Latest Tax Law Updates

By Notification No. 134/2026 dated 8 October 2026, the CBDT has replaced Form No. 161 with a new form for applying for waiver of penalty under Section 440(2) of the Income-tax Act, 2025, as substituted by the Finance Act, 2026.

Practical impact: The waiver requires payment of tax, interest and additional income-tax of 100% or 120% of the tax on under-reported income from misreporting within the due date stated in the demand notice, with no appeal filed. Taxpayers who receive a penalty or demand notice should check the due date on the notice and use the revised form.

By Press Release dated 28 September 2026, the CBDT has extended the due date for filing the Return of Income for Assessment Year 2026-27, for taxpayers whose accounts must be audited (persons covered by S. No. 2 of the Table below Explanation 2 to Section 139(1) of the Income-tax Act, 1961), from 31 October 2026 to 21 November 2026. Consequently, the specified date for furnishing the tax audit report for these taxpayers also moves from 30 September 2026 to 21 October 2026.

Practical impact: Audited taxpayers (companies, firms and others required to obtain a tax audit) now have until 21 October 2026 to file Form 3CA/3CB-3CD and until 21 November 2026 to file the ITR for AY 2026-27, without needing a belated or condonation request. Filing within the extended window helps avoid interest under Section 234A and the risk of a defective-return or late-filing notice; the revised dates should also be diarised for advance-tax and audit-engagement planning.

See the updated deadline calendar →

By Notification No. 121/2026 dated 22 September 2026, the CBDT has amended the Income-tax Rules, 2026 so that a resident individual or Hindu Undivided Family (HUF) buying immovable property from a non-resident can deposit and report tax deducted under Section 195 (new Section 393(2)) of the Income-tax Act, 2025 through the challan-cum-statement in Form No. 141, instead of the earlier TAN-based process. A new Schedule E has been added to Form No. 141 for these transactions, and Form No. 132 has been updated to match. The amendment takes effect from 1 October 2026.

Practical impact: Resident buyers of immovable property from non-resident sellers on or after 1 October 2026 no longer need to obtain a TAN before depositing this TDS — the challan-cum-statement in Form 141 (Schedule E) now serves the purpose. Buyers who skip or under-deduct this TDS remain exposed to a TDS default notice under Section 201 (new Section 398); using the correct form and schedule from the effective date is the safest way to avoid one.

How to respond to a TDS default notice →

By Notification No. 120/2026 dated 17 September 2026, the CBDT has notified the Income-tax (Fourth Amendment) Rules, 2026, amending Rules 160, 176 and 225 of the Income-tax Rules, 2026. The reference to the power of arrest has been omitted from Rule 225 (recovery of arrears of tax), and the words “except arrest and detention” have been removed from the connected provision. Rule 176 now requires certain communications to be served “by way of an electronic communication” in place of the earlier requirement of affixing a digital signature. The amendments to Rules 2 to 4, including Rule 225, apply retrospectively from 1 April 2026. The same notification extends the due date under Rules 246(4) and 256(4) from 30 September 2026 to 31 March 2027 for persons already registered under the 1961 Act, and replaces Form 169 (registration as a valuer) and Form 171 (registration as an authorised income-tax practitioner).

Practical impact: If you have an outstanding demand under Section 156 (new Section 289) and recovery proceedings have begun, the Tax Recovery Officer’s toolkit no longer includes arrest and detention of the defaulter. The remaining recovery modes — attachment and sale of movable and immovable property, appointment of a receiver, and recovery through third parties — are unaffected, so a demand still needs to be answered, paid or formally stayed within the statutory window. Applying for a stay of demand under Section 220 (new Section 411(12)) pending appeal remains the correct route where the demand is disputed.

How to respond to a Section 156 demand notice →

By Notification No. 1 of 2026 dated 10 September 2026, the Directorate of Income Tax (Systems) has prescribed the format, procedure and guidelines for furnishing the Statement of Financial Transactions in SFT-2517 (Depository transactions) under Section 508(1) of the Income-tax Act, 2025 read with Rule 237(6) of the Income-tax Rules, 2026. Every depository registered under the Depositories Act, 1996 must generate the prescribed data file from its own systems and upload it through the designated SFTP server, reporting transaction-level information on the transfer of listed securities and units of mutual funds along with the capital gains computation.

Practical impact: This is the companion notification to SFT-2518 below, and together they complete the capital-gains reporting chain feeding the Annual Information Statement and the pre-filled capital gains figures in your ITR. Because the depository now reports your share and mutual fund transfers directly, any difference between your own computation and the pre-filled figure is visible to the department and is a standard trigger for an inquiry notice under Section 142(1) (new Section 268(1)) or a defective-return notice under Section 139(9) (new Section 263(7)). Reconcile your contract notes and demat statements against the AIS before filing, and preserve them so a subsequent query can be answered with documentary support.

