ITA61 stands for Income Tax Act, 1961 ITA25 stands for Income Tax Act, 2025
Changes at the enactment stage versus the bill are marked in RED
Personal Tax
Resident individual/HUF not required to obtain TAN to deduct/pay TDS on
consideration for transfer of immovable property to non-resident seller
(effective from 1 October 2026). Using PAN instead of TAN will suffice.
Interest from Motor Accident Claims Tribunal to an individual or his
legal heir will tax exempt & no TDS up to Rs. 50,000 p.a.
Persons Resident Outside India (PROIs) allowed to invest in equity of
listed Indian companies through Portfolio Investment Scheme (PIS), with
per-investor cap raised from 5% to 10% & aggregate cap from 10% to
24%.
Capital gains exempt on redemption of Sovereign Gold Bonds (SGB) only
where bonds subscribed at the time of original issue & held till
maturity.
Buyback of Shares
Consideration received on buy-back shall be chargeable to tax under head
“Capital gains” in hands of shareholders, instead of dividend income.
Promotor shall mean as defined under SEBI Buyback Regulations, 2018 (for
listed shares) or as defined under Companies Act or a person hold
directly/indirectly 10% of shareholding (for unlisted shares).
Promoter shareholders to pay additional income-tax on capital gains as
below:
Promotor/Co.
Long Term
Short Term
Base Tax (A)
Additional Tax (B)
Effective Rate (C)=(A)+(B)
Base Tax (A)
Additional Tax (B)
Effective Rate (C)=(A)+(B)
Unlisted Shares
Domestic Co.
12.5%
9.5%
22%
22%
0%
22%
Foreign Co.
12.5%
17.5%
30%
35%
0%
35%
Others
12.5%
17.5%
30%
30%
0%
30%
Listed Shares
Domestic Co.
12.5%
9.5%
22%
20%
2%
22%
Foreign Co.
12.5%
17.5%
30%
20%
10%
30%
Others
12.5%
17.5%
30%
20%
10%
30%
A surcharge rate of 12% applicable on tax charged & paid under Buyback
provisions
Corporate Tax - MAT
Final Tax
Minimum Alternate Tax (MAT) shall considered as final tax in old
regime.
Rate of Tax
MAT rate reduced to 14 percent (from existing 15 percent)
Exemption
Exemption from MAT allowed to foreign companies opting for
presumptive taxation scheme.
Credit Set Off
No MAT Credit allowed/generated in old regime. Existing MAT Credit
set-off allowed up to 25% of tax liability in new regime.
Corporate Tax - Miscellaneous Changes
PF/ESIC
Deduction for PF/ESI & other welfare fund contributions for
employee’s contribution shall be allowed if deposited by income tax
return filing due date.
MCA-CBDT Joint Committee
A joint committee of MCA & CBDT will be constituted to examine
and
recommend integration of ICDS into IND AS, promoting alignment
between tax & AS.
Startup Tax Exemption
Turnover threshold to claim exemption enhanced from INR 100 Cr
to
INR 300 Cr for eligible start-up.
International Tax - Incentives for Non-Residents & Foreign Companies
•
Tax holiday up to tax year 2026-2047 granted to foreign cloud &
data
centre companies on income earned from procuring data centre
services from specified Indian data centres, to promote India as a
global digital & AI infrastructure hub.
•
Five-years tax exemption granted to non-resident entities supplying
tools, capital equipment, technology, or related services to
notified electronic goods & toll manufacturing units, aimed at
strengthening domestic manufacturing ecosystems.
•
Five-year exemption on foreign income granted to non-resident
experts visiting India for first time to render services under
notified schemes, aimed at attracting global talent &
facilitating
knowledge transfer.
•
To incentivise prospecting & exploration of critical minerals,
certain minerals included in Schedule XII, making related
expenditure eligible for deduction u/s 51 of ITA25.
