Tag: Income Tax

Capital Gains Tax in India: Current Rates, Holding Periods and Exemptions

Selling shares, mutual fund units, gold or property brings a capital gains question with it. The rules were simplified significantly from 23 July 2024, and Budget 2026 made a further change to how share buybacks are taxed. Knowing the current capital gains tax rates, holding periods and exemptions lets you plan the timing of a sale and set aside the right amount of tax.

From 1 April 2026 the Income-tax Act 2025 applies and section numbers have changed. For familiarity, this guide uses the older section references that most people still recognise; the substance of the rates described below carries forward.

Key takeaways

Listed shares and equity mutual funds become long-term after 12 months; most other assets after 24 months.
Long-term gains are taxed at 12.5% without indexation for most assets; listed equity gains get an annual exemption of ₹1.25 lakh.
Short-term gains on listed equity (where STT is paid) are taxed at 20%; other short-term gains are taxed at slab rates.
Resident individuals and HUFs selling land or buildings bought before 23 July 2024 can compare 12.5% without indexation with 20% with indexation.
Reinvestment exemptions under sections 54, 54F and 54EC remain valuable for property sellers.

Holding periods: short term or long term?

Asset	Long-term if held for more than
Listed equity shares, equity-oriented mutual funds, units of business trusts	12 months
Other listed securities (such as listed bonds)	12 months
Land, buildings, unlisted shares, gold, jewellery, other assets	24 months
Specified mutual funds (mostly debt), unlisted bonds and debentures, market-linked debentures	Always treated as short term

The last row matters: gains on debt-oriented mutual fund units bought on or after 1 April 2023 are taxed at slab rates, whatever the holding period.

Current capital gains tax rates

Type of gain	Rate
Long-term gain on listed equity and equity funds	12.5% on gains above ₹1.25 lakh a year
Short-term gain on listed equity and equity funds (STT paid)	20%
Long-term gain on property, unlisted shares, gold and other assets	12.5% without indexation
Short-term gain on other assets	Slab rates
Specified mutual funds, unlisted bonds, market-linked debentures	Slab rates

Surcharge and 4% health and education cess apply on top. Surcharge on long-term and short-term equity gains is capped at 15%.

Grandfathering for older equity holdings

For listed shares and equity funds bought before 1 February 2018, the cost can be taken as the higher of actual cost and the fair market value on 31 January 2018 (limited to the sale price). This protects gains that accrued before long-term gains on equity became taxable.

Property sales: the pre-July 2024 choice

Indexation was withdrawn from 23 July 2024. For land or buildings acquired before that date, resident individuals and HUFs can compute tax both ways and pay the lower:

12.5% on the gain without indexation, or
20% on the gain with indexation.

A simple example: a flat bought in 2012 for ₹40 lakh is sold in 2026 for ₹1.2 crore. Without indexation the gain is ₹80 lakh, and tax at 12.5% is ₹10 lakh. With indexation the gain would be much lower, and tax at 20% on that lower gain may work out cheaper. Always run both computations with the actual cost inflation index figures before filing.

Non-residents do not get this choice and pay 12.5% without indexation. Buyers must deduct TDS on property purchased from NRIs; see our guide on NRI property sales and TDS.

Share buybacks after Budget 2026

From 1 October 2024 to 31 March 2026, the entire buyback proceeds were taxed as dividend in the shareholder’s hands. From 1 April 2026, buybacks are again taxed as capital gains, so only the difference between the buyback price and the cost of acquisition is taxable. Promoters face an additional levy that raises their effective rate. If you tendered shares in a buyback in either period, check which regime applies to the date of the buyback.

Exemptions that reduce capital gains tax

The main reinvestment reliefs for long-term gains are:

Section 54 — gain on sale of a residential house, reinvested in another residential house in India within the prescribed time. The exemption is capped at ₹10 crore.
Section 54F — gain on sale of any other long-term asset (such as shares or land), where the net sale consideration is invested in a residential house. Conditions apply on the number of houses already owned.
Section 54EC — gain on land or buildings invested in specified bonds within six months, up to ₹50 lakh, with a five-year lock-in.
Capital Gains Account Scheme — if the new house is not bought before the return due date, the unused amount can be deposited in this scheme with a bank to keep the exemption alive.

Keep purchase deeds, improvement bills, brokerage statements and bank records for every claim.

Practical points before you file

Match your AIS. Sale transactions reported by brokers, registrars and sub-registrars appear in the Annual Information Statement. Differences should be explained or corrected.
Set off losses correctly. Short-term losses can be set off against both short-term and long-term gains; long-term losses only against long-term gains. Unused losses carry forward for eight years if the return is filed on time.
Rebate limits. The section 87A rebate under the new regime cannot be used against tax on special-rate gains such as listed equity gains.
Advance tax. Large gains during the year may need advance tax in the quarter of sale to avoid interest.
Choose the right form. Capital gains generally require ITR-2 (or ITR-3 if you also have business income).

For the wider changes under the new law, read our overview of the tax year concept under the Income-tax Act 2025.

Frequently asked questions

What is the long-term capital gains tax rate on shares in India?

12.5% on gains above ₹1.25 lakh a year for listed equity shares and equity mutual funds held for more than 12 months, plus applicable surcharge and cess.

Is indexation still available on property?

Only as an option for resident individuals and HUFs selling land or buildings acquired before 23 July 2024, where they may pay 20% with indexation instead of 12.5% without it.

How are debt mutual funds taxed now?

Units of specified (mostly debt) mutual funds bought on or after 1 April 2023 are taxed at slab rates regardless of holding period.

How much can be invested in 54EC bonds?

Up to ₹50 lakh, within six months of the sale of land or buildings, with a five-year lock-in.

If you are planning a sale of property or investments and would like a clear tax computation in advance, we would be glad to help.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 1, 2026

ITR for NRIs: Which ITR Form, What to Report and Common Mistakes

Many non-resident Indians still earn income in India: rent from a flat, interest on NRO deposits, dividends, or gains on shares and mutual funds. Filing an ITR for NRI status is often the only way to claim back excess TDS, carry forward losses and keep a clean record for future property sales or visa and loan applications.

