Income Tax
Income Tax Department notifies all ITR forms for AY 2026-27 with a revamped Schedule CG that separately captures gains on equity instruments before and after July 23, 2024 — the date from which revised rates and holding periods under Finance Act 2025 apply.
Taxpayers carrying on business who wish to opt out of the new default regime for AY 2026-27 must now file the newly notified form by the due date u/s 139(1).
Council also recommended zero GST on term life insurance and 5% on health insurance, marking the most significant rate rationalisation in three years.
ITAT Mumbai
Special Bench holds deeming FMV mechanism cannot override substance of court-approved scheme.
Delhi HC
Proviso to Section 144B(7)(vii) confers a statutory right; NFAC order set aside for fresh adjudication.
GST
Circular No. 231/2026 ends uncertainty; ITC now confirmed for statutory canteen obligations.
The Board has issued Circular No. 4/2026 granting condonation of delay for companies that missed filing Form 10-IC (Section 115BAA) and Form 10-ID (Section 115BAB) for AY 2020-21 onwards. Applications must be made to the jurisdictional PCIT/CIT. No penalty shall be levied where delay is condoned, and consequential refund claims will be processed accordingly. The circular provides much-needed relief to companies that inadvertently missed the original deadline while otherwise meeting the substantive conditions for the concessional tax rate.
The updated list of charitable institutions approved under Section 80G(5)(vi) has been released via Notification No. 42/2026. Donations to these institutions qualify for 50% or 100% deduction, depending on their category. The notification supersedes the provisional approval list and takes effect from FY 2025-26. Donors are advised to verify current approval status on the income tax portal before claiming deductions.
New tax slabs under Section 115BAC provide zero tax up to Rs 12 lakh with rebate u/s 87A. Standard deduction raised to Rs 75,000. Section 44AD threshold enhanced to Rs 3 crore for digital transactions. TDS rate on professional fees u/s 194J reduced to 7.5%. LTCG on listed equities now taxed at 12.5% without indexation; holding period for STCG treatment reduced to 12 months. Indexation benefit removed across all asset classes. Advance Pricing Agreement rollback extended to five years.
CBDT has notified ITR Forms 1 through 7 for AY 2026-27 via Notification No. 38/2026. Key changes include a new schedule for crypto and virtual digital assets (VDA) in all forms, mandatory disclosure of foreign bank accounts in ITR-1, enhanced Schedule AL reporting, and a dedicated column for Section 115BBH tax on VDA income. The utility software will be available on the income tax portal from June 1, 2026.
The Board has released draft rules proposing upward revision of safe harbour margins for IT and ITES transactions, with a new category for intra-group loan transactions at MCLR plus 150 basis points. Comments from stakeholders are invited within 30 days. The final rules, once notified, will be applicable from FY 2025-26 onwards and are expected to reduce transfer pricing disputes substantially.
Following the Supreme Court's Safari Retreats decision and conflicting AAR rulings, CBIC has issued a comprehensive master circular clarifying GST ITC treatment. Canteen services provided under Factories Act obligation are eligible for ITC. Health insurance for employees in hazardous occupations qualifies. Club memberships and personal use items remain blocked. Leased accommodation is available pro-rata to business use. The circular is intended to arrest further litigation at the pre-adjudication stage.
The 55th GST Council recommended zero rate for term life insurance premiums and 5% (without ITC) for health insurance. GST on electric commercial vehicles reduced to 5%. Prosecution threshold under CGST Act raised from Rs 2 crore to Rs 3 crore. An amnesty scheme for demands up to Rs 25 lakh as of April 1, 2026 has been proposed. Clarifications on online gaming taxation and actionable claims are expected in the forthcoming circular.
The Delhi High Court held that the power of provisional attachment u/s 83 is drastic and must be exercised strictly against the taxable person whose proceedings are pending. Attaching property of a third party without establishing nexus violates the statute. The Court reiterated that Section 83 cannot be used as a revenue recovery tool and ordered immediate release of the attached property.