International Tax - IFSC
•
Period of profit-linked deduction for IFSC units extended to 20
consecutive years(CY) out of 25 years, & 20 CY for Offshore
Banking
Units (OBU), even for those IFSC units
& OBUs who's intial 10 years period expired on 31 March
2025.
•
Business income of IFSC units, after expiry of deduction period,
shall be taxed at a concessional rate of 15%, providing a stable
&
predictable tax regime post tax holiday.
•
Provisions relating to deemed dividend applicable to treasury
centres in IFSC are rationalised to eliminate unintended tax
implications on genuine intra-group treasury operations.
•
Deemed dividend provisions shall not apply where parent or principal
entity of group listed outside India & both including other
group
entity involved in transaction located in foreign jurisdictions as
notified by Central Government.
Transfer Pricing– Safe Harbour
Nature of transaction
Present
Introduced
Threshold limit for availing safe Harbour
Rs. 300 crores
Rs. 2000 crores
Approval of Safe Harbour for IT Services
Income Tax Department
Automated Process
(5 years-choice of taxpayer)
Software Development
17%/18%
15.5%
IT Enabled Services
17%/18%
15.5%
Knowledge Process Outsourcing
24%/21%/18%
15.5%
Contract Research & Development services relating to software development
24%
15.5%
Resident entity providing data centre services to a related foreign company
(including
cloud services)
NA
15%
Non-residents for component warehousing in a bonded warehouse
NA
2% of Invoice Value
Transfer Pricing - Advance Pricing Agreement (APA)
Modified Return pursuant to APA
•
Applicable only in respect of tax years covered under APA
•
Scope of modification restricted strictly to matters addressed in
APA
•
Modified return filed within 3 months from
month-end in
which APA executed
Associated Enterprises (AEs)
will also be permitted to file modified returns where their taxable
income impacted due to APA concluded by counterparty.
Fast-track unilateral APAs for IT/ITES companies
implemented, with an expected completion timeline of 2–2.5
years, to improve certainty & reduce litigation.
Transfer Pricing - Revised Time Limit for TPO Orders
ITA61
ITA25
Reference to TPO for international & specified domestic transactions
Reference to TPO continues for international & specified domestic transactions
TPO order passed at least 60 days before assessment limitation
TPO order passed one month prior to month of assessment limitation
Calculation of 60 days led to ambiguity & litigation
Fixed calendar cut-off dates prescribed
No specific cut-off dates mentioned
Clear deadlines:
•
31 Jan (if limitation ends on 31 Mar)
•
31 Oct (if limitation ends on 31 Dec)
Higher compliance uncertainty
Improved certainty, clarity, & ease of compliance
Transfer Pricing - DRP Assessment Timelines Clarified
The amendments clarify that:
•
If draft assessment order issued within prescribed
assessment
timeline, subsequent time available to AO for
completing
assessment will be governed exclusively by DRP
framework.
•
General assessment time limits do not override
timelines prescribed under DRP mechanism once draft
order validly issued.
Additional provisions are inserted to clearly define & remove
ambiguity
regarding time available to complete assessments both where
objections are
filed & where DRP directions are issued.
These clarifications apply retrospectively to align past assessments
with
clarified intent of law.
Transfer Pricing - Others
Transition from Penalty to Fee-Based Compliance
❖
Existing framework levies a fixed penalty of
₹1,00,000 for failure to file Form 3CEB within due
date now, replaced with a mandatory graded fee,
reducing litigation & bringing certainty. Fee
applies automatically, without discretionary waiver.
Effective from 1 April 2026 (Tax
Year 2026–27 onwards ).
❖
Revised Fee Structure for Delay in Filing Form 3CEB:
Delay Period
Fee Payable
Up to 1 month
₹50,000
Beyond 1 month
₹1,00,000
Rationalisation of Specified Domestic Transactions (SDT)
❖
Transactions with newly established SEZ units
excluded from scope of SDT.