The process is not complicated once you know which form applies, what counts as taxable in India and where the usual errors happen. This guide covers the return for the financial year 2025-26, which is still filed under the Income-tax Act 1961.

Key takeaways

Residential status decides everything; confirm it before choosing a form.
Most NRIs file ITR-2; ITR-3 applies only if there is business or professional income in India. ITR-1 and ITR-4 are not available to non-residents.
Only Indian-source income (income received, accruing or arising in India) is taxable for a non-resident; foreign income and foreign assets are not reported while non-resident.
The section 87A rebate is for residents only, so an NRI may owe tax even where a resident with the same income would not.
A belated return for FY 2025-26 can still be filed up to 31 December 2026, with a late fee.

Step 1: Confirm your residential status

Before anything else, work out whether you were a non-resident for FY 2025-26. The basic test looks at the number of days you were in India during the year (182 days) and, in some cases, a combination of 60 or 120 days in the year with 365 days over the previous four years. Indian citizens with Indian income above ₹15 lakh who are not taxable in any other country may be treated as deemed residents. Some returning Indians qualify as “resident but not ordinarily resident” (RNOR), which has its own reporting rules.

Our guide on NRI residential status rules walks through each test with examples.

Which ITR form should an NRI file?

Your Indian income	Form
Salary for work in India, rent, interest, dividends, capital gains	ITR-2
Business or professional income in India (including partner remuneration)	ITR-3
Only interest income, with low total income	Usually ITR-2 (ITR-1 is not allowed)
Presumptive income under section 44AD or 44ADA	ITR-3 (ITR-4 is not allowed)

Choosing the wrong form is one of the most common reasons for a defective return notice, so this step is worth a second look.

What to report in an ITR for NRI

Income from house property

Report rent from Indian property, less municipal taxes paid, with the standard deduction of 30% and interest on a housing loan where eligible. Tenants paying rent to an NRI must deduct TDS, so check that the TDS appears in your tax credit statement.

Interest and dividends

Interest on NRO savings and fixed deposits is taxable. Interest on NRE accounts and FCNR deposits is generally exempt for non-residents, but should still be reviewed each year against the account type. Dividends from Indian companies are taxable and usually carry TDS.

Capital gains

Gains on Indian shares, mutual funds and property are taxable in India. For listed equity shares and equity-oriented funds, long-term gains above ₹1.25 lakh are taxed at 12.5% and short-term gains at 20% under the rates applying since 23 July 2024. Property sales by NRIs attract TDS at the buyer’s end; our article on TDS on NRI property sales explains how to seek a lower deduction certificate.

Salary

Salary for services rendered in India is taxable here even if paid abroad. Salary for work done outside India is generally not taxable in India for a non-resident.

What you do not report

While you are a non-resident, foreign income, foreign bank accounts and Schedule FA (foreign assets) do not need to be reported. This changes once you become resident and ordinarily resident, so plan for the year you return.

TDS, tax credits and DTAA relief

TDS on payments to NRIs is often deducted at higher rates under section 195, which is why many NRIs are due a refund. To claim it:

Download Form 26AS and the Annual Information Statement (AIS) and match every TDS entry with your records.
Report each credit in the correct schedule, including the relevant section code.
If you rely on a lower treaty rate under a Double Taxation Avoidance Agreement (DTAA), keep a Tax Residency Certificate from your country of residence and file Form 10F where required. See our guide on DTAA benefit, TRC and Form 10F.
Where your country taxes the same income, keep Indian tax payment evidence to claim credit there.

Tax rates and the rebate point

NRIs use the same slab rates as residents under the new or old regime, but they cannot claim the rebate under section 87A. Under the new regime, an NRI with ₹12 lakh of taxable Indian income would pay about ₹62,400 including cess, whereas a resident with the same income would pay nothing after the rebate. Some deductions, such as certain investment-linked ones under the old regime, are also restricted for non-residents. It is worth comparing both regimes before filing.

Common mistakes in NRI returns

Filing ITR-1 out of habit from resident years.
Wrong residential status, particularly in the year of leaving or returning to India.
Missing TDS credits because the deductor used a different PAN or quarter; always reconcile with AIS.
Treating NRO interest as exempt in the same way as NRE interest.
No pre-validated Indian bank account, which delays refunds. The refund goes to an Indian account; validate it on the e-filing portal in advance.
Not e-verifying within the time allowed, which leaves the return incomplete.
Ignoring capital loss carry forward, which requires a return filed by the original due date.

Frequently asked questions

Is it compulsory for an NRI to file an income tax return?

It is required if total Indian income exceeds the basic exemption limit, and it is advisable where TDS has been deducted and a refund is due or losses need to be carried forward.

Can an NRI file ITR-1?

No. ITR-1 is available only to resident individuals. Most NRIs use ITR-2, or ITR-3 if they have business or professional income in India.

Is NRE account interest taxable in India?

Interest on NRE accounts is generally exempt for a person who is non-resident, while NRO interest is taxable.

What if I missed the original due date for FY 2025-26?

You can still file a belated return up to 31 December 2026, with a late fee of up to ₹5,000 (₹1,000 if total income does not exceed ₹5 lakh). Some losses cannot be carried forward in a belated return.

If you are an NRI and would like help choosing the right form, reconciling TDS or claiming a refund, we would be glad to assist.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

October 31, 2026

Appeal to the Income Tax Appellate Tribunal (ITAT): Process, Fees and Timelines

The Income Tax Appellate Tribunal is the final fact-finding authority in income-tax disputes. An ITAT appeal is usually filed after the Commissioner (Appeals) has decided the first appeal, and the Tribunal’s view on facts is generally final, with further appeals to the High Court limited to substantial questions of law. That makes this stage especially important to get right.

This guide explains who can file, the time limits under the Income-tax Act, 1961 and the new Income-tax Act, 2025, the fee structure, how to obtain a stay of demand and how to prepare for the hearing.

