Income Tax Updates

ACT OF PARLIAMENT  |  MINISTRY OF LAW & JUSTICE  |  30 MARCH 2026

Finance Act 2026 Notified — Income Tax Rates and Surcharge Structure for AY 2026-27 Now Law

The Finance Act, 2026 (Act No. 4 of 2026) received Presidential assent on 30 March 2026 and was published in the Gazette of India on the same date. Most provisions — Sections 2 to 129 and Sections 152 and 156 — came into force on 1 April 2026. The Act gives formal legal effect to Budget 2026 proposals and prescribes income tax rates applicable for Assessment Year 2026-27 under the Income Tax Act, 1961, as well as under the new Income Tax Act, 2025 framework. Importantly, the Lok Sabha passed the Finance Bill on 25 March 2026 with 32 amendments; the Rajya Sabha returned it the same day, completing the legislative cycle within hours of the financial year-end.

Key provisions of Finance Act 2026: Under the new tax regime (Section 115BAC), the basic exemption threshold is ₹4 lakh; for individuals under the old regime it remains ₹2.5 lakh (₹3 lakh for senior citizens; ₹5 lakh for super senior citizens). The 4% Health and Education Cess continues unchanged. A new surcharge of 12% is introduced on capital gains arising from share buybacks — previously these were taxed as dividend in shareholders' hands post October 2024, and the surcharge now standardises treatment. The Act also contains parallel rate schedules under Part I-A (for IT Act 1961, applicable to AY 2026-27 for income of FY 2025-26) and Part I-B (for IT Act 2025, applicable from Tax Year 2026-27 onwards). Total Budget expenditure for FY 2026-27: ₹53.47 lakh crore; gross tax revenue target: ₹44.04 lakh crore.

Sources: CA Club India — Finance Act 2026 Notified  |  TeamLease RegTech — Finance Act 2026

NOTIFICATION  |  CBDT / IT ACT 2025  |  EFFECTIVE 1 APRIL 2026

Four New IT Forms Replace Eight Old Ones — Form 97, 98, 104 and 112 Now Operative

CBDT has introduced four new simplified forms under the Income Tax Act, 2025 and Income Tax Rules, 2026, effective 1 April 2026. Form 97 replaces Form 60, which was the declaration filed by persons without PAN for specified transactions under Rule 159 of IT Rules 2026 (previously Rule 114B). Form 98 replaces Form 61, which was the quarterly log filed by the recipient of declarations. These two forms together are expected to reduce annual filings by approximately 80–85% from the current 12.5 crore, as the new system uses standardised pre-fill and technology-driven processes. Form 104 replaces Form 10A, the registration application for trusts and institutions under Sections 12A and 80G — the new form introduces auto-fill capability, requires fewer supporting documents, and promises faster approval timelines. Form 112 replaces both Form 10B and Form 10BB, which were the audit report forms for charitable and religious trusts (Form 10B) and for approved institutions (Form 10BB) — these are now consolidated into a single form.

These changes are part of the broader rationalisation under IT Rules 2026, which reduced the total number of income tax forms from 399 under IT Rules 1962 to 190 under IT Rules 2026. Practitioners filing NPO audit reports, trust registrations, or handling non-PAN declarations must transition to the new form numbers immediately — old forms are no longer valid for Tax Year 2026-27 onwards.

Sources: CA Club India — Forms 97 & 98  |  CA Club India — Form 112  |  CA Club India — Form 104

TOOL LAUNCH  |  INCOME TAX DEPARTMENT  |  APRIL 2026

IT Department Launches Rule Comparison and Form Mapping Utilities on incometaxindia.gov.in

The Income Tax Department has released two new digital transition tools on its official portal, incometaxindia.gov.in, to help taxpayers and practitioners navigate the shift from the Income Tax Act, 1961 to the Income Tax Act, 2025. The Rule Comparison Utility maps every provision of the Income Tax Rules, 1962 to its exact counterpart in the Income Tax Rules, 2026 on a section-by-section basis, flagging where rules have been renumbered, consolidated, or substantively changed. The Forms Mapping Tool provides a complete cross-reference of every old form to its new equivalent — for instance, Form 16 (TDS salary certificate) → Form 130; Form 26AS (Annual Information Statement) → Form 168; Form 15G/15H → Form 121; Form 10A → Form 104; Form 10B/10BB → Form 112; Form 3CA-3CB-3CD → Form 26; Form 12BB → Form 124; ITR-U → ITR-UN.