❖
Where income enhanced after arm’s length price (ALP)
determination: No deduction shall be allowed in
respect of such transactions.
❖
Measure aimed at preventing misuse of transfer
pricing benefits in SEZ-linked arrangements.
Deductions – Cooperative Society
Area
Finance Act, 2026
Key Conditions / Limits
Profit-linked deduction for primary co-operatives
Deduction of profit/gains extended to primary co-operative societies supplying
cattle
feed & cotton seed to federal co-operatives & Govt. organisations
Extension of existing deduction for milk, oilseeds, fruits & vegetables
Inter-co-operative dividend income (new tax regime)
Dividend income received from another co-operative society allowed as deduction
under new tax regime to prevent double taxation
Allowed only to the extent further distributed to members
Time-bound availability
Inter-co-operative dividend deduction available for a period of three years
Restricted to dividend on investments made up to 31-01-2026
National co-operative federations
Dividend income received by a notified national federal co-operative from a company
allowed as deduction under new tax regime
Subject to notification & prescribed conditions
Tax Deducted at Source (TDS)
A rule-based automated system enabled for small taxpayers for
issuance of lower or nil TDS certificates, eliminating manual
applications to Assessing Officer, reducing human interface,
ensuring faster & more transparent processing.
Form 15G / Form 15H may be submitted once with depository, which
will make declaration applicable to investments across multiple
companies, thereby significantly reducing repetitive submissions,
paperwork, & follow-ups.
Tax Collected at Source (TCS)
Nature of Transaction
Earlier TCS Rate
Revised TCS Rate
Key Benefit
Overseas tour packages
5% up to Rs.10 lakh or
20% thereafter
2% without limit
Reduced cash-flow blockage
LRS – Education & medical purposes
Nil up to Rs.10 lakh
5% above Rs.10 lakh
Nil up to Rs.10 lakh
2% above Rs.10 lakh
Relief for students & patients
LRS for other purposes
Nil up to Rs.10 lakh
20% above Rs.10 lakh
Nil up to Rs.10 lakh
20% above Rs.10 lakh
-
Sale of alcoholic liquor
1%
2%
Uniform & lower TCS
Sale of scrap
1%
2%
Reduced compliance burden
Sale of minerals
1%
2%
Improved liquidity for sellers
Sale of tendu leaves
5%
2%
Significant rate reduction
Compliance – Due Dates
(Applicable from tax year 2025–26 onwards)
Compliance
Description
Old Due Dates
Revised Due Dates
Revised Return (Sec. 139(5) of ITA61)*
Revised return can be filed up to 12 months from end of relevant Tax Year
31st Dec
31st Mar
Belated Return (Sec. 139(4) of ITA61)
Belated return can be filed up to 12 months from end of relevant Financial Year
31st Dec
31st Mar
Income Tax Return – Non-Audit Cases
Due date for filing ITR for non-audit taxpayers (including business cases not liable
for
audit) has been extended
31st July
31st Aug
Income Tax Return – Non-Audit Trust Cases
Due date for filing ITR for non-audit trusts has been extended
31st July
31st Aug
*Subject to payment of a nominal fee of ₹1,000 / ₹5,000, based on total income being
up to ₹5,00,000 or exceeding ₹5,00,000, respectively.
Assessment, Penalty, Prosecution
Single combined order for assessment & penalty, reducing
multiple
proceedings.
No interest on penalty during pendency of appeal before first
appellate
authority.
Mandatory pre-deposit for obtaining stay of demand on an order which
is in appeal is to be reduced from 20% to 10% calculated only on
core tax demand (yet to be notified)
Immunity framework has been extended to cover cases involving
misreporting of income. Such immunity subject to payment of 100%
additional tax on tax payable.
Decriminalisation & rationalisation of prosecution provisions
for
certain minor and procedural non-compliances, such as non-production
of books/information & defaults relating to TDS provisions
(including payments in kind).
