Tax experts seek CBDT master circular to resolve legacy guidance issues
Apr 9, 2026
Experts flag ambiguity over applicability of legacy circulars under the new Income-tax Act, 2025, seeking clarity to reduce disputes and ensure uniform compliance
With the rollout of the Income-tax Act, 2025, tax experts have urged the Central Board of Direct Taxes (CBDT) to issue a “master circular” clarifying the applicability of legacy circulars under the new regime.
Over the years, the CBDT has issued numerous circulars and clarifications under the Income-tax Act, 1961 to interpret provisions and address taxpayer concerns. However, the transition to the new law, where several provisions have been removed, renumbered, or restructured, has disrupted the linkage between these circulars and the revised provisions.
Experts say this has created uncertainty for both taxpayers and tax officers, who must now assess the continued relevance of legacy guidance without a clear framework, raising the risk of inconsistent interpretation.
Richa Sawhney, partner at Grant Thornton Bharat, pointed out that some circulars may have lost relevance due to changes in law or judicial pronouncements, making their continued applicability unclear. She suggested that a master circular should categorise legacy guidance into applicable, redundant, and withdrawn circulars to ensure consistency in implementation.
According to her, issuing a master circular would reinforce the objective of the 2025 Act to reduce litigation and promote voluntary compliance.
“In practical terms, a master circular is not merely desirable; it is a necessary transition tool to ensure that the promise of simplification under the Income-tax Act, 2025 is fully realised on the ground,” Sawhney said.
The issue stems from Section 536 of the new law, which deals with repeal and savings. It provides that circulars, directions, and notifications issued under the 1961 Act will continue to apply, provided they are not inconsistent with the provisions of the new law.
However, experts note that the phrase “so far as it is not inconsistent” remains open to interpretation, particularly where provisions in the new law have undergone significant language changes as compared to the old law.
Chetan Daga, partner at AdvantEdge Consulting, said the expression creates ambiguity in determining whether existing circulars remain valid under the new framework.
"It is necessary that the tax department clarifies the expression 'so far as it is not inconsistent' or issues a master circular explaining which of the circulars under the old law shall or shall not apply in the new Act," Daga stated.
According to Abhishek A Rastogi, partner at Rastogi Chambers, even minor drafting changes can raise questions about the continued applicability of circulars, making interpretation a subjective exercise.
"The Government should issue a comprehensive master circular listing applicable and redundant circulars under the new law. Such a move would reduce disputes, ensure uniform application, and support ease of doing business during the transition," added Rastogi.
Tax professionals point out that while the Reserve Bank of India (RBI) has long provided clarity through master circulars under the Foreign Exchange Management Act (FEMA) on legacy foreign exchange matters, a similar consolidated master circular from the CBDT on legacy tax guidance would greatly reduce uncertainty during the shift to the Income-tax Act, 2025.
[The Business Standard]