows. A certificate can decide whether a taxpayer suffers withholding at normal rates or at a reduced rate. For companies with thin margins, high-value contracts or recurring receipts, the difference can be large.

The FAQs confirm that LDC/NDC applications filed and disposed of before 31 March 2026 are protected. Where an application under section 197 of the 1961 Act was filed before 31 March 2026 but is still pending on 1 April 2026, it may be treated as filed under the 2025 Act. That applies where approval is sought for Tax Year 2026-27 onwards. Applications filed on or after 1 April 2026 will be dealt with entirely under the 2025 Act.

For CFOs and tax teams, this means withholding planning for FY 2026-27 should not wait because of the transition. But application status, filing date and certificate period should be tracked closely.

What Businesses Should Do Now

The practical step is not to learn all 23 FAQs by heart. It is to build a transition tracker.

Every company should sort open tax matters into three buckets: matters relating to tax years before 1 April 2026, matters relating to Tax Year 2026-27 onwards, and mixed or uncertain matters. Each notice, application, recovery action, appeal, certificate and proceeding should be tagged with the Act that applies, the section reference, the proceeding status and an internal owner.

For large groups, this tracker should cover direct tax litigation, TDS certificates, trust or institutional approvals, search/survey matters, director exposure, recovery proceedings and pending applications. It should also record whether a matter began before or after 1 April 2026.

This is not merely legal housekeeping. It cuts the risk of missed responses, wrong objections, incorrect section references, duplicate filings and needless disputes.

The Takeaway: Old-Year Governance Still Matters in the New Act

The CBDT’s FAQs make one point very clear. The Income-tax Act, 2025 is not a clean reset. It is a controlled transition.

The 1961 Act will continue to matter for old-year proceedings, searches, demands, penalties, approvals and applications. The 2025 Act will govern the new tax-year world. Between the two sits section 536, the bridge.

For taxpayers, the lesson is simple. Do not treat every action after 1 April 2026 as a new-Act action. Do not assume old approvals are lost. Do not assume old demands are dead. Do not assume pending applications must start from zero. Fix the period, the proceeding and the trigger date, then decide which Act applies.

In the coming years, good tax governance will not only mean knowing the law. It will mean knowing which law applies.

That may be the most practical compliance skill of India’s two-Act transition era.