Conversion of Penalty into Fee
•
Penalties replaced by per-day fee (with maximum cap)
for:
- Failure to get accounts audited
- Non-furnishing of Transfer Pricing report
- Default in furnishing SFT / reportable accounts
Rationalisation of Tax on Special Income
•
Tax rate on unexplained income reduced - 60% to 30%
•
Separate penalty of 10% removed
•
Penalty aligned with misreporting (200% of tax)
Relief in Search Assessment – “Other Person” Cases
•
Where incriminating material relates to only one tax
year, block assessment period restricted to that
year
•
Definition of block period amended to reduce
compliance burden
Extended Time Limit for Search Assessments
•
Limitation period linked to date of initiation of
search
•
Time limit extended from 12 months
to
18 months for specified persons
Expanded Scope of Return
•
Return allowed even after reassessment proceedings
begin, with
additional 10% tax
•
Permitted where taxpayer reduces earlier reported
loss
•
No penalty on additional income disclosed via return
Rationalisation of Prosecution Provisions
•
Maximum imprisonment reduced to 2
years for
first offence and 3 years for
subsequent
offence
•
Courts empowered to impose fine in lieu of
prosecution, where
appropriate
Penalty for Non-Compliance in Crypto-asset Reporting
•
₹200 per day for non-furnishing of crypto
transaction statement
•
₹50,000 penalty for furnishing inaccurate
information or failure
to correct
Assessment, Penalty, Prosecution
Reassessment – minimum time of 30 days granted to
file ITR
w.e.f. 30th March 2026
Reassessment – issuance of notices implementing court/higher
authority
orders within 3 months from end of quarter in which
order
received by tax authorities
Prior approvals/defect - considered as procedural &
administrative
w.e.f. 1st April 2021, it will not held
assessment invalid where
such approval granted electronically
DSC authentication – faceless assessment units permitted to
authenticate
electronically without DSC w.e.f. 1st April
2022
ITAT orders -
uploaded electronically on portal for authorities/taxpayers and
deemed communicated in real time w.e.f. 1st Oct
2026; limitation period computed accordingly
Interest on penalty demand – no interest levy till appeal is pending
with
first appellate authority w.e.f. 1st April
2027
Power of Tax Recovery Officer to arrest taxpayers for recovery of
tax dues withdrawn, reflecting a move towards less coercive recovery
mechanisms.
Foreign Asset Disclosure Reforms (FAST-DS 2026)
One-time 6-month window proposed to disclose undisclosed foreign
assets/income (Immunity from prosecution & penalty under Black Money Act)
(yet to be
notified)
Category
Foreign Asset / Income Threshold
Cost to Regularise
Immunity
Category A
Undisclosed income/assets up to ₹1 crore
30% of Income/FMV of asset + 30% additional tax = 60%
Immunity from prosecution
Category B
Asset up to ₹5 crore not reported
₹1 lakh one-time fee
Immunity from penalty & prosecution
Small Asset Amnesty
Assets below ₹20 lakh (retrospective relief from 1st October 2024)
Not applicable
Immunity from prosecution
Miscellaneous Changes
Schedule XI simplified by removing contribution limits &
salary/shareholder-based distinctions, aligning recognition
criteria with section 17 of EPF Act, & rationalising
investment
norms in line with EPFO guidelines.
The Tonnage Tax Scheme is rationalised to ensure consistency
with Inland Vessels Act, 2021 & rules framed thereunder.
STT increased on:
1.
Sale of options – 0.10% to
0.15% of option premium
2.
Sale of option where option exercised –
0.125%
to 0.15% of intrinsic value
Disclaimer:
This preliminary document has been prepared by AKGVG & Associates. It is for
information only and should not be considered as an advice or opinion, or otherwise.
AKGVG & Associates does not intend to advertise its services through this. The
content is strictly for private circulation and must not be distributed to any other
person or replicated in any form without the prior written consent of AKGVG &
Associates.