Key takeaways

Either the taxpayer or the department can appeal to the ITAT against orders of the CIT(A) and certain other orders, such as revision orders and DRP-directed assessments.
Under the 1961 Act, an ITAT appeal is filed in Form 36 within 60 days of the date on which the order is communicated; the 2025 Act uses Form 115 and a time limit counted from the end of the month of communication.
Fees range from ₹500 to a maximum of ₹10,000, depending on assessed income.
The other side can file cross-objections within 30 days of receiving notice of the appeal.
The Tribunal can grant a stay of demand, typically on deposit of at least 20% of the amount or suitable security.

Orders that can be appealed to the ITAT

Common examples include:

Orders of the CIT(A) or the Joint Commissioner (Appeals) on assessments, penalties and other matters.
Revision orders under section 263, where the Principal Commissioner sets aside an assessment as erroneous and prejudicial to revenue.
Assessment orders passed in pursuance of Dispute Resolution Panel directions.
Orders relating to registration of charitable trusts and approvals under certain sections.

The department appeals only where the tax effect crosses monetary limits. Under CBDT Circular No. 09/2024 dated 17 September 2024, the threshold for a departmental appeal to the ITAT is ₹60 lakh, subject to specified exceptions.

ITAT appeal time limits and fees

Item	Position under the 1961 Act
Form	Form 36 (cross-objections in Form 36A)
Time limit	60 days from the date the order is communicated
Condonation of delay	Possible on showing sufficient cause, with an affidavit
Fee: assessed income up to ₹1 lakh	₹500
Fee: above ₹1 lakh up to ₹2 lakh	₹1,500
Fee: above ₹2 lakh	1% of assessed income, up to ₹10,000
Fee: other matters	₹500
Stay application	₹500
Cross-objections	Within 30 days of receiving notice of the appeal; no fee in most cases

For orders under the Income-tax Act, 2025, the appeal lies under section 362 in Form 115, within two months from the end of the month in which the order is communicated. The fee slabs remain broadly the same. Always check which Act and form apply to the order you are challenging.

How to file an ITAT appeal

Step 1: Analyse the CIT(A) order

List each issue decided against you and the reasons given. Consider whether the finding is on facts, law or both. Drop weak issues; a focused appeal is more persuasive.

Step 2: Draft grounds and a short statement

Grounds should be numbered, concise and specific to the amount and the error. For example: ‘The learned CIT(A) erred in confirming the disallowance of ₹8,40,000 under section 40(a)(ia) without appreciating that the payee had offered the receipt in its return.’

Step 3: Assemble the appeal set

Form 36 duly signed and verified.
Certified or downloaded copy of the CIT(A) order and the assessment order.
Grounds of appeal before the AO/CIT(A) and before the Tribunal.
Fee challan.

Step 4: File through the ITAT e-filing portal

The Tribunal’s e-filing system allows appeals, stay applications and documents to be filed online. Keep the acknowledgement and watch for the notice of hearing.

Stay of demand before the Tribunal

An appeal to the ITAT does not automatically stop recovery. If the Assessing Officer is pursuing the demand:

First request a stay from the AO and, if needed, from the Principal Commissioner.
If recovery continues, apply to the Tribunal for a stay, showing a prima facie case, balance of convenience and possible hardship.
The Tribunal can grant a stay, generally subject to deposit of not less than 20% of the disputed amount or furnishing security of equal value.
A stay is granted for up to 180 days, extendable to a total of 365 days if the delay in disposal is not attributable to the taxpayer.

Preparing for the hearing

Paper book: an indexed, paginated set of documents that were before the lower authorities, with a certificate to that effect.
Case law compilation: judgments relied on, with relevant paragraphs marked.
Written synopsis: a two to three page note per issue, summarising facts, the lower authorities’ view and your submission.
Additional evidence: allowed only with the Tribunal’s permission and for good reason, so ideally everything should have been filed earlier.

Many benches hold hearings physically as well as through video conference. Be ready with the short facts; hearings often move quickly.

After the ITAT order

If the order has a mistake apparent from the record, a miscellaneous application can be filed within six months from the end of the month in which the order was passed.
The order is given effect by the AO, usually leading to a revised demand or refund; follow up if this is delayed.
A further appeal lies to the High Court within 120 days, only on a substantial question of law.

If you are still at the first appeal stage, our guide to filing Form 35 before CIT(A) explains that process, and our note on penalty under section 270A covers the penalty side.

Frequently asked questions

What is the time limit for an ITAT appeal?

Under the 1961 Act, 60 days from the date the order is communicated. For orders under the 2025 Act, two months from the end of the month in which the order is communicated. Delays can be condoned for sufficient cause.

What is the maximum fee for an ITAT appeal?

Where assessed income exceeds ₹2 lakh, the fee is 1% of assessed income subject to a maximum of ₹10,000. Lower slabs apply for smaller incomes.

Can I raise new grounds before the ITAT?

The Tribunal can admit additional grounds, particularly pure questions of law arising from facts already on record, but it is best to include all grounds at the start.

Is it necessary to pay the demand before filing an ITAT appeal?

There is no statutory pre-deposit for filing, but recovery can continue unless a stay is obtained, which usually requires paying a part of the demand.

If you are considering an appeal to the ITAT, our team would be glad to help you assess the issues and prepare the appeal.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

October 14, 2026

Filing an Income Tax Appeal before CIT(A): Form 35, Time Limit and Grounds

When an assessment or penalty order adds to your income and you disagree, the first remedy is an appeal to the Commissioner of Income-tax (Appeals), commonly called the CIT(A). For orders under the Income-tax Act, 1961, the CIT appeal Form 35 is filed online, with a statement of facts and grounds of appeal. A carefully framed appeal, filed within time, is often the most effective step in resolving a dispute.

The Income-tax Act, 2025 has introduced a new form number for first appeals, and the Finance Act, 2026 has adjusted some related rules. This guide covers the essentials: which orders can be appealed, time limits, fees, drafting grounds and managing the demand while the appeal is pending.