These utilities are critical for HR departments, payroll processors, tax practitioners, and ERP administrators who must update their internal systems, form references, and TDS section codes before processing the first payroll and vendor payments of Tax Year 2026-27. Any TDS certificate or return filed under old form numbers for the new tax year will be technically non-compliant. The Department has also separately released an "Navigator of IT Rules 2026" document — a plain-language guide for professionals mapping old rules to new ones — available for download on the portal.

Source: CA Club India — Income Tax Dept Launches New Utilities for Rules 1962 vs Rules 2026

OPERATIONAL CHANGE  |  IT ACT 2025  |  EFFECTIVE 1 APRIL 2026

Every TDS Section Number Has Changed — Update Your ERP Before the First Payment of FY 2026-27

The Income Tax Act, 2025 has restructured all TDS and TCS provisions under three broad sections replacing the dozens of numbered sections under IT Act 1961. TDS on salary (previously Section 192) now falls under Section 392 of IT Act 2025. TDS on all non-salary payments to residents and non-residents moves to Sections 393 and 394. The quarterly TDS return for salary, previously filed on Form 24Q, is now filed on Form 138. Every TDS certificate, return, and challan reference must use the new section numbers from 1 April 2026 — using old section codes will trigger validation errors in the TDS filing system and can result in disallowance of the related expense under the equivalent of Section 40(a)(ia), which is a direct P&L risk for businesses. Additionally, manpower supply contracts are now explicitly covered under the new equivalent of the former Section 194C, with TDS at 1% (individuals/HUFs) or 2% (others). If your company was not deducting TDS on manpower service invoices, this must be corrected from the first payment of FY 2026-27.

Two other significant practical changes: Buyers purchasing immovable property from a Non-Resident Indian (NRI) can now deduct TDS using their own PAN-based challan, eliminating the earlier requirement to obtain a TAN registration — a major compliance simplification for property buyers. On TCS, Budget 2026 has rationalised several rates from 1 April 2026: overseas tour packages → flat 2%; LRS remittances for education and medical purposes → 2% (reduced); alcoholic beverages → 2%. The Government has also introduced an automated system for processing NIL/Lower TDS certificates through the income tax portal, significantly reducing processing time compared to the earlier manual route with Assessing Officers. All TDS deductors — companies, firms, and individuals — must update their ERP systems, payroll software, and vendor master data before processing the first cycle of FY 2026-27.

Sources: ClearTax — TDS & TCS Changes from 1 April 2026  |  CA Club India — TDS & TCS Rate Chart FY 2026-27

MCA Updates

COMPLIANCE ALERT  |  MCA  |  DUE DATE: 30 APRIL 2026

MSME Form-1 Due 30 April 2026 — Half-Yearly Return for Outstanding Payments to MSME Suppliers

All "Specified Companies" — companies that have received goods or services from Micro or Small Enterprises and whose payments to MSME suppliers are outstanding beyond 45 days from the date of acceptance (or deemed acceptance) — must file MSME Form-1 with the Registrar of Companies (ROC) for the half-year period October 2025 to March 2026 by 30 April 2026. This is a mandatory half-yearly return under the Specified Companies (Furnishing of Information about Payment to Micro and Small Enterprise Suppliers) Order, 2019, issued under Section 405 of the Companies Act, 2013. The form captures the name and PAN of each MSME supplier to whom payment is overdue, the outstanding amount, and the reasons for delay.

This filing applies to all companies — public, private, OPC — regardless of size. However, nil filing is not required: companies with no outstanding dues exceeding 45 days to any MSME supplier as on 31 March 2026 are exempt from filing for this period. Form-1 is filed on the MCA V3 portal (mca.gov.in) with mandatory DSC from an authorised director. Non-compliance attracts a penalty of ₹20,000 on the company and on every officer in default, with an additional ₹1,000 per day of continuing default up to a maximum of ₹3 lakh, under Section 405(4) of the Companies Act. Notably, unpaid dues to MSME suppliers beyond 45 days also trigger disallowance of the related expense under Section 43B(h) of the Income Tax Act — so this is both a corporate law and a direct tax compliance issue.

