Section 536 is the transitional heart of the Income-tax Act 2025. Titled Repeal and Savings, it has 4 sub-sections and sub-section 2 alone contains 22 sub-clauses each addressing a distinct transitional situation [L4-C1]. Every working practitioner reads Section 536 at every touchpoint with legacy 1961-Act matters. This lesson walks the section in operational detail.
Sub-section 1: the repeal
Sub-section 536(1) is the operative repeal clause. It reads to the effect that the Income-tax Act 1961 (43 of 1961) is hereby repealed. Effective from 1 April 2026. The 65-year-old Act stood repealed at that moment. But the repeal is not absolute; the savings in sub-section 2 preserve substantial parts of the old-Act framework for pending matters.
Sub-section 2: the 22 savings sub-clauses
Sub-section 536(2) is the savings clause with 22 distinct sub-clauses. It preserves the operative effect of the 1961 Act framework in specified transitional situations, ensuring continuity of pending proceedings and validity of prior actions. The 22 sub-clauses are not enumerated in this lesson exhaustively (that requires the bare Act text), but the practitioner-relevant sub-clauses are:
Sub-clause 2(c): pending proceedings continue under the old Act. Any proceeding pending under the 1961 Act on 1 April 2026, and any proceeding initiated on or after 1 April 2026 in respect of Tax Year 2025-26 (Assessment Year 2026-27) or earlier tax years, continues under the 1961 Act as if that Act had not been repealed. Practitioner impact: if you are defending a Section 148 reassessment for AY 2023-24, you continue to argue under the 1961-Act Section 148 framework, not under the 2025-Act framework.
Sub-clause 2(j): old CBDT circulars, notifications, instructions, approvals remain valid. Circulars, notifications, instructions, and approvals issued under the 1961 Act remain valid unless in conflict with the 2025 Act. Practitioner impact: the roughly 4,000 CBDT circulars issued under the 1961 Act continue to be citable authority for interpretation of substantively continuing provisions. Test for conflict: if the underlying provision is substantively similar, the old circular applies. If the provision is materially different, the old circular does not apply. VERIFY: this is a working interpretation; formal CBDT clarification on specific circulars is expected in future.
Sub-clause 2(a): repeal does not affect anything done or suffered under the 1961 Act. Assessments completed, refunds issued, penalties levied, prosecutions filed under the 1961 Act remain valid. Practitioner impact: no reopening or invalidation of pre-1 April 2026 assessments merely by reason of the repeal.
Sub-clause 2(b): any right, privilege, obligation, or liability acquired, accrued, or incurred under the 1961 Act is preserved. Practitioner impact: refunds accrued under the 1961 Act continue to be payable; tax liabilities determined under the 1961 Act continue to be recoverable.
Sub-clause 2(d): any orders passed under the 1961 Act continue to have effect. Practitioner impact: assessment orders, penalty orders, prosecution orders passed under the 1961 Act do not need to be re-issued under the 2025 Act.
Sub-clause 2(e): appeals, revisions, and applications under the 1961 Act may continue as if the Act had not been repealed. Practitioner impact: appeals filed before Commissioner (Appeals), ITAT, High Court, Supreme Court under the 1961 Act continue under that framework. New appeals from pre-1 April 2026 assessments may be filed either under the 1961 Act framework (via Section 536(2)(e)) or under the corresponding 2025-Act provisions.
Sub-clause 2(f): refund of tax paid under the 1961 Act is not affected.
Sub-clause 2(g): set-off of losses under the 1961 Act carries forward under the 2025 Act. Practitioner impact: business losses of AY 2023-24 available for set-off in FY 2026-27 continue to be usable, subject to the standard 8-year limit and other conditions.
Sub-clause 2(h): unabsorbed depreciation under the 1961 Act carries forward.
Sub-clause 2(i): advance tax and TDS paid under the 1961 Act are creditable under the 2025 Act.
Sub-clauses 2(k) through 2(v) address further specific situations (Vivad se Vishwas settlements, faceless assessment cases, transfer pricing cases, non-resident cases, refunds under specific sections, ITR-U updated returns, etc). VERIFY: exact enumeration and content of sub-clauses 2(k) through 2(v) against the bare Act text.
Sub-section 3: the Tax Year to Previous Year mapping
Sub-section 536(3) is the mapping clause. It provides that any reference in the 2025 Act to a Tax Year shall be read as a reference to the corresponding Previous Year under the 1961 Act, and any reference to a Previous Year shall correspondingly refer to a Tax Year in the same period [L4-C2]. This clause is the technical mechanism that lets the 2025 Act use the unified Tax Year concept while remaining internally consistent with the 1961 Act's dual Previous Year and Assessment Year framework for transitional purposes.
