Removal of difficulties.

535(1)

If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by general or special order, do anything not inconsistent with the provisions which appears to it to be necessary or expedient for the purpose of removing the difficulty.

535(2)

In particular, and without prejudice to the generality of the foregoing power, any order referred to in sub-section (1) may provide for the adaptations or modifications subject to which the Income-tax Act, 1961 shall apply in relation to the assessments for the tax year ending on the 31st March, 2026, or any earlier tax year.

535(3)

No order under sub-section (1) shall be made after the expiration of three years from the 1st April, 2026.

535(4)

Every order made under this section shall be laid, as soon as may be, after it is made, before each House of Parliament.

Explanation

Section Summary:

Section 535 of the new income tax law provides the Central Government with the authority to address and resolve any difficulties that arise in implementing the provisions of the Act. This section allows the government to issue orders to adapt or modify the Income-tax Act, 1961, to ensure smooth application of the law, particularly for assessments up to the tax year ending March 31, 2026. The government’s power to issue such orders is time-bound and must be exercised within three years from April 1, 2026. Additionally, any orders issued under this section must be presented before both Houses of Parliament.

Key Changes:

1. New Authority to Resolve Implementation Issues: Unlike the previous Income-tax Act, 1961, this section explicitly grants the Central Government the power to issue orders to remove difficulties in implementing the new law.
2. Time-Bound Power: The government can only exercise this power for three years after April 1, 2026, after which no further orders can be issued under this section.
3. Parliamentary Oversight: Any orders issued must be presented before both Houses of Parliament, ensuring legislative oversight.

Practical Implications:

1. Flexibility in Implementation: Taxpayers and businesses may benefit from clarifications or modifications issued by the government to address ambiguities or challenges in applying the new law.
2. Certainty for Assessments: For assessments up to March 31, 2026, the government can adapt or modify the Income-tax Act, 1961, to align with the new provisions, reducing potential confusion.
3. Limited Window for Adjustments: Since the government’s power is limited to three years, taxpayers and businesses should stay informed about any orders issued during this period that may affect their compliance or tax liabilities.

Critical Concepts:

1. Adaptations or Modifications: These refer to changes or adjustments made to the Income-tax Act, 1961, to ensure compatibility with the new law. These changes are not permanent and are specific to the implementation period.
2. General or Special Order: The government can issue orders that apply broadly (general) or to specific situations (special), depending on the nature of the difficulty.

Compliance Steps:

1. Monitor Government Orders: Taxpayers and businesses should keep track of any orders issued under this section, as they may impact compliance requirements or tax calculations.
2. Review Assessments: For assessments up to March 31, 2026, ensure that any adaptations or modifications issued by the government are correctly applied.
3. Stay Updated: Since orders must be presented before Parliament, taxpayers can monitor parliamentary proceedings for any relevant updates.

Examples:

1. Scenario 1: Suppose a new provision in the law creates ambiguity about how certain deductions should be calculated for the tax year 2025-26. The Central Government issues an order clarifying the calculation method. Taxpayers must apply this clarification when filing their returns for that year.
2. Scenario 2: If a provision in the new law conflicts with an existing rule in the Income-tax Act, 1961, the government may issue an order modifying the old rule to align with the new law for assessments up to March 31, 2026. Taxpayers must follow the modified rule during this period.

This section ensures that the transition to the new tax law is smooth and that any implementation challenges are addressed promptly and transparently.