- New Income-tax Act, 2025, starts April 1, 2026.
- Businesses face risks from old system references.
- Mismatched documentation causes reporting and compliance errors.
As companies begin working under the Income-tax Act, 2025, from April 1, 2026, many expected the shift to be routine because tax rates have largely stayed the same. That sense of continuity, however, may be creating false comfort. Tax expert CA Nishant Shankar says the real pressure is not coming from the law itself, but from how businesses are updating systems, documentation, and compliance processes.
According to him, organisations that fail to fix operational gaps now may end up dealing with notices, corrections, and avoidable disputes later during this transition.
Why Are Old Tax References Becoming A Compliance Risk?
Shankar said one of the biggest concerns is that many companies are still relying on references linked to the Income-tax Act, 1961. ERP systems, tax manuals, internal SOPs, and intercompany agreements have not been fully aligned with the new framework.
“With the Income Tax Act, 2025, becoming effective from April 1, 2026, many companies and even professionals assume that the transition will be smooth since tax rates remain largely unchanged. However, risks may even come from gaps in execution,” Shanker wrote on LinkedIn.
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He also explained, “Many internal documents, intercompany agreements, tax opinions, ERP mappings and even SOPs will continue to refer to old provisions of the 1961 Act.”
This can create reporting mismatches. A company may deduct TDS correctly, but if the system still tags the transaction under an old section, filing errors can appear. “When the quarterly TDS returns are filed under the new Act, the system might reflect a mismatch between section reporting and tax deduction,” he says.
How Can Capital Gains And TDS Mapping Errors Affect Businesses?
Shankar also highlighted risks in capital gains reporting and loss adjustments. “Based on internal templates built on the old Act, the finance team might classify the gain as LTCG and apply indexation. However, under the new structure, the holding period interpretation or asset classification may differ.”
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He added, “A Company may have b/f long-term capital losses, but due to a mismatch in mapping, it might set off these losses against STCG, something not permitted.”
He warned, “In the current ‘tax year’, one will have to be more careful to avoid repeated notices, corrections, and vendor disputes.”