CBIC has extended the due date for annual returns and reconciliation statements for FY 2024-25. GSTR-9C self-certification remains available for taxpayers with aggregate turnover below Rs 5 crore. CBIC has also issued a revised format for GSTR-9 incorporating new fields for reporting ITC reversal under Rule 42/43 and HSN-level disclosure for outward supplies above Rs 50 lakh.
Whether Section 56(2)(x) applies to share transfers made at less than FMV under a holding-subsidiary restructuring scheme sanctioned by the NCLT, or whether the deeming fiction is displaced by the substantive reality of the court-approved arrangement.
The Special Bench held that where consideration is determined pursuant to a court-approved scheme and is not a colourable device to shift income, Section 56(2)(x) is not attracted. FMV under Rule 11UA is a computational mechanism, not a charging provision, and cannot override substance. Addition of Rs 18.4 crore deleted.
Whether long-term capital gain on listed penny stocks can be treated as unexplained cash credits u/s 68 solely on the basis of a SEBI investigation report naming the scrip as price-manipulated, without establishing the assessee's direct involvement.
Revenue must establish direct, specific link between assessee and accommodation entry providers. A generalised SEBI report is insufficient. Assessee's burden discharged through contract notes and demat statements. Tribunal applied the principle that tax authorities cannot proceed on suspicion alone.
AO computed Section 14A disallowance at Rs 3.2 crore under Rule 8D against actual exempt income of only Rs 45 lakh. Whether disallowance can exceed exempt income earned.
Following settled High Court authority, Tribunal restricted disallowance to Rs 45 lakh — the actual exempt income. Rule 8D is a mechanism for computation, not an independent charging provision. Disallowance exceeding exempt income is legally untenable.
Whether penalty u/s 271(1)(c) can be levied where the assessee proactively disclosed additional income during assessment proceedings before the AO made any specific detection.
Following Price Waterhouse Coopers (SC), voluntary disclosure before detection negates the mens rea of concealment. Penalty proceedings require both actus reus and culpable intent. Bonafides of assessee demonstrated by proactive disclosure. Penalty of Rs 62 lakh cancelled.
Whether reassessment proceedings and consequent addition of Rs 1.61 crore u/s 68 are valid where the notice u/s 148 was not issued through the mandatory faceless assessment mechanism prescribed under Section 151A of the Income Tax Act.
Tribunal dismissed Revenue appeal. Reassessment notice not routed through the Section 151A faceless mechanism is jurisdictionally invalid. Once the foundational jurisdiction is undermined by a binding High Court judgment in the assessee's own case, the entire assessment including substantive additions cannot survive. Revenue appeal dismissed.
Whether Kanpur Development Authority, a statutory body, qualifies for charitable exemption u/s 11 and 12; whether infrastructure fund of Rs 10.97 crore received under government orders is taxable; and whether contribution of Rs 20 lakh to AwasBandhu is an allowable application of income.
Tribunal dismissed Revenue appeal. Authority established for public development purposes qualifies as charitable under Section 2(15). Infrastructure funds received under government orders and utilised per state committee directives are non-taxable. Contribution to AwasBandhu constitutes permissible application of income under Section 11.
Whether reassessment notice issued beyond three years is valid where approval was obtained from the Principal Commissioner of Income Tax instead of the Specified Authority designated under Section 151(ii) of the Income Tax Act.
Tribunal allowed the appeal and quashed reassessment. For notices issued beyond three years, Section 151(ii) mandates approval only from the Specified Authority. Approval from PCIT who does not hold that designation is without jurisdiction. Notices u/s 148A(d) and 148 both quashed. Addition u/s 69A cannot survive.
Two issues: (i) Whether satisfaction note must be recorded before issuance of Section 153C notice; (ii) Whether a separate satisfaction note is required where the same AO exercises jurisdiction over both the searched person and the other person.
On (i): Recording satisfaction before notice is a jurisdictional pre-condition; non-compliance renders proceedings void. On (ii): Even where the same AO has dual jurisdiction, an independent satisfaction note based on cogent material is required. The phrase "belong to" denotes authorship, not mere relevance. Revenue appeal dismissed.
Whether NFAC can deny personal hearing where the assessee made a specific written request under the proviso to Section 144B(7)(vii) before an addition of Rs 8.5 crore was proposed.
