Income-tax law / Legislative continuity

Section 294 of the Income-tax Act, 1961: Tax Charge Pending Legislation

Section 294 addresses the position when Parliament has not yet enacted the income-tax charging provision for an assessment year by 1 April. The corresponding provision under the Income-tax Act, 2025 is Section 530, which uses the concept of a tax year.

Law update (28 October 2026): The Income-tax Act, 2025 applies from 1 April 2026, subject to its repeal and savings provisions for earlier years. For a tax year under the 2025 Act, consult Section 530; Section 294 remains relevant when considering the earlier statutory regime.

Section 294: Statutory provision under the 1961 Act

If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income-tax for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force.

The words "or super-tax" were omitted by the Finance Act, 1965, with effect from 1 April 1965. The statutory wording above reflects that omission.

Meaning, definitions and operation

When does this safeguard apply?

Section 294 addresses a limited legislative gap: on 1 April of an assessment year, a Central Act has not yet made provision for charging income-tax for that year. The income-tax law can continue to operate on a provisional statutory basis until the charging provision is enacted.

Which charging provision is used?

The provision requires a comparison between (a) the provision in force in the preceding assessment year and (b) the provision proposed in the Bill then before Parliament. Whichever is more favourable to the assessee is treated as operative during the intervening period. The test concerns the applicable charging provision, not an unrestricted choice between all provisions of two tax regimes.

Important terms

Assessment year: Under the 1961 Act, the twelve-month period commencing on 1 April, generally following the previous year in which income was earned.
Central Act: An Act of Parliament that makes the relevant statutory provision for the charge of income-tax.
Bill then before Parliament: A legislative proposal pending before Parliament at the relevant time; a Bill is not itself an enacted charging law.
More favourable to the assessee: The more beneficial of the two specified charging provisions for the taxpayer in the circumstances of the case.

Section 530 of the Income-tax Act, 2025

The Income Tax Department's section navigator identifies Section 530 of the Income-tax Act, 2025 as corresponding to Section 294 of the 1961 Act. It retains the legislative-continuity rule, referring to 1 April in any tax year and to the preceding tax year rather than an assessment year.

The 2025 provision similarly contemplates using the more favourable of the previous tax year's provision and the provision proposed in the Bill before Parliament until Parliament enacts the charging provision. The parliamentary committee's examination described the change as textual simplification rather than a policy change.

Important distinction: Section 294 of the Income-tax Act, 2025 concerns a different subject. The corresponding section number for the rule discussed on this page is 530, not 294.

Illustration of the continuity rule

Suppose the relevant charging legislation is not enacted by 1 April. The preceding year's charging provision and the charging provision proposed in the Bill before Parliament are compared. If the proposed provision is more favourable to a particular assessee, Section 294 (or Section 530 for a tax year governed by the 2025 Act) provides for its provisional application until the Central Act supplies the charging provision. The actual liability must then be considered under the law as enacted and any applicable transitional rules.

Practical considerations

Identify the tax or assessment year and which Act governs it.
Confirm whether the annual charging legislation had been enacted by 1 April.
Examine the preceding year's charging provision and the relevant Bill pending before Parliament.
Document why one provision is more favourable in the taxpayer's circumstances.
Recheck the position when the charging legislation is enacted.

Frequently asked questions

Does Section 294 permanently fix the tax rate?

No. It supplies a statutory rule for the period pending the relevant charging legislation. The final enacted law must also be examined.

Does the provision automatically grant a tax exemption?

No. It is a continuity mechanism for the charge of tax, not a general exemption or deduction provision.

What is the equivalent provision after 1 April 2026?

Section 530 of the Income-tax Act, 2025 is the corresponding provision for tax years governed by that Act.

Official legislation and reference materials

This explanatory article is general information. For a particular assessment or tax year, consult the enacted legislation, amendments, applicable notifications and professional advice.