Key takeaways

A first appeal lies to the CIT(A) or, in certain cases, the Joint Commissioner (Appeals), against orders listed in section 246A of the 1961 Act.
The appeal must be filed within 30 days of service of the notice of demand or the order, with condonation possible for sufficient cause.
Tax on the returned income must be paid before the appeal can be admitted.
Fees are ₹250, ₹500 or ₹1,000 depending on assessed income.
Under the Income-tax Act, 2025, the equivalent first appeal is filed in Form 99; the e-filing portal shows the form applicable to your order.

Which orders can be appealed

Common appealable orders include:

Assessment orders under section 143(3) or 144, and reassessment orders under section 147.
Intimations under section 143(1) where an adjustment has been made.
Penalty orders, including under section 270A.
Orders levying fees or interest in certain cases, and orders under section 154 that enhance liability or reduce a refund.
Orders treating a person as an assessee in default for TDS.

If the issue is a simple mistake apparent from the record, a rectification under section 154 may be quicker. Where the intimation itself is the problem, see our guide on the section 143(1) intimation.

Time limit and fees for a CIT appeal in Form 35

Item	Position
Time limit	30 days from service of the notice of demand (or the order, where no demand)
Late appeal	Can be admitted if there was sufficient cause; explain the delay with evidence
Pre-condition	Tax due on returned income paid; if no return, advance tax payable paid (with exemption possible for good reason)
Fee: assessed income up to ₹1 lakh	₹250
Fee: assessed income above ₹1 lakh up to ₹2 lakh	₹500
Fee: assessed income above ₹2 lakh	₹1,000
Fee: other matters	₹250

The fee is paid through the income-tax challan before filing, and the challan details are entered in the form.

Drafting good grounds of appeal

Grounds are the heart of the appeal. They should be concise, issue-wise and free of argument.

Structure that works

General ground that the order is contrary to law and facts (keep it short).
Specific grounds, one for each addition or disallowance, stating the amount and why it is wrong.
Procedural grounds, such as denial of a hearing or invalid notice, where relevant.
Interest and penalty grounds, noting that consequential interest and initiation of penalty are also disputed.
A reservation to add, alter or withdraw grounds.

Example

Suppose an order added ₹14 lakh as unexplained cash credit under section 68 and disallowed ₹2.2 lakh of interest. Good grounds would read:

‘The learned AO erred in adding ₹14,00,000 under section 68 despite confirmations, bank statements and ITRs of the lenders being filed, thereby establishing identity, creditworthiness and genuineness.’
‘The learned AO erred in disallowing interest of ₹2,20,000 without appreciating that the loans were used for the business.’

Statement of facts

The statement of facts tells the story: the business, the return, what happened in assessment and what was submitted. Keep it factual and chronological. Detailed legal arguments are better placed in written submissions later.

Filing the appeal online

Log in to the e-filing portal and open e-File > Income Tax Forms > Form 35 (or the form shown for your order).
Select the assessment year and the order being appealed; details are pre-filled where available.
Enter the date of service of the order and demand, the disputed amount and the fee challan.
Upload the statement of facts, grounds of appeal and supporting documents.
Verify with an electronic verification code or digital signature.

Most appeals are now heard under the faceless appeal scheme, with notices and submissions exchanged online and personal hearings through video conferencing on request.

Managing the demand during the appeal

Filing an appeal does not automatically stop recovery. To avoid coercive action:

Request a stay from the Assessing Officer, explaining the grounds and the prima facie strength of the appeal.
Administrative guidelines have generally allowed a stay on payment of a percentage of the disputed demand, historically 20%. Budget 2026 proposed a lower 10% payment for appeals under the new law, so check the current instruction for your case.
Where hardship is significant or the addition is clearly unsustainable, ask for a lower payment with reasons.
Track the demand on the portal and respond to any outstanding demand intimation promptly.

After filing: preparing for the hearing

Prepare a paper book with all documents already on record before the AO, indexed and paginated.
If new evidence is required, request admission under rule 46A, explaining why it could not be filed earlier.
File written submissions issue by issue, linking each to evidence.
Keep the appeal active; respond to every notice from the appellate unit on time.

If the CIT(A) order is not fully favourable, the next step is an appeal to the Tribunal, explained in our guide to ITAT appeals.

Frequently asked questions

What is the time limit to file Form 35?

The appeal must be filed within 30 days of service of the notice of demand, or of the order where there is no demand. Delay can be condoned if you show sufficient cause.

What is the fee for filing an appeal before CIT(A)?

It is ₹250 where assessed income is up to ₹1 lakh, ₹500 where it is above ₹1 lakh up to ₹2 lakh, and ₹1,000 where it exceeds ₹2 lakh. Other matters attract ₹250.

Can I add grounds after filing Form 35?

Yes. Additional grounds can be raised before the appeal is decided, especially where they arise from the record, although the appellate authority decides whether to admit them.

Does filing an appeal stop recovery of the demand?

No. A separate stay request is needed. Paying a portion of the disputed demand, as per current guidelines, usually supports the request.

If you are planning a first appeal against an income-tax order, our team would be happy to help frame the grounds and file it on time.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

October 12, 2026

The ‘Tax Year’ Concept under the Income-tax Act 2025: Goodbye Previous Year and Assessment Year

For more than sixty years, Indian taxpayers had to juggle two years at once: income was earned in the “previous year” and taxed in the following “assessment year”. The tax year Income-tax Act 2025 concept replaces both with a single, intuitive term. From 1 April 2026, the year in which you earn income is simply your tax year.

It is a small change in wording with a big benefit in clarity. First-time filers no longer need to be told that income of 2026-27 is “assessed in 2027-28”, and businesses dealing with foreign group companies can use a term that sounds familiar. This article explains what the tax year means, how it works for new businesses, and how to handle the transition period when both old and new terms will be in use.