The right to personal hearing is a statutory right and cannot be denied by the NFAC irrespective of the faceless assessment framework. The assessment order was passed in clear violation of natural justice. Assessment set aside for fresh adjudication with personal hearing. HC imposed costs of Rs 10,000 on Revenue.
Whether non-compete fee received by a company for agreeing not to carry on its pharmaceutical business for five years, paid simultaneously with the sale of the division, is taxable as business income or as a capital receipt.
Section 28(va) specifically includes any sum received for restricting or limiting business activity. The fact that the underlying business has been transferred does not convert the non-compete fee into a capital receipt. The restrictive covenant is a separate obligation, and the fee therefor falls squarely within the charging provision.
Whether reassessment proceedings based on alleged "Client Code Modification" transactions were justified where no specific company or correct broker name appeared in the AO's reasons and the assessee had already disclosed and paid tax at the highest applicable rate on those transactions.
Delhi HC dismissed Revenue appeal confirming ITAT's finding that reassessment was without application of mind. Where the assessee has already paid tax on the same transactions at the highest applicable rate, no income can be said to have escaped assessment. The AO lacked tangible material to form a genuine belief of escapement.
Whether a Show Cause Notice for excess ITC for FY 2020-21 issued on 29.11.2024 satisfies the requirement of Section 73(2) CGST Act that the notice be issued "at least three months prior" to the order deadline of 28.02.2025.
Gauhati HC dismissed the writ petition. Applying the corresponding date rule from Dodds v. Walker via the General Clauses Act, the notice issued 29.11.2024 is fully within the three-month window before the 28.02.2025 order deadline. The petition challenging the SCN as barred by limitation was rejected.
(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of every person.
(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.
(1) The following incomes shall be deemed to accrue or arise in India:— (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.
(1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.
(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee.
(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".
Explanation 1: Any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.
(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.
Where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017, (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (c) any property other than immovable property, without consideration, the aggregate fair market value of which exceeds fifty thousand rupees…
Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
Proviso: Where the assessee is a company (not being a company in which the public are substantially interested) and the sum credited consists of share application money, share capital, share premium or any such amount, any explanation offered shall be deemed not satisfactory unless the source of funds in the hands of the subscriber is also explained to the satisfaction of the Assessing Officer.
Income-tax payable at the following rates for individuals / HUFs under the new default regime (AY 2026-27): Up to Rs 3,00,000 — Nil • Rs 3,00,001 to Rs 7,00,000 — 5% • Rs 7,00,001 to Rs 10,00,000 — 10% • Rs 10,00,001 to Rs 12,00,000 — 15% • Rs 12,00,001 to Rs 15,00,000 — 20% • Above Rs 15,00,000 — 30%.
Rebate u/s 87A available up to Rs 60,000 where total income does not exceed Rs 12,00,000. Standard deduction of Rs 75,000 available for salaried individuals and pensioners.
Notwithstanding anything contained in section 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to a person other than the person referred to in section 153A, the books of account or documents or assets shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of such other person in accordance with the provisions of section 153A.
(1) For the purposes of this Act, the expression "supply" includes — (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration.
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business.
(2) No registered person shall be entitled to ITC unless — (a) he is in possession of a tax invoice or debit note; (b) he has received the goods or services; (c) the tax charged has actually been paid to the Government; (d) he has furnished the return u/s 39.
Input tax credit shall not be available in respect of: (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) except for further supply, transport of passengers, or imparting training; (b) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery; (c) membership of a club, health and fitness centre; (d) travel benefits extended to employees on vacation; (e) works contract services when supplied for construction of an immovable property…
Section 73 (no fraud): Where tax has not been paid/short-paid/erroneously refunded without fraud or wilful misstatement, SCN shall be issued with at least 3 months' opportunity to pay. Time limit: 3 years from due date of annual return. Penalty: 10% of tax subject to minimum Rs 10,000.
Section 74 (fraud): Where non-payment is by reason of fraud, wilful misstatement or suppression of facts with intent to evade, time limit is 5 years. Penalty: 100% of tax in addition to tax and interest.
