Section 294 avoids a gap in the charge of tax at the start of an assessment year. If, on 1 April of any assessment year, provision has not yet been made by a Central Act for charging income-tax for that year, the Act nevertheless has effect until such provision is made.
In the interim, the Act applies 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.
Operative consequences
Collection and other machinery provisions continue to operate on 1 April even if the annual Finance Act has not been enacted.
The interim rate is whichever of the previous year's provision and the Bill's proposal is more favourable to the assessee.
The interim position lasts only until the Central Act providing for the charge is made.
Status
Section 294 is operative for assessment year 2026-27. It is not time-limited. The Finance Act, 2026 did not amend this section.
The 1961 Act governs assessment year 2026-27 and earlier; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is s. 530, framed by reference to the tax year.
Function in the statutory architecture
Section 294 avoids a gap in the charge of tax at the start of an assessment year. If, on 1 April of any assessment year, provision has not yet been made by a Central Act for charging income-tax for that year, the Act nevertheless has effect until such provision is made.
In the interim, the Act applies 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.
Operative consequences
Status
Section 294 is operative for assessment year 2026-27. It is not time-limited. The Finance Act, 2026 did not amend this section.
The 1961 Act governs assessment year 2026-27 and earlier; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is s. 530, framed by reference to the tax year.