KARSETU Transition 2026: ERP System Migration and Dual Compliance Architecture Under the Income-tax Act, 2025

India's legislative shift from the Income-tax Act, 1961 to the Income-tax Act, 2025 is far more than a statutory housekeeping exercise. For finance professionals, corporate tax teams, and Chartered Accountants managing enterprise-level compliance, the KARSETU initiative presents a formidable operational challenge — one that sits squarely at the intersection of tax law and information technology.

While legal commentators continue to debate the interpretive nuances of the 2025 Act, corporate treasuries and ERP administrators are confronting a more immediate and consequential question: Is our technology infrastructure ready to handle two entirely different tax regimes running simultaneously?

With the 31 March 2026 deadline approaching at pace, the professional community must pivot from theoretical discussion to practical, system-level execution. The concept of "Dual Logic" — where an ERP must simultaneously honour obligations under two distinct legislative frameworks — is the defining compliance challenge of the coming fiscal transition.

The Dual Compliance Architecture: What It Actually Means

Running Two Regimes in Parallel

From 1 April 2026, every ERP platform deployed across Indian enterprises will need to function in a split-logic environment. This is categorically not a clean switchover — it is a period of legislatively mandated parallel operation. The system must be capable of supporting three concurrent compliance demands:

  1. Retrospective obligations under the Income-tax Act, 1961 — covering finalisation of accounts, completion of tax audits, and all compliance matters pertaining to Financial Year 2025-26 (Assessment Year 2026-27).

  2. Forward-looking transactional compliance under the Income-tax Act, 2025 — applicable to all TDS and TCS obligations arising within Tax Year 2026-27, where every deduction trigger must conform to the architecture of the new law.

  3. Timestamp-governed validation logic — where the date and time of credit or payment, whichever is earlier, serves as the primary determinant of which statutory regime governs a given transaction.

Critical Note: A transaction recorded at 11:59 PM on 31 March 2026 falls squarely within the Income-tax Act, 1961 framework. An entry posted at 12:01 AM on 1 April 2026 is governed entirely by the Income-tax Act, 2025. The margin for error is literally a matter of minutes.

This reality demands that enterprise systems are not merely updated — they must be re-engineered to respond intelligently to date-stamped transactional data with regime-specific logic gates.

The Structural Overhaul: Moving from Sections to Table-Based Mapping

The Dissolution of the Familiar Section Framework

Perhaps the single most impactful structural change introduced by the Income-tax Act, 2025 is the complete dismantling of the legacy section-based TDS architecture. The 2025 Act consolidates what were previously fragmented provisions scattered across dozens of sections into a coherent, Table-based format under two primary provisions:

  • Section 392 — governing TDS on Salary
  • Section 393 — governing TDS on Non-Salary payments