January to March 2026 was an unusually active period for CBDT circulars. With the IT Act 2025 transition, the Board issued several clarificatory and transitional circulars. Here are the four that matter most for practising CAs.
1. Circular No. 1/2026: Transitional Provisions for Pending Assessments
Issued: 15 January 2026
This circular clarifies how pending assessments and proceedings will be handled after 1 April 2026. The key points:
- Assessments pending under the old Act (proceedings initiated before 1 April 2026) will continue under the old Act's substantive provisions, but procedural requirements will follow the 2025 Act
- Notices issued after 1 April 2026, even for AY 2025-26 and earlier, must cite 2025 Act section numbers
- The savings clause under Section 536 of the 2025 Act preserves the validity of all actions taken under the old Act
Practical implication: If your client has a pending assessment for AY 2023-24, the AO will issue further notices citing 2025 Act sections. Your response should reference the 2025 Act sections but note the substantive law applicable (IT Act 1961) for the relevant assessment year.
2. Circular No. 3/2026: TDS Compliance During Transition
Issued: 8 February 2026
This circular addresses TDS compliance for the transition period:
- TDS deducted in Q4 FY 2025-26 (January to March 2026) should be deposited citing old section numbers (194C, 194J, etc.)
- TDS deducted from 1 April 2026 onwards must cite the new 2025 Act section numbers
- Form 26AS for AY 2026-27 will show a consolidated view, mapping both old and new sections
- Challan forms (ITNS 281) will be updated by 1 April 2026 to reflect new sections
Practical implication: CAs handling TDS compliance for clients should ensure that April 2026 challans use the new section numbers. A TDS deposit citing old Section 194C instead of new Section 393 after 1 April 2026 could cause processing delays.
3. Circular No. 5/2026: Clarification on New Regime Default
Issued: 1 March 2026
This circular reiterates that for AY 2026-27:
- The new tax regime (Section 115BAC of old Act, now Section 200 of 2025 Act) continues to be the default regime
- Taxpayers who wish to opt for the old regime must do so before the due date of filing the return
- For salaried employees, the employer must deduct TDS under the new regime unless the employee submits Form 12BAA opting for the old regime
- The opt-out is available for each assessment year independently (no lock-in)
Practical implication: CAs should proactively advise clients in March/April whether the old or new regime is more beneficial for AY 2026-27. The slab rates and deduction limits are unchanged from AY 2025-26 under both regimes.
4. Circular No. 7/2026: Faceless Assessment Expansion
Issued: 20 March 2026
This circular expands the scope of faceless proceedings under the 2025 Act:
- All scrutiny assessments initiated after 1 April 2026 will be faceless (no exceptions for search cases or international taxation, which were previously excluded)
- The faceless appeal scheme now covers all first appeals to CIT(A) without exception
- Video conferencing for personal hearings will be available through the e-filing portal
- The assessment order must be passed within 12 months from the end of the relevant assessment year (tightened from 18 months)
Practical implication: CAs handling assessment proceedings should expect all new proceedings to be faceless. The compressed timeline (12 months) means faster turnarounds on information requests. Be prepared to respond to notices within the shorter timeframes specified.
How to Stay Current
CBDT circulars are published on the income tax department's website, but they are not always easy to find. They are sometimes issued as press releases first, with the formal circular following days later.
TaxMarg indexes all CBDT circulars as they are published. You can search for any topic ("transitional provisions," "TDS transition," "faceless assessment") and get the relevant circular with its full text and cross-references to the Act sections it interprets.