How to respond to a Section 142(1) inquiry notice →

By Notification No. 2 of 2026 dated 10 September 2026, the Directorate of Income Tax (Systems) has prescribed the format, procedure and guidelines for furnishing the Statement of Financial Transactions in SFT-2518 (Mutual Fund transactions) under Section 508(1) of the Income-tax Act, 2025 read with Rule 237(6) of the Income-tax Rules, 2026. Registrars and Share Transfer Agents must report transaction-level information on transfer of mutual fund units, together with a control statement signed by the Designated Director. Reporting is half-yearly — the half-year ending 30 September is due by 31 October, and the half-year ending 31 March by 30 April.

Practical impact: The data reported under SFT-2518 feeds directly into the Annual Information Statement and the pre-filled capital gains figures in your ITR. Where the amount you report differs from what the RTA has filed, the mismatch is a standard trigger for an inquiry notice under Section 142(1) (new Section 268(1)) or a defective-return notice under Section 139(9) (new Section 263(7)). Taxpayers with mutual fund redemptions or switches should reconcile their own computation against the AIS before filing, and retain broker/RTA statements so any subsequent query can be answered with documentary support.

How to respond to a Section 142(1) inquiry notice →

By Notification No. 114/2026 dated 14 August 2026, the CBDT has notified the Foreign Assets of Small Taxpayers – Disclosure Scheme Rules, 2026, operationalising the one-time voluntary disclosure scheme introduced by the Finance Act, 2026. Eligible taxpayers may declare undisclosed foreign assets and/or foreign income by filing Form 1 electronically between 16 August 2026 and 31 December 2026, after which an order in Form 2 determines the amount payable (payable within two months without interest, or a further two months with interest at 1% per month).

Practical impact: Undisclosed foreign assets and income are a common trigger for reassessment show-cause notices under Section 148A (new Section 281). This scheme offers a limited window to regularise such holdings — with immunity from prosecution and relief depending on the value and nature of the disclosure — before the department initiates proceedings. Aggregate fair market value limits apply (broadly ₹1 crore for undisclosed foreign income/assets combined, up to ₹5 crore for certain non-residence or already-taxed categories). Anyone who has received, or fears receiving, a notice concerning foreign assets should evaluate eligibility well before the 31 December 2026 cut-off.

How to respond to a Section 148A reassessment notice →

CBIC Instruction No. 01/2026-GST, dated 3 August 2026, directs CGST field formations to coordinate with State Mining Authorities for periodic sharing of information on illegal mining and transportation of minerals. CGST Zones must designate nodal officers, set up information-sharing mechanisms, and initiate action under GST law wherever tax evasion is detected.

Practical impact: Businesses in mining, mineral trading, or mineral transportation can expect closer scrutiny of turnover, e-way bill movement, and royalty-linked data. Mismatches flagged through this data-sharing channel may trigger show cause notices (DRC-01) or vehicle detention proceedings — maintain reconciled records of mining permits, dispatch quantities, and GST returns.

How to respond to GST DRC-01 →

CBIC Circular No. 256/02/2026-GST, dated 25 July 2026, clarifies how the department will file appeals before the GST Appellate Tribunal (GSTAT) against appellate orders arising from DGGI cases adjudicated by a Common Adjudicating Authority (CAA). The circular specifies the reviewing authority, the appeal filing procedure, the communication mechanism between formations, and which GSTAT Bench has jurisdiction over such cases.

Practical impact: If your case originated from a DGGI investigation and was decided by a Common Adjudicating Authority, the department now has a defined channel to appeal an order in your favour to GSTAT. Track appeal timelines after a favourable first-appeal order — the dispute may not end there.

How to respond to GST DRC-07 →

CBDT Notification No. 97/2026, dated 24 July 2026, amends the Income-tax Rules, 2026 to insert Appendix IV prescribing Form ITR-BN — the return of income to be furnished in block assessment proceedings. The form applies where a search is initiated under Section 247 or requisition made under Section 248 of the Income-tax Act, 2025 on or after 1 April 2026.

Practical impact: If you receive a notice to file a block-period return following a search or requisition under the new Act, the return must be filed in Form ITR-BN — not a regular ITR. Filing in the wrong form can render the return defective.

Read the IT Act 2025 guide →

The CBDT has released a Guidance Note (press release dated 24 July 2026) explaining the reporting obligations of Reporting Crypto-Asset Service Providers (RCASPs) under Section 509 of the Income-tax Act, 2025, Rules 241 to 244 and Form 167. It covers due diligence, reporting procedures and compliance, with detailed FAQs aligned to the OECD's Crypto-Asset Reporting Framework (CARF).