Key takeaways

Section 3 of the Income-tax Act, 2025 defines the tax year as the twelve-month financial year beginning on 1 April.
For a new business, profession or source of income, the first tax year runs from the date it begins until 31 March of that financial year.
Income earned from 1 April 2026 to 31 March 2027 is income of tax year 2026-27; the terms “previous year” and “assessment year” are not used under the new Act.
FY 2025-26 and earlier years continue to be described using previous year and assessment year, because the 1961 Act still governs them.
Update internal templates, contracts and communication so that the right term is used for the right period.

What the tax year means under the Income-tax Act 2025

Under the new Act, the tax year is the period of twelve months of the financial year starting on 1 April. The year in which income is earned and the year used to describe it are now the same. Returns, advance tax, TDS certificates and assessments all refer to the tax year.

Old terms and new terms side by side

Period of earning income	Old description (1961 Act)	New description (2025 Act)
1 April 2025 to 31 March 2026	Previous year 2025-26, assessment year 2026-27	Continues under the 1961 Act
1 April 2026 to 31 March 2027	Not applicable	Tax year 2026-27
1 April 2027 to 31 March 2028	Not applicable	Tax year 2027-28

So the return for income earned in 2026-27, which will be filed in 2027, is the return for tax year 2026-27. There is no separate assessment year label.

New businesses and new sources of income

The old law had a similar rule for new businesses, and the new Act keeps it in simpler words. If a business or profession is set up, or a new source of income comes into existence, during a financial year, the first tax year starts on that date and ends on 31 March of the same financial year.

Example: A private limited company is incorporated and commences business on 15 November 2026. Its first tax year runs from 15 November 2026 to 31 March 2027, and every subsequent tax year is a full financial year. The company does not need to prepare a separate longer period; its first set of tax computations covers four and a half months.

The same applies to an individual who begins freelancing, or who starts earning rental income from a newly acquired property, midway through the year. The income from that new source is computed from its start date within that tax year.

Special situations

The 1961 Act contained certain exceptions where income was assessed in the same year it was earned, for example in the case of persons leaving India permanently, discontinued businesses and some shipping income of non-residents. The new Act continues to deal with such cases through specific provisions, now described with reference to the tax year. If any of these situations applies to you, check the relevant provision of the 2025 Act rather than relying on older practice.

The transition: two sets of terms for a while

The Income-tax Act, 2025 applies to income of tax year 2026-27 onwards. The 1961 Act continues for earlier years through transition provisions. In practice, this means:

The return for FY 2025-26 is filed for assessment year 2026-27 under the 1961 Act. The same applies to the tax audit for FY 2025-26.
Notices for earlier years, such as scrutiny or reassessment, will continue to refer to assessment years.
Advance tax, TDS and TCS for 2026-27 are dealt with under the new Act and refer to tax year 2026-27.
New forms under the Income-tax Rules, 2026, such as Form 130 for salary TDS certificates, use the tax year.

For a broader overview of what else changed, see our guide to the Income-tax Act 2025.

Practical steps for businesses and individuals

Update document templates. Salary certificates, investment declaration requests, vendor TDS communications and board notes should refer to the tax year for 2026-27 onwards.
Label files carefully. In your records, keep folders for “AY 2026-27 (FY 2025-26)” and “Tax year 2026-27” distinct, so that nobody mixes up the governing law.
Review contracts. Agreements that refer to “assessment year” or “previous year” in tax clauses may need a simple update, particularly for multi-year arrangements.
Configure software. Accounting, payroll and TDS software should label periods correctly; most providers have released updates.
Brief your team. A short note explaining which term applies to which period avoids confusion in client and vendor communication.
Keep old references for old years. When replying to a notice for an earlier year, continue to use the assessment year and the 1961 Act sections quoted in it.

Why the change is helpful

The dual-year system was a regular source of errors: taxpayers selected the wrong assessment year while paying challans, or confused the year of a notice. Using a single tax year aligns India with the approach of many other countries, simplifies explanations for non-resident investors and should reduce such avoidable mistakes over time.

Frequently asked questions

What is a tax year under the Income-tax Act 2025?

It is the twelve-month financial year beginning on 1 April. For a new business or a new source of income, the first tax year starts on the date it begins and ends on the following 31 March.

Is assessment year 2027-28 the same as tax year 2026-27?

The period of income is the same, 1 April 2026 to 31 March 2027. However, the new Act uses only the term tax year 2026-27; the assessment year label is not used for this period.

Which year do I select for my FY 2025-26 return?

Assessment year 2026-27, since that year is still governed by the Income-tax Act, 1961.

Does the tax year change due dates for returns or advance tax?

The concept itself only changes terminology. Due dates are set by the Act and rules for each compliance, so check the dates notified for tax year 2026-27.

If you would like help moving your tax records and processes to the new tax year framework, our team is here to help.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

October 3, 2026

Taxation and Other Laws (Amendment) Act 2026: Key Income Tax Changes Explained

The Taxation and Other Laws Amendment Act 2026 received Presidential assent on 17 August 2026. It is the first significant set of amendments to the Income-tax Act, 2025 since the new law came into force on 1 April 2026, and it also amends the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.

The Act replaces the Income-tax (Amendment) Ordinance promulgated on 5 June 2026 and adds further changes. Its focus is on investment, manufacturing and financial markets rather than on individual tax slabs, so most salaried taxpayers will see no change in their tax. Businesses with foreign investors, fund managers, REIT and InvIT structures, and electronics or data centre operations should read on.

Key takeaways

The Act received assent on 17 August 2026, after being passed by the Lok Sabha on 6 August and the Rajya Sabha on 10 August 2026.
Foreign institutional investors and the Bank for International Settlements are exempt from tax on interest and capital gains from government securities, with effect from 1 April 2026, subject to conditions.
The safe harbour for offshore funds managed from India has been simplified by removing four conditions.
Special purpose vehicles of business trusts face a higher surcharge of 25%, while unitholders receive an exemption on dividends from such SPVs.
New or extended exemptions support electronics manufacturing, bonded warehousing of components, rough diamond sales in notified zones and data centre services.