Practical translation: Tax Year 2026-27 under the 2025 Act = Previous Year 2026-27 under the 1961 Act = Assessment Year 2027-28 under the 1961 Act. Tax Year 2025-26 under the 2025 Act (which is entirely a transitional period since the Act came into force on 1 April 2026) = Previous Year 2025-26 = Assessment Year 2026-27.
Sub-section 4: the residual savings
Sub-section 536(4) is a residual clause providing that any matter not specifically covered by sub-sections 1 through 3 shall be governed by the General Clauses Act 1897 as if the 1961 Act had been repealed by a Central Act. This is the safety net for edge cases not enumerated. Practitioner impact: rarely invoked in practice, but useful for genuine gap situations.
Practical scenarios: Section 536 in action
Scenario 1: AY 2023-24 reassessment notice received in July 2026
A client receives a Section 148 reassessment notice under the 1961 Act in July 2026 for AY 2023-24. Section 536(2)(c) says the 1961 Act continues to apply. Practitioner defends the reassessment under the 1961-Act Section 148 framework (with the 3-year / 10-year time-limit distinction as amended by Finance Act 2021), Section 148A pre-Notice procedure, and the CBDT circulars issued under the 1961 Act. New-Act Section 148 equivalent does not apply because the tax year predates the commencement of the 2025 Act. The Finance Act 2026 amendment (3-month timeline for reassessment notices giving effect to court findings) does apply if the reassessment notice is being issued to give effect to a court order (procedural rules applicable at the time of notice issuance apply even to pre-2025-Act tax years).
Scenario 2: CBDT Circular No. 5/2010 on Section 194IA TDS on property
CBDT Circular No. 5/2010 clarified TDS obligations under Section 194IA (TDS on immovable property purchase). Section 194IA of the 1961 Act corresponds to Section 393 Table A entry for immovable property under the 2025 Act. Under Section 536(2)(j), the Circular remains valid unless in conflict with the 2025 Act. Practical test: does Section 393 Table A entry substantively differ from Section 194IA? If the rate, threshold, and mechanism are the same (they are, per the ICAI mapping), the Circular continues to apply. Cite it as "CBDT Circular No. 5/2010 dated X, continued under Section 536(2)(j) of the Income-tax Act 2025."
Scenario 3: Business loss of AY 2021-22 carried forward
Client has business loss of Rs 10 crore from AY 2021-22 (Tax Year 2020-21 under the new mapping via Section 536(3)) available for set-off in FY 2026-27. Under Section 536(2)(g), the loss continues to be available for set-off under the 2025 Act, subject to the 8-year carry-forward limit measured from the original tax year of loss. 8 years from AY 2021-22 means the loss is available up to and including AY 2029-30 (Tax Year 2028-29). Set-off in FY 2026-27 (Tax Year 2026-27) is permitted; loss lapses if unused by end of Tax Year 2028-29.
Scenario 4: Appeal pending before Commissioner (Appeals) as of 1 April 2026
Client has an appeal filed with CIT(A) under the 1961-Act framework for AY 2024-25, pending as of 1 April 2026. Under Section 536(2)(e), the appeal continues under the 1961-Act framework. CIT(A) passes the appellate order under the 1961 Act framework. Further appeal to ITAT (if the client is aggrieved) is filed under the corresponding provisions; per Section 536(2)(e), the appeal may continue as if the 1961 Act had not been repealed, so the ITAT proceedings continue under 1961-Act framework. Practitioner may cite either 1961-Act sections (via Section 536(2)(e)) or the corresponding 2025-Act sections at their choice; the substantive law applied is the 1961 Act.
The Section 536 audit habit
Practitioners have institutionalised a Section 536 audit habit: before responding to any query or drafting any advisory note that touches a pre-1 April 2026 matter, check which Section 536 sub-clause applies and cite it in the response. This defends against the two most common errors: (1) applying 2025-Act framework to pre-2025-Act matters (incorrect because Section 536(2)(c) preserves 1961-Act application), and (2) discarding old-Act CBDT circulars as if they were no longer valid (incorrect because Section 536(2)(j) preserves their validity).
Next lesson: the CBDT FAQ on Interplay and Transition dated 20 March 2026 and its 10 thematic areas, plus the FY 2026-27 compliance calendar.