(1) Where during the pendency of any proceedings under section 62, 63, 64, 67, 73 or 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary to do so, he may, by order in writing, attach provisionally any property, including bank account, belonging to the taxable person.
(2) Every such provisional attachment shall cease to have effect after the expiry of one year from the date of the order made under sub-section (1).
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed.
(1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply are in two different States, two different Union territories, or a State and a Union territory, shall be treated as an inter-State supply of goods.
(5) Supply of goods or services or both where the supplier is in India and the place of supply is outside India; or to/by a Special Economic Zone developer or unit; or in the taxable territory not being an intra-State supply shall be treated as inter-State trade or commerce.
(1) The provisions of this section apply to determine the place of supply where the location of the supplier or the location of the recipient is outside India.
(2) The place of supply shall be the location of the recipient of services, except where the recipient's location is not available in the ordinary course of business, in which case it shall be the location of the supplier.
Finance Minister presented the Union Budget 2025 with the most significant overhaul of personal income tax since 2020. The new default tax regime under Section 115BAC now provides zero tax for individuals with income up to Rs 12 lakh through a revised rebate u/s 87A of Rs 60,000. Standard deduction raised to Rs 75,000. New slabs rationalized with the 15% bracket covering Rs 10-12 lakh range. The government estimates revenue forgone at Rs 1.1 lakh crore annually, projecting that increased consumption and formalization of the economy will offset the fiscal cost.
Following the sweeping amendments to capital gains taxation under Finance Act 2025 — which bifurcated gains into pre-July 23, 2024 and post-July 23, 2024 periods — the Income Tax Department has notified revised ITR forms (ITR-1 through ITR-6) for Assessment Year 2026-27.
Schedule CG has been substantially restructured. Taxpayers with equity share or equity mutual fund gains must now separately report: (i) gains on assets sold on or before July 22, 2024 (taxable at old rates of 15%/10%) and (ii) gains on assets sold on or after July 23, 2024 (taxable at revised rates of 20%/12.5% with modified holding period thresholds).
ITR-2 and ITR-3 additionally carry a new sub-schedule for reporting buy-back proceeds treated as deemed dividend u/s 2(22)(f) following the Finance Act 2025 amendment shifting the tax burden from the company to the shareholder.
The forms are now live on the e-filing portal (www.incometax.gov.in). The due date for individuals and HUFs not subject to audit is July 31, 2026. Taxpayers are advised to verify their Form 26AS and AIS before filing to avoid mismatch notices.
This is one of the most complex ITR revision cycles in recent years. Tax professionals and taxpayers must carefully identify the correct holding period cut-off for each asset disposal. Errors in the new Schedule CG are likely to trigger automated scrutiny under the faceless assessment system.
CBDT has notified the new Form 10-IEA for individuals and HUFs carrying on business or profession who wish to opt out of the new default tax regime for AY 2026-27. Under Section 115BAC(6), such taxpayers retain the right to elect the old regime, but must exercise the option by filing Form 10-IEA on or before the due date u/s 139(1).
The form must be filed electronically on the income tax portal. Late filing will not be accepted and the taxpayer will be assessed under the new regime by default. Taxpayers who had filed Form 10-IEA for AY 2025-26 and continue in the old regime do not need to re-file for AY 2026-27 unless they wish to switch.
The option under Section 115BAC(6) is available only to taxpayers having income under "Profits and gains of business or profession." Salaried individuals and those with no business income must use the old regime directly without filing Form 10-IEA.
The 55th GST Council recommended raising the monetary threshold for prosecution from Rs 2 crore to Rs 3 crore. Compounding provisions are also proposed to be liberalised, allowing taxpayers to settle prosecution risk by paying compounding amounts at pre-adjudication stage.
Term life insurance premiums proposed to be exempt from GST. Health insurance reduced to 5% without ITC. Electric commercial vehicles brought to 5% GST. An amnesty scheme covering outstanding demands up to Rs 25 lakh as of April 1, 2026 is expected to clean up large volumes of small litigation.
The Council confirmed 28% GST on the face value of online gaming bets, treating it as actionable claims. Further clarification on treatment of player balance and bonus credits is expected in an upcoming circular.