Background: from ordinance to Act

In June 2026, the Government issued an ordinance to exempt certain foreign investors’ income from government securities, with the aim of deepening the bond market and supporting inflows. An ordinance must be approved by Parliament to continue, so the Taxation and Other Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha in August. The Bill carried the ordinance’s provisions forward and added a wider set of amendments. With the Act now in place, the ordinance stands repealed, and actions taken under it are protected.

Key changes in the Taxation and Other Laws Amendment Act 2026

Area	What changed	Effective from
FIIs and BIS in government securities	Exemption on interest and capital gains	1 April 2026
Offshore fund safe harbour	Four eligibility conditions removed	1 April 2026
Business trust SPVs	Surcharge increased to 25%; dividends exempt for unitholders	1 April 2026
Electronics capital goods	Exemption for foreign suppliers extended to tax year 2040-41	Extension of existing relief
Bonded warehouse components	New exemption for foreign companies	1 October 2026 to 31 March 2041
Rough diamonds in notified zones	New exemption for foreign sellers	1 October 2026 to 31 March 2041
Data centre services	Wider exemption, fewer approvals	1 April 2026
Payment modes	Updated reference for zero-charge electronic payment modes	On publication

1. Exemption for FIIs and BIS on government securities

Foreign institutional investors and the Bank for International Settlements are now exempt from income tax on interest and on capital gains arising from investment in government securities, with effect from 1 April 2026. The exemption depends on furnishing the prescribed information in the prescribed form and manner. For Indian businesses, the indirect benefit is a deeper and more liquid bond market.

2. Simpler safe harbour for fund management from India

The Income-tax Act offers a safe harbour so that an offshore fund managed by a fund manager in India does not create a taxable presence merely because of that management. The Act removes four conditions that fund managers had found difficult: a minimum of 25 members, a 10% cap on participation by a single investor, a minimum corpus of ₹100 crore, and a 25% limit on investment in a single entity. Other safeguards, such as limits on participation by Indian residents and conditions on the fund manager, continue.

3. Business trusts and their SPVs

REITs and InvITs hold assets through special purpose vehicles. The amendments raise the surcharge on SPVs of business trusts to 25%, and give unitholders an exemption on dividend income arising from such SPVs. The practical effect is a more uniform treatment of dividends at the unitholder level. Trust managers should revisit distribution models and investor communication for the current tax year.

4. Support for electronics manufacturing

Foreign companies that supply capital goods, equipment or tooling to contract manufacturers of specified electronic goods, such as mobile phones, laptops, tablets and servers, already enjoyed an exemption. The Act extends it to tax year 2040-41. A new exemption also covers foreign companies that store components in bonded warehouses for supply to Indian contract manufacturers, from 1 October 2026 to 31 March 2041.

5. Rough diamonds and data centres

Foreign mining companies and similar sellers of rough diamonds in notified special zones receive an exemption on income from such sales, for the same period from 1 October 2026. For data centres, the Act widens the exemption available to foreign companies procuring data centre services from India, including facilities leased and operated by an Indian company, and removes the need for individual notification.

6. Payment and Settlement Systems Act

The 1961 Act required certain businesses to offer prescribed electronic payment modes without charging a fee. With the new Act in force, the reference in the Payment and Settlement Systems Act has been updated so that the Government can notify such payment modes going forward.

Who should review these changes?

Businesses with foreign portfolio investors or those raising debt from overseas investors.
Fund managers running or planning offshore funds from India, including from GIFT City.
REIT and InvIT sponsors, managers and SPVs.
Electronics manufacturers and their foreign suppliers, including logistics partners operating bonded warehouses.
Data centre operators providing services to foreign customers.

For most individuals and small businesses, the amendments do not change tax rates, slabs or deductions. It remains important, however, to follow the new Act’s structure, which we explain in our guide to the Income-tax Act 2025.

Practical next steps

Map the changes to your structure: identify which provisions touch your investors, entities or supply chain.
Check the effective dates: some provisions apply from 1 April 2026, others only from 1 October 2026.
Review contracts and offer documents: tax clauses and investor disclosures may need updating.
Plan documentation: several exemptions depend on prescribed information or conditions being met.
Monitor rules and notifications: the details of forms and procedures will follow through rules published by the CBDT on the Income Tax Department website.

Frequently asked questions

When did the Taxation and Other Laws (Amendment) Act 2026 come into force?

It received Presidential assent on 17 August 2026. Several provisions apply retrospectively from 1 April 2026, while others take effect from 1 October 2026 or from publication.

Does the Act change income tax slabs for individuals?

No. The amendments focus on investment, business trusts, manufacturing and related areas. Individual slab rates are unchanged by this Act.

What happened to the June 2026 ordinance?

The Act replaces the Income-tax (Amendment) Ordinance, 2026. Its provisions for FIIs and BIS continue through the Act, and the ordinance itself stands repealed.

Which law does the Act amend?

Mainly the Income-tax Act, 2025, together with the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.

If you would like to understand how the Taxation and Other Laws (Amendment) Act 2026 applies to your business or investors, we would be happy to talk it through.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

October 2, 2026

Income-tax Act 2025: Key Changes Every Taxpayer Should Know

The Income-tax Act 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961 after more than six decades. Parliament passed the new law in August 2025, it received Presidential assent on 21 August 2025, and the Income-tax Rules, 2026 were notified on 20 March 2026 to put it into operation.

For most taxpayers, the headline message is reassuring: the new Act is primarily a rewrite for clarity, not a new tax policy. Rates, the broad treatment of income and familiar systems such as PAN, TAN and faceless assessment continue. What changes is the language, the numbering and some of the concepts you will see on forms and notices. Here is what every taxpayer and business should know.

Key takeaways

The Income-tax Act 2025 applies from 1 April 2026, so income earned in the tax year 2026-27 onwards is governed by it.
The Act has 536 sections and 16 schedules, compared with over 800 sections in the 1961 Act, with provisos and explanations folded into the main text and many rules shown as tables.
“Previous year” and “assessment year” are replaced by a single “tax year”.
Section and form numbers have changed, so documents such as Form 16 and Form 26AS now carry new numbers.
Returns, audits and proceedings for FY 2025-26 and earlier years continue under the 1961 Act through transition provisions.

