A S BANKA ADVISORS

The Income-tax Act 2025 came into force on April 1, 2026. Your AY 2026-27 income tax return will still be filed under the Income-tax Act 1961. That single fact will resolve about 80 percent of the questions your finance team and your CA practice are receiving this filing season.

The Section 536 Anchor: Why FY 2025-26 Income Stays Under the 1961 Act

Section 536 of the Income-tax Act 2025 is a saving clause. It does two things in two sub-clauses, and both are decisive for AY 2026-27.

Sub-clause 1 says that any liability, refund right, or thing accrued under the Income-tax Act 1961 before April 1, 2026 continues under the 1961 Act. Sub-clause 4 says income of any previous year ending on or before March 31, 2026 is computed, assessed, charged, and re-assessed under the 1961 Act in its entirety. Your salary, business income, capital gains, house property, and other-source income for FY 2025-26 are therefore 1961 Act income, end to end.

The Income-tax Act 2025 successor sections (the new chapter structure) start applying only from FY 2026-27 income, that is, AY 2027-28 returns. The cleaner mental model: AY 2026-27 = old Act sections, AY 2027-28 = new Act sections, in every schedule of every ITR form.

What This Means for Your Founders, Your Promoters, and Your Finance Team

Founders filing as individuals or HUFs continue under ITR-1 to ITR-3, depending on income profile. Promoters with capital gains from ESOP exercises, secondary sales, or down-round redemptions report under Schedule CG, citing Sections 45 to 55A of the 1961 Act, with Section 112A grandfathering and Section 48 indexation rules unchanged. Section 115BAC remains the default tax regime; if your founder team has opted out by filing Form 10-IEA in an earlier AY, the opt-out continues subject to recurring-choice rules under the 1961 Act.

Companies under ITR-6 continue to claim the Section 115BAA (22 percent concessional rate) or Section 115BAB (15 percent for new manufacturing) regimes for FY 2025-26 income. Tax-audit timelines under Section 44AB and the October 31, 2026 due date for audited entities are unchanged. Transfer pricing report filers under Section 92E continue under the November 30, 2026 due date.

The Seven AY 2026-27 ITR Forms at a Glance

• ITR-1 (Sahaj): Resident individual, total income up to Rs 50 lakh, salary plus one house property plus other sources.
• ITR-2: Individual or HUF with capital gains, no business or profession income.
• ITR-3: Individual or HUF with business or profession income.
• ITR-4 (Sugam): Presumptive taxation under Section 44AD, 44ADA, or 44AE, total income up to Rs 50 lakh.
• ITR-5: Firms including LLPs, BOI, AOP (other than ITR-7 filers).
• ITR-6: Companies (other than Section 11 exemption claimants).
• ITR-7: Trusts, political parties, scientific research institutions, news agencies, charitable institutions.

Five Watchouts for the AY 2026-27 Filing Season

1. Software vendor errors are likely. If your return-filing utility shows a 2025 Act successor section label on any AY 2026-27 schedule, that is a vendor bug. Flag it.
2. Schedule TDS still uses 1961 Act codes. Match Form 26AS, AIS data, and your Form 16 / 16A entries to 1961 Act sections (192 for salary, 194-series, 195, 206C). Form 16 issued by employers for FY 2025-26 will cite 1961 Act sections.
3. Capital gains data assembly takes longer than expected. Reconcile broker statements against AIS before assembling Schedule CG. Pre-grandfathering NAVs under Section 112A and indexation under Section 48 require care.
4. Foreign asset disclosure is high-stakes. Schedule FA and Schedule FSI reporting under Section 139 read with Rule 12AB continues. Black Money Act 2015 penalties for non-disclosure are unchanged.
5. E-verification window is 30 days. Aadhaar OTP, EVC through net banking, or signed ITR-V post to CPC Bengaluru. Miss the 30-day window and the return is treated as not filed.

Filing Due Dates and Penalty Map (Unchanged for AY 2026-27)

• July 31, 2026: Non-audit individuals, salaried, HUFs, AOPs.
• October 31, 2026: Audited entities, companies, partnership firms.
• November 30, 2026: Section 92E transfer pricing report filers.
• December 31, 2026: Belated or revised return under Section 139(4) / 139(5).
• March 31, 2028: Updated return ITR-U under Section 139(8A), 24 months from end of AY.

Penalty exposure under the 1961 Act remains: Section 234A interest at one percent per month on unpaid tax from due date, Sections 234B and 234C interest on advance-tax shortfalls at the same rate, Section 234F late fee of Rs 5,000 (or Rs 1,000 if income up to Rs 5 lakh), and Section 270A penalty of 50 percent for under-reporting and 200 percent for misreporting.

The Practitioner Sprint Plan

Refresh your firm’s working paper templates this month. Add a one-line annotation at the top of every FY 2025-26 working paper: “AY 2026-27 governed by Income-tax Act 1961 read with Section 536 of the Income-tax Act 2025.” Brief your team that successor sections under the new Act do not appear on AY 2026-27 forms. Bulk-onboard returns only after validating the CBDT-released offline utility against a test scenario. Send a one-page client FAQ explaining the transition: due dates unchanged, regimes unchanged, schedules unchanged, sections cited still 1961 Act, the new Act starts at AY 2027-28.

For the detailed slide deck covering all seven forms, the seven schedule references, the five watchouts, and the ten-step filing-season sprint, download the full carousel below.

Download the full carousel PDF

Need Help Navigating This?

Complex AY 2026-27 situations: transition-year capital gains, mixed-regime decisions across promoter and family members, foreign assets disclosure, business taxpayer with tax-audit obligation, or transfer-pricing reporting under Section 92E. Get expert guidance from A S Banka Advisors Private Limited.

Book a quick call to map your AY 2026-27 filing season under the Section 536 transition framework.