Sources: SAGInfotech — MSME Form-1 Filing Guide  |  ClearTax — Form MSME-1 Due Dates

COMPLIANCE ALERT  |  MCA  |  DUE DATE: 30 APRIL 2026

Nidhi Companies: File NDH-3 Half-Yearly Return by 30 April 2026 for Oct 2025–Mar 2026

The Ministry of Corporate Affairs has issued a reminder to all Nidhi Companies to file Form NDH-3 — the mandatory half-yearly return under Rule 21 of the Nidhi Rules, 2014 read with Section 406 of the Companies Act, 2013 — for the period October 2025 to March 2026. The filing deadline is 30 April 2026, which is 30 days from the conclusion of the half-year ending 31 March 2026. Form NDH-3 captures details of members and deposits, borrowings, loans outstanding, fixed deposits, and branch information, and must be certified by a practising Company Secretary, Chartered Accountant, or Cost Accountant. The form is filed on the MCA V3 portal with mandatory DSC.

Nidhi Companies that fail to file within the due date attract additional fees under Section 403 of the Companies Act — late fees escalate from 2x to 12x the normal fee depending on the degree of delay. Defaulting companies also risk losing the regulatory benefits available to Nidhi entities and face potential cancellation of their Nidhi status in egregious cases. The MCA has separately reminded Nidhi Companies that the Companies Compliance Facilitation Scheme 2026 (CCFS-2026) — which allows pending annual filings at just 10% of additional fees — opens on 15 April 2026 and closes 15 July 2026. Companies with pending backlog of annual filings (beyond just NDH-3) should use this window proactively.

Sources: CA Club India — MCA Alerts Nidhi Companies on NDH-3  |  MMJC — FAQs on CCFS-2026

Recent Case Laws — January to March 2026

Four landmark Supreme Court and High Court rulings you need to know — two on GST, two on Income Tax.

GST  |  SUPREME COURT  |  CIVIL APPEAL NO. 170 OF 2026  |  9 JANUARY 2026

SC: GST Appeal Pre-Deposit Refund is Governed by Section 107(6) — Not Section 54's Limitation Period

State of Jharkhand & Ors. v. M/s BLA Infrastructure Pvt. Ltd. [Citation: 2026 LLBiz SC 5] — The Supreme Court settled an important procedural dispute in GST litigation. BLA Infrastructure had made a mandatory 10% pre-deposit under Section 107(6) of the Jharkhand GST Act to maintain its appeal against a demand of ₹16.9 lakh. It succeeded in appeal and claimed a refund. The State rejected the refund arguing it was time-barred under Section 54 (the general GST refund provision with its two-year limitation period). The Jharkhand High Court directed the refund using Section 54. The State challenged this in the Supreme Court — not to deny the refund, but to correct the legal route.

The Supreme Court agreed with the State on the point of law and set aside the HC's Section 54 analysis as "unnecessary." It held that the refund of a statutory pre-deposit made for maintaining a GST appeal is governed exclusively by Section 107(6) read with Section 115 of the GST Act — not Section 54. Crucially, the SC directed the refund to be paid to BLA Infrastructure with interest within four weeks. The practical takeaway for taxpayers: once you succeed in a GST appeal, your pre-deposit refund cannot be blocked by the tax department citing Section 54's limitation period. The correct refund route is the appellate provision itself.

Sources: TaxGuru — GST Pre-Deposit Refund Mandatory After Appeal Success  |  LiveLaw Biz — SC Ruling

GST  |  TRIPURA HIGH COURT  |  8 JANUARY 2026

HC: ITC Cannot Be Reversed Merely Because Supplier Failed to Pay GST — Fraud Must Be Proved

M/s Gopal Textiles v. State of Tripura — The Tripura High Court joined a growing line of High Courts across the country in holding that a bona fide purchasing dealer cannot be penalised for the supplier's failure to remit GST to the government. The Court upheld the constitutional validity of Section 16(2)(c) of the CGST Act, which conditions ITC availability on actual tax payment by the supplier, but applied a doctrine of "reading down" based on the Supreme Court's jurisprudence: Section 16(2)(c) cannot be interpreted to deny ITC to a recipient where the transactions are genuine, properly documented, and there is no allegation of fraud, collusion, or connivance. The Court set aside the demand for reversal of ₹1.11 crore in ITC and held that the department must proceed against the defaulting supplier first.