Why a new Income-tax Act 2025?

Over the years the 1961 Act grew through hundreds of amendments. Sections such as 80-IA or 80-IB sat alongside provisions numbered with multiple letters, and a single sentence could run across several provisos. That made the law harder to read and increased the room for disputes.

The Government’s stated aim was a simpler, modern code with a reduced compliance burden. According to the Income Tax Department, rules have been reduced from 511 to 333 and forms from 399 to 190. The drafting uses shorter sentences, tables and formulas, and removes provisions that had become obsolete.

The main changes at a glance

1. A single “tax year”

Under the old law, income earned in a “previous year” was assessed in the following “assessment year”. This was a common source of confusion, especially for first-time filers. The new Act uses one term, the tax year, which is the financial year from 1 April to 31 March. Income earned from 1 April 2026 to 31 March 2027 is income of tax year 2026-27. Our upcoming guide on the tax year concept explains this in more detail.

2. New section numbers

Almost every provision has moved. A few commonly used examples are shown below. Always check the official mapping before quoting a section in a return or reply.

Provision	Income-tax Act, 1961	Income-tax Act, 2025
Exempt incomes	Section 10	Section 11
New tax regime	Section 115BAC	Section 202
Rebate for resident individuals	Section 87A	Section 156
Return of income	Section 139	Section 263
TDS provisions	Sections 192 to 194T	Consolidated in section 393

3. TDS and TCS in tables

TDS provisions that were spread across dozens of sections are now largely consolidated, with the nature of payment, threshold and rate set out in tables. For deductors, this means updating accounting software, deduction masters and vendor communication to refer to the new provisions.

4. New form numbers

The Income-tax Rules, 2026 renumber most forms. For example, the salary TDS certificate earlier called Form 16 is now Form 130, Form 16A is Form 131, the employee declaration in Form 12BB is Form 124, and the annual tax statement earlier known as Form 26AS is Form 168.

5. What has not changed

Tax rates and slabs: the new Act did not itself change the slab rates, which continue as set by the Finance Act.
Heads of income: salary, house property, business or profession, capital gains and other sources remain.
Core deductions: popular deductions continue, although under new section numbers.
Administration: PAN, TAN, e-filing and the faceless assessment framework continue.

What happens to earlier years?

This is the question we hear most often. The transition provisions ensure that the old law continues to apply to periods before 1 April 2026. In practice:

The return for FY 2025-26 (assessment year 2026-27) is filed under the 1961 Act.
A tax audit for FY 2025-26 is conducted under section 44AB, with Form 3CD. See our guide to the tax audit for FY 2025-26.
Pending assessments, appeals and reassessments relating to earlier years continue, and registrations and approvals granted under the old Act generally remain valid where consistent with the new law.

This means that for the next few years, many businesses will work with both Acts in parallel.

A practical checklist for businesses

Update your accounting and payroll systems so that TDS sections, forms and certificates reflect the new numbering from tax year 2026-27.
Revise templates for invoices, vendor declarations, investment proof collection and salary certificates that quote old section numbers.
Brief your finance team on the tax year concept and on which Act applies to which period.
Keep a mapping sheet of the sections you use regularly, cross-checked with the official comparison published by the Department.
Review agreements that refer to specific sections of the 1961 Act, such as tax clauses in contracts, and consider whether updates are needed.
Watch for guidance in the form of FAQs, circulars and amendments. The Taxation and Other Laws (Amendment) Act 2026 has already made further changes.

Tips for individual taxpayers

For salaried individuals, the change will be visible mainly in paperwork. Your employer will issue the TDS certificate in Form 130 for tax year 2026-27, and you will submit investment details to your employer in Form 124. When you check your tax credits, look for Form 168. If an older notice or document refers to a 1961 Act section, that is normal, as long as it relates to a year before 1 April 2026.

Frequently asked questions

When did the Income-tax Act 2025 come into force?

It came into force on 1 April 2026. It received Presidential assent on 21 August 2025, and the Income-tax Rules, 2026 were notified on 20 March 2026.

Have income tax rates changed under the new Act?

The new Act is mainly a simplification. It did not itself change the tax rates or slabs; these continue to be set through the annual Finance Act.

Which law applies to my return for FY 2025-26?

The Income-tax Act, 1961. The new Act applies to income of tax year 2026-27 onwards, and the transition provisions keep earlier years under the old law.

Do I need to learn the new section numbers?

It helps to know the ones you use often. For everything else, the Department’s comparison tables are the safest reference.

If you would like help understanding how the Income-tax Act 2025 affects your business or personal taxes, our team is here to help.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

October 1, 2026

Tax Audit for FY 2025-26: Due Date, Applicability and Preparation Checklist

The tax audit due date 2026 for FY 2025-26 (assessment year 2026-27) has moved. On 28 September 2026 the Central Board of Direct Taxes (CBDT) announced that the tax audit report, originally due on 30 September 2026, can now be furnished by 21 October 2026, and the related income tax return by 21 November 2026.

This is welcome breathing space, but three weeks passes quickly when books still need closing, confirmations are pending and the audit itself has to be completed. This guide explains who needs a tax audit for FY 2025-26, the dates that now apply, and a practical checklist to help your business hand over clean, well-organised records.

Key takeaways

The tax audit report for FY 2025-26 is now due by 21 October 2026, and the ITR for audited taxpayers by 21 November 2026, as announced by the CBDT on 28 September 2026.
FY 2025-26 is still governed by the Income-tax Act, 1961, so the audit is under section 44AB and reported in Form 3CA or 3CB with Form 3CD.
Businesses generally need an audit above ₹1 crore turnover, or above ₹10 crore where cash receipts and cash payments are each within 5% of the total.
Transfer pricing cases (Form 3CEB) follow their own timeline and are not covered by this extension, so check separately.
Starting preparation now, with a reconciled trial balance and supporting schedules, keeps the process smooth and reduces last-minute queries.

