Income Tax Act

Official PDF pages 586–590

SOURCE PDF PAGE 586
( 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provided in the repealed Income-tax Act has been substituted with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2026 under the repealed Income-tax Act, if it had not been so repealed, on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income as it would have been included under the repealed Income-tax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( i )   any sum payable under the repealed Income-tax Act may be recovered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recovery of such sum under repealed Income-tax Act;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repealed Income-tax Act shall, so far as it is not inconsistent with the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revision under the repealed Income-tax Act had expired on or before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;”

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SOURCE PDF PAGE 587
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;”

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SOURCE PDF PAGE 588
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;

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( 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.

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SOURCE PDF PAGE 590
SCHEDULE I
[ See   section 9(12)]
CONDITIONS FOR CERTAIN ACTIVITIES NOT
TO CONSTITUTE BUSINESS CONNECTION IN INDIA
1 . (1) The eligible investment fund referred to in section 9(12), means a fund es -
tablished or incorporated or registered outside India, which collects funds from
its members for investing it for their benefit and fulfils the following conditions:––
( a )   the fund is not a person resident in India;
( b )   the fund is––
( i )   a resident of a country or a specified territory with which an agree -
ment referred to in section 159(1) or (2) has been entered into;
or
( ii )   established or incorporated or registered in a country or a specified
territory as notified in this behalf;
( c )   the aggregate participation or investment in the fund, directly, by persons
resident in India does not exceed 5% of the corpus of the fund as on the
1st April and the 1st October of the tax year, subject to the conditions
that—
( i )   for the purposes of calculation of such aggregate participation or
investment in the fund, any contribution made by the eligible fund
manager during the first three years of operation of the fund, not
exceeding twenty-five crore rupees, shall not be taken into account;
( ii )   where the aforesaid aggregate participation or investment in the
fund exceeds 5% on the 1st April or the 1st October of the tax year,
the condition mentioned in this clause shall be deemed to be satis -
fied, if it is satisfied within four months of the 1st April or the 1st
October of such tax year;
( d )   the fund and its activities are subject to applicable investor protection
regulations in the country or specified territory where such fund is es -
tablished or incorporated or is a resident;
( e )   the fund has a minimum of twenty-five members who are, directly or
indirectly, not connected persons;
( f )   any member of the fund along with connected persons shall not have any
participation interest, directly or indirectly, in the fund exceeding 10%;
( g )   the aggregate participation interest, directly or indirectly, of ten or less
members along with their connected persons in the fund, shall be less
than 50%;
( h )   the fund shall not invest more than 25% of its corpus in any entity;
( i )   the fund shall not make any investment in its associate entity;
( j )   the monthly average of the corpus of the fund shall not be less than one
hundred crore rupees subject to the following:––
( i )   if the fund has been established or incorporated in the tax year,
then corpus of fund shall not be less than one hundred crore rupees