On 7 August 2026 the Income Tax Department issued Notification No 7/2026 a final order under Section 45 3 b of the Income Tax Act 2025 read with Rule 35 2 of the Income Tax Rules 2026 determining the applicable assessment year and accounting period for specified taxpayer entities The order harmonizes the computation of income allowances and deductions across fiscal years particularly addressing transitional provisions for taxpayers shifting between old and new tax regimes It provides authoritative guidance on the treatment of carried forward losses unabsorbed depreciation and indexation benefits in the context of the 2025 Acts revised framework The order is binding on all jurisdictional assessing officers and becomes effective 1 April 2027 with immediate effect on pending assessment orders that reference conflicting procedural interpretations
Key Takeaways
- Assessment Year Determination Protocol The order establishes a mandatory protocol for assessing officers to designate the correct assessment year based on the due date of return filing eliminating ambiguity in cross regime income computation and ensuring consistent application of the 2025 Acts provisions
- Transitional Loss and Depreciation Rules Specific guidance is provided on the carry forward and set off of business losses and unabsorbed depreciation when taxpayers transition between the old and new tax regimes including the treatment of indexation benefits on capital assets held across the transition date
- Binding Effect on Pending Assessments All pending assessment orders that reference outdated procedural interpretations must be revised to conform with the 7/2026 order with assessing officers required to issue rectification orders within 30 days thereby reducing litigation and ensuring uniformity across the jurisdiction
Disclaimer:This article is compiled and summarized based on publicly available information and is for general information and academic exchange purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. For tax planning, please consult a qualified professional tax advisor or legal counsel.
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