Tax audit due date 2026: what changed

The normal timeline for taxpayers requiring an audit is a report by 30 September and a return by 31 October. After requests from taxpayers and professional bodies, the CBDT extended both dates for assessment year 2026-27.

Compliance for FY 2025-26	Original due date	Revised due date
Tax audit report (Form 3CA/3CB with Form 3CD)	30 September 2026	21 October 2026
ITR for taxpayers requiring a tax audit	31 October 2026	21 November 2026
Transfer pricing cases (Form 3CEB)	Separate timeline	Not covered by this extension

The relief applies to taxpayers covered by clause (a) of Explanation 2 to section 139(1), which includes companies and assessees whose accounts must be audited. If your case involves international or specified domestic transactions, or you are unsure which category you fall into, confirm the applicable dates on the Income Tax Department portal before planning around them.

A note on the new Act

The Income-tax Act, 2025 came into force on 1 April 2026 and replaces “previous year” and “assessment year” with a single “tax year”. That regime applies to income earned from 1 April 2026 onwards. The accounts for FY 2025-26, and the audit you are completing now, remain under the 1961 Act, its sections and its forms.

Who needs a tax audit for FY 2025-26

Section 44AB sets out the thresholds. In simple terms:

Businesses: turnover or gross receipts above ₹1 crore. The limit rises to ₹10 crore where aggregate cash receipts and aggregate cash payments are each not more than 5% of the respective totals.
Professionals: gross receipts above ₹50 lakh.
Presumptive taxation cases: a business opting for section 44AD, or a professional under section 44ADA, who declares profit below the presumptive rate and whose income exceeds the basic exemption limit may need an audit.
Businesses that opted out of 44AD: where the five-year lock-in rules apply, audit may be required even at lower turnover levels.

A private limited company or LLP whose accounts are already audited under another law still needs a separate tax audit report if it crosses these thresholds. In that case, the report is given in Form 3CA; otherwise it is Form 3CB. Both are accompanied by Form 3CD, the detailed statement of particulars.

What the tax audit report covers

Form 3CD is detailed, and much of the effort goes into gathering evidence for its clauses. Some of the areas that typically take the most time are:

Turnover and GST reconciliation: matching books with GSTR-1, GSTR-3B and, where applicable, the annual return.
Payments to MSME suppliers: identifying amounts payable to micro and small enterprises beyond the permitted period under section 43B(h).
TDS and TCS compliance: deductions made, deposited and reported, plus any short or late deductions.
Cash transactions: loans and deposits taken or repaid, and receipts that may attract sections 269SS, 269ST or 269T.
Related-party payments and disallowances: under sections 40A(2)(b), 40(a) and 43B.
Depreciation schedule: additions, deletions and put-to-use dates as per the Act.
Quantitative details: for manufacturing and trading businesses, opening stock, purchases, sales and closing stock by quantity.

Tax audit preparation checklist

Use this as a working list for the next few weeks. Assigning an owner and a date to each item helps the whole team move at the same pace.

Finalise the books: close all entries for FY 2025-26, pass year-end provisions and lock the period.
Reconcile bank and loan accounts: every account, including closed or dormant ones, should tie to statements as of 31 March 2026.
Prepare party-wise ledgers: debtors, creditors, advances and loans, with balance confirmations where possible.
Match GST data: turnover per books versus GST returns, and input tax credit per books versus GSTR-2B.
Compile the TDS workbook: section-wise deductions with challans and quarterly return acknowledgements.
Tag MSME vendors: keep Udyam registration details and payment dates ready for the 43B(h) review.
Update the fixed asset register: invoices and dates for additions, and sale proceeds for disposals.
Stock records: closing inventory valuation method, stock statements given to banks, and quantitative reconciliation.
Collect statutory documents: PF and ESI challans, loan agreements, partnership deed or MOA, and any earlier tax orders.
Review the AIS and Form 26AS: check that income reported by others matches your books before the ITR is filed.

Penalty for missing the deadline

If a taxpayer required to get accounts audited fails to furnish the report by the due date, section 271B allows a penalty of 0.5% of turnover or gross receipts, subject to a maximum of ₹1,50,000. Section 273B provides that no penalty is levied where there was a reasonable cause for the failure, but it is far better not to rely on that. A late or incomplete report can also make the related return defective and invite further queries during scrutiny.

The practical answer is simple: plan your timeline back from 21 October and give yourself a buffer for the report upload and acceptance on the portal.

After the audit: filing the return

Once the report is uploaded and accepted by the taxpayer on the e-filing portal, the ITR can be finalised using figures consistent with the audited accounts and Form 3CD. Keep the audit working papers and supporting schedules organised, because they are the first thing you will need if you later receive a notice. Our guide on replying to a scrutiny notice under section 143(2) explains why good documentation at this stage saves time later. For indirect tax developments that may affect your reconciliations, see our note on the 57th GST Council meeting.

Frequently asked questions

What is the tax audit due date for FY 2025-26?

Following the CBDT announcement of 28 September 2026, the tax audit report for FY 2025-26 (AY 2026-27) is due by 21 October 2026, and the related ITR by 21 November 2026.

Does the extension apply to transfer pricing cases?

No. Taxpayers who must furnish Form 3CEB for international or specified domestic transactions follow a separate timeline. Check the dates applicable to your case on the official portal.

Is the tax audit for FY 2025-26 under the new Income-tax Act 2025?

No. The Income-tax Act, 2025 applies from 1 April 2026. FY 2025-26 accounts are audited under section 44AB of the Income-tax Act, 1961 using Forms 3CA/3CB and 3CD.

What is the turnover limit for tax audit?

For a business, ₹1 crore, rising to ₹10 crore where cash receipts and cash payments are each within 5% of the totals. For professionals, gross receipts above ₹50 lakh. Presumptive taxation cases have their own conditions.

If you would like help organising your records, reconciliations and schedules for the tax audit, our team is happy to support you.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

September 30, 2026