This ruling is consistent with the settled judicial trend across the Gauhati, Calcutta, Kerala, and Delhi High Courts — all of which have consistently held that ITC is a vested statutory right that cannot be mechanically reversed simply because the supplier's tax does not reflect in GSTR-2B. The authorities must establish that the recipient was a knowing participant in the supplier's default — i.e., fraud or collusion must be affirmatively proved. The Calcutta High Court similarly ruled in Pushpa Devi Jain v. State of West Bengal (February 2026) that where the petitioner held valid tax invoices and bank statements showing GST payment, ITC reversal orders were unsustainable in the absence of any fraud allegation.

Sources: TaxO — Tripura HC Ruling (8 Jan 2026)  |  TaxGuru — Calcutta HC: ITC Reversal Set Aside

INCOME TAX  |  SUPREME COURT  |  SLP DIARY NO. 8153/2026  |  1 MARCH 2026

SC Dismisses Revenue Appeal: Reassessment Based on Decade-Old Surveys Without Fresh Year-Specific Material Is Invalid

ACIT v. UK Grid Solutions Limited [Citation: 2026 TAXSCAN (SC) 171] — The Supreme Court dismissed the Income Tax Department's Special Leave Petition against the Delhi High Court's ruling in favour of UK Grid Solutions Limited, a GE Group entity. The Department had issued reassessment notices for Assessment Years 2013-14 and 2014-15 based on surveys conducted in 2007 and 2019 on GE Group companies in India, assuming that UK Grid's business model had remained unchanged across all those years and therefore constituted a Permanent Establishment (PE) in India. The Delhi High Court (February 2025) struck down both sets of reassessment notices, holding that the Assessing Officer had merely extrapolated stale survey findings without any fresh year-specific tangible material and without independently evaluating the facts of each assessment year.

The Supreme Court bench of Justices J.B. Pardiwala and K.V. Viswanathan dismissed the Revenue's SLP, noting a gross delay of 267 days in filing the petition (not satisfactorily explained) and finding no merit to interfere with the High Court's order. The bench clarified that the underlying legal question remains open for future adjudication. The key principle emerging from the Delhi HC ruling — upheld by the SC — is that each assessment year must be independently evaluated. A PE determination is a fact-specific inquiry and cannot be presumed from findings in respect of other years or other entities. Reassessment proceedings launched without fresh tangible material specific to the year under consideration are unsustainable.

Source: Taxscan — SC Dismisses Revenue SLP: UK Grid Solutions (1 Mar 2026)

INCOME TAX  |  SUPREME COURT  |  SLP NO. 8091/2026  |  16 MARCH 2026

SC Upholds Quashing of BPCL Reassessment: No Failure to Disclose Material Facts Means No Valid Reopening

ACIT v. Bharat Petroleum Corporation Ltd. [Citation: 2026 TAXSCAN (SC) 158] — The Supreme Court declined to interfere with the Bombay High Court's ruling quashing income tax reassessment proceedings initiated against Bharat Petroleum Corporation Ltd. (BPCL) for Assessment Years 2013-14 and 2014-15. The Assessing Officer had issued reassessment notices under Section 148 alleging that BPCL had wrongly claimed exemption under Section 10(34) in respect of dividend income received through a trust structure, and had incorrectly claimed deductions under Section 32AC for AY 2014-15. The Bombay High Court — a Division Bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla — quashed both sets of notices, holding that BPCL had fully disclosed all material facts necessary for assessment in its original returns. There was no failure to disclose and no tangible material before the AO to form a valid reason to believe that income had escaped assessment.

The Supreme Court bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe dismissed the Revenue's SLP, declining to interfere with the Bombay HC ruling. The key principle: reassessment is not permissible where the assessee has made full and true disclosure of all material facts. The Revenue cannot reopen a completed assessment merely because it has formed a different view on facts that were already before the AO. This ruling reaffirms the foundational limit on the reassessment power under Section 147/148 — a provision that has been the subject of significant judicial scrutiny and statutory amendment in recent years.

Sources: Taxscan — SC Upholds BPCL Reassessment Quashing (16 Mar 2026)  |  LiveLaw Biz — Direct Tax Monthly Digest March 2026

KEY COMPLIANCE DEADLINES — APRIL TO AUGUST 2026

7 APR 2026 — TODAY TDS/TCS deposit for March 2026 deductions · Banks: full NOP-INR forex position compliance deadline (RBI circular 27 Mar 2026)	15 APR 2026 CCFS-2026 opens — file pending ROC annual returns at 10% of additional fee. Window closes 15 July 2026.
