Section 536 — Repeal and savings. Successor to s.297 of the 1961 Act.
Section 536 is in Chapter XXIII — Miscellaneous, which runs from section 499 to section 536.
Sub-section (1) repeals the Income-tax Act, 1961. Sub-section (2) saves a long list of things from that repeal, and is expressed to operate subject to sub-section (4) — the reference having been changed from "sub-section (3)" by Act No. 4 of 2026 with effect from 1 April 2026.
Clauses (a) to (f) preserve the past: the previous operation of the repealed Act and anything done or suffered under it; rights, privileges, obligations and liabilities acquired, accrued or incurred; and elections, declarations and options in force immediately before commencement, deemed made under the corresponding provision of this Act. Clause (c) decides most live cases — the repealed Act continues to apply, and its procedure to be followed, both for proceedings pending on commencement and for proceedings initiated on or after 1 April 2026 (including notices, assessment, reassessment, recomputation, rectification, penalty, reference, revision and appeals) in respect of any tax year beginning before 1 April 2026. Clause (d) allows penalty proceedings for such years under the repealed Act, and clause (e) continues pending applications, appeals, references and revisions before any authority, the Appellate Tribunal or any court.
Clause (g), substituted with effect from 1 April 2026, deals with interest where, in a proceeding relating to a tax year beginning before that date, a refund falls due or a default is made on or after it: the repealed Act's interest provisions apply for the period on or after that date, but with its rate replaced by the rate in the corresponding provision of this Act, from the date that rate was modified. The earlier text had instead applied this Act's interest provisions for the period after commencement. Clause (h), also substituted, provides that a sum allowed as a deduction or excluded from total income for a tax year beginning before 1 April 2026, which on violation of conditions or otherwise was required under the repealed Act to be included in a subsequent tax year, is deemed income of that subsequent tax year and included under the same head as it would have been under the repealed Act.
Clauses (i) to (v) carry balances and consequences forward. Sums payable under the repealed Act may be recovered under this Act; agreements, approvals, recognitions, circulars, instructions, notifications, orders, rules and schemes continue so far as not inconsistent with this Act; an expired limitation period is not revived by a longer period here. Clause (l), whose sub-clauses (i) and (ii) were substituted with effect from 1 April 2026, treats credit carried forward under section 115JAA or 115JD of the repealed Act as credit under the corresponding provisions or under section 206(3) or (4) of this Act, allowable for the period it would have been allowed under the repealed Act if the conditions continue to be satisfied. Clause (m) carries brought forward losses under a five-entry Table — house property (section 71B), business or profession (section 72), speculation business (section 73), specified business (section 73A) and owning and maintaining race horses (section 74A) — to be set off in the manner of the repealed section named. Clause (n) carries capital losses under section 74 of the repealed Act forward for up to eight financial years immediately succeeding the financial year in which the loss was first computed. Clauses (o) to (q) preserve the clawbacks under sections 72A, 72AB and 47/47A; clauses (r) to (t) add unabsorbed allowances under sections 32(2) and 35(4), the deductions under sections 35ABA, 35ABB, 35D, 35DD, 35DDA, 35E and the first proviso to section 36(1)(ix), and the credit balance in the provision for bad and doubtful debts under section 36(1)(viia) standing at the end of the tax year beginning 1 April 2025. Clause (u) continues faceless schemes, treating them as made under the corresponding provision or under section 532 where there is none, and clause (v) keeps the repealed Act applicable to proceedings connected with a search under section 132 or a requisition under section 132A initiated before commencement.
Sub-section (3) construes a reference to a tax year commencing on 1 April 2025 or earlier as a reference to the corresponding previous year under the repealed Act, and sub-section (4) applies section 6 of the General Clauses Act, 1897 to the effect of the repeal.
Repealing an Act in operation for over sixty years leaves accrued liabilities, unfinished proceedings, unexhausted losses and credits, and approvals people have relied on. The section keeps them alive and, more importantly, decides which statute governs each: the repealed Act by year of income rather than by date of action, so an old year stays with the old law even when the notice issues after the new Act has begun.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Dividing line for which Act governs a proceeding | Tax year beginning before the 1st April, 2026 | The repealed Act and its procedure apply both to proceedings pending on commencement and to proceedings initiated on or after 1 April 2026 in respect of such a tax year | Sub-section (2)(c) |
| Carry forward of capital losses from the repealed Act | Up to eight financial years | Immediately succeeding the financial year in which the loss under section 74 of the repealed Act was first computed; set off against income under the head "Capital gains" computed under this Act | Sub-section (2)(n) |
| Interest on refunds and on defaults for earlier tax years | The rate provided in the corresponding provision of this Act, substituted for the repealed Act's rate | Where a refund falls due, or default is made, on or after 1 April 2026 in a proceeding relating to a tax year beginning before that date; the substitution applies from the date the rate was modified under this Act | Sub-section (2)(g)(A) and (B), as substituted by Act No. 4 of 2026 w.e.f. 1-4-2026 |
| Bad and doubtful debts provision carried over | The credit balance standing on the last day of the tax year beginning 1 April 2025 | Under section 36(1)(viia) of the repealed Act; added to the amount credited to the corresponding account for the tax year beginning 1 April 2026 | Sub-section (2)(t) |
| Construction of references to earlier years | A tax year commencing on the 1st April, 2025 or any earlier tax year | Read as a reference to the corresponding previous year under the repealed Act | Sub-section (3) |
The governing statute is chosen by the tax year, not the date of the notice: clause (c) sends every proceeding relating to a tax year beginning before 1 April 2026 to the repealed Act, including proceedings initiated after that date. Interest is the exception — under the substituted clause (g) the repealed Act's interest provisions continue for periods on or after 1 April 2026 but with this Act's rate read into them, so the framework is old and the rate is new. Losses and allowances survive but keep their old character, clause (m) requiring each head to be set off in the manner of the repealed section named in column C. Clause (k) is easy to miss: a limitation period already expired is not revived merely because this Act allows a longer one.
An assessee receives a reassessment notice in 2027 for a tax year that began in April 2024. Clause (c) puts the whole proceeding, including its procedure, under the repealed Income-tax Act, 1961, even though the notice issues well after this Act commenced. If that reassessment produces a refund falling due in 2027, clause (g) applies the repealed Act's interest provisions for the period from 1 April 2026, but at the rate provided in the corresponding provision of this Act from the date that rate was modified.
You meet this section the moment a notice arrives for an old year, because it decides whether the notice, the assessment and the appeal run under the 1961 Act or this one. It is also what you rely on when carrying an old brought forward loss, allowance, credit or approval into a return filed under this Act.
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, penalty, reference, revision and appeals) in respect of any tax year beginning before the 1st April, 2026
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
upto eight financial years immediately succeeding the financial year in which such loss was first computed under the repealed Income-tax Act
See the full 1961 to 2025 concordance.
See the circulars index.
See the notifications index.