Practical impact: Crypto exchanges and service providers must gear up for structured reporting of user transactions. For investors, this means crypto trades will increasingly be visible to the tax department — mismatches between reported crypto data and your ITR can trigger scrutiny or reassessment notices.

How to respond to a scrutiny notice →

CBDT Notification No. 85/2026, dated 15 July 2026, fixes the Cost Inflation Index for Financial Year 2026-27 at 384. This index is used to compute the indexed cost of acquisition/improvement for long-term capital gains on eligible assets.

Practical impact: If you're computing capital gains for FY 2026-27 — including in response to a scrutiny or reassessment notice involving capital asset transactions — use 384 as the CII for the year.

How to respond to a scrutiny notice →

The GST Appellate Tribunal (GST Order No. 156/2026, dated 10 July 2026) has introduced a token mechanism allowing appellants to preserve their appeal filing deadline. An appellant who generates a token on or before 31 July 2026 is treated as having complied with the filing due date, provided the actual appeal is completed within 60 days of token generation.

Practical impact: If you have a GST appeal due around this deadline (including appeals arising from DRC-07 demand orders) and are not yet ready to file the complete appeal, generate a token before 31 July 2026 to protect your limitation period, then complete filing within the following 60 days.

How to respond to GST DRC-07 →

CBDT Notification No. 80/2026 (dated 10 July 2026) exempts specified payments — interest, dividend, professional fees, commission and other prescribed receipts — made to 14 categories of eligible IFSC units from TDS, where the recipient claims deduction under Section 147 of the Income-tax Act, 2025. The relief runs for 20 consecutive tax years as opted by the payee, subject to filing Form No. 1(N) and meeting prescribed conditions, and applies retrospectively from 1 April 2026.

Practical impact: Payers to IFSC-unit recipients should confirm the recipient has filed Form 1(N) before applying nil TDS — deducting no tax without a valid Form 1(N) on record can itself trigger a TDS default notice.

Read the IT Act 2025 guide →

The Finance Act, 2026 (effective 1 April 2026) amended the IT Act 2025 in 56 places. These amendments address ambiguities in the original text and introduce new policy measures. Key changes relevant to taxpayers receiving notices:

Penalty & Prosecution Rationalisation:

• Certain offences have been decriminalised — including failure to produce books of account and TDS defaults where the amount does not exceed ₹10 lakh
• Proportionality principle introduced — penalty amounts now calibrated to the severity of default
• Procedural relief provisions added for first-time technical defaults

New Exemptions:

• Foreign companies earning from data centre services in IFSC units exempt from Indian tax — effective 1 April 2026

Reassessment Clarifications:

• Parallel amendments to Section 281 (reassessment) clarify the meaning of "information" that triggers the show-cause process — narrowing arbitrary use

CBDT has also released a user-friendly booklet on IT Act 2025 as amended by Finance Act 2026 — available on incometaxindia.gov.in.

Read the IT Act 2025 guide → | Check your penalty exposure →

GSTN has issued an advisory announcing changes to the APIs of both the e-Invoice and e-Way Bill systems, effective 1 August 2026. Businesses using third-party accounting or ERP software for GST compliance should take note.

What this means:

• Your GST software vendor needs to update API integrations before 1 August 2026 — check with them immediately
• Failure to update may result in e-Invoice generation or e-Way Bill creation failures from 1 August 2026
• If e-Invoices fail to generate, the underlying supply may be treated as non-compliant — triggering ASMT-10 scrutiny notices
• Businesses generating e-Invoices manually via the IRP portal are not affected

Action required: Confirm with your software/ERP provider that their API integration is updated before August 1st.

What to do if you receive a GST ASMT-10 notice →

CBDT Circular No. 4/2026 reaffirms that every communication issued by an Income Tax authority — including notices, show-cause notices, summons, letters, and assessment orders — must carry a Document Identification Number (DIN) on its face. Any communication without a DIN is deemed to have never been issued.

Why this matters when you receive a notice:

• Check the notice for a DIN — it is typically a 20-digit alphanumeric number printed at the top
• Verify the DIN on the Income Tax portal: incometax.gov.in → e-Verify DIN
• If the notice has no DIN, or if the DIN is invalid on verification, the notice is legally void — you can raise this in your response
• This applies to all notice types: Section 268(1), 270(8), 281, 289, and 263(7)

Exception: Only notices issued on the e-Proceedings portal (which auto-generate DINs) and those issued during search/survey operations are exempt from this requirement.

Step-by-step guide to handling IT notices →

The Income Tax Act, 2025 came into force on 1 April 2026, replacing the Income Tax Act, 1961 after 65 years. The new Act restructures all provisions with new section numbering, simplified language, and a tabular/formula-based drafting style.

Key changes affecting notices:

• Section 139(9) (Defective Return) → Now Section 263(7)
• Section 142(1) (Inquiry Before Assessment) → Now Section 268(1)
• Section 143(2) (Scrutiny Notice) → Now Section 270(8)
• Section 148A (Pre-Reassessment SCN) → Now Section 281
• Section 156 (Demand Notice) → Now Section 289
• Section 245 (Refund Adjustment) → Now Section 438

What this means for you: Notices issued from 1 April 2026 will carry the new section numbers. Your response procedures remain the same — only the section references change. All pages on this site have been updated with both old and new section numbers for easy reference.

Read the full IT Act 2025 Guide → | View Section Mapping Table →

Under the new IT Act 2025, the reassessment framework (formerly Section 148A) is now governed by Section 281. The time limits for issuing reassessment notices are:

• 3 years from the end of the relevant assessment year — for all cases
• 5 years from end of relevant AY — where income escaping assessment exceeds ₹50 lakh
• 10 years from end of relevant AY — where the AO has evidence of assets/expenditure not disclosed exceeding ₹50 lakh

The mandatory show-cause procedure before issuing notice u/s 281 continues — the AO must share the "information" with you and give you 7 days to respond before the notice is formally issued.

How to respond to a reassessment notice →

The IT Act 2025 codifies faceless assessment as the default procedure. All communications — notices, show-cause notices, assessment orders — are routed exclusively through the e-Proceedings portal on incometax.gov.in.

What this means for responding to notices:

• Never submit documents physically to the Assessing Officer's office
• All responses must be uploaded on the portal under e-Proceedings → relevant notice type
• Acknowledgement of response is auto-generated — save it
• Personal hearings may be requested via the portal if needed (not automatically available)

Full step-by-step response guide →

The GST Amnesty Scheme under Section 128A, which waived interest and penalties on Section 73 demands (non-fraud cases) for FY 2017-18 to 2019-20, has now closed. The deadline for full tax payment was 31 March 2025 and the application deadline was 30 June 2025 — both have passed.

If you missed the scheme and still have a pending DRC-01 for these years:

• The waiver benefit is no longer available — interest and penalty will apply
• Section 73 demands can still be contested if the tax demand itself is incorrect
• Paying admitted tax before the adjudication order is issued may still result in reduced penalties at the AO's discretion
• Engage a CA immediately if an adjudication hearing has been scheduled

How to respond to GST DRC-01 →

From FY 2022-23 onwards, Input Tax Credit (ITC) claims are validated only against GSTR-2B (system-generated, auto-populated). GSTR-2A is no longer an acceptable basis for ITC claims in case of a mismatch notice.

If you received a GST ASMT-10 notice for ITC mismatch:

• Download your GSTR-2B for the disputed period — this is your primary defence document
• If GSTR-2B shows the ITC, your claim is valid — attach it with your reply
• If supplier filed late and didn't appear in your GSTR-2B — the ITC is not claimable for that period (must be claimed in the month supplier files)
• Timing differences between GSTR-2A and GSTR-2B are a common source of ASMT-10 notices

How to respond to GST ASMT-10 →

GST authorities have intensified cancellation proceedings under Rule 22 where a registered person has not filed returns for 6 or more consecutive tax periods. A REG-17 notice is issued with a 7-day response window.

Critical: Cancellation blocks ITC for your customers. If your GSTIN is cancelled, every business that purchased from you and claimed your GST as ITC faces a notice. This makes timely response to REG-17 non-negotiable.

• File ALL pending GSTR-3B returns before submitting your reply — even if you have to pay late fees
• Attach proof of all return filings with your revocation application
• Revocation must be applied within 30 days of cancellation order

How to respond to GST REG-17 →

The IT Act 2025 restructures penalty provisions. Key changes relevant to notices:

• Failure to comply with notice u/s 268(1) [old 142(1)] — Penalty of ₹10,000 per default (unchanged)
• Concealment of income — Penalty range remains 100%–300% of tax on undisclosed income; the new Act clarifies "misreporting" vs "under-reporting" with separate penalty rates
• Misreporting of income — 200% of tax (same as before)
• Under-reporting of income — 50% of tax on under-reported income
• Failure to file return — Late fee u/s 234F continues; ₹1,000 if total income ≤ ₹5 lakh, ₹5,000 otherwise

Calculate your penalty →

The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) are now the primary data sources used by the Income Tax Department for scrutiny case selection. Mismatches between your ITR and AIS/TIS trigger automated notices.

Before responding to any scrutiny notice (Sec 270(8) / old 143(2)):

• Download your AIS and TIS from the Income Tax e-filing portal (Services → Annual Information Statement) and compare each entry against your filed ITR before responding

Full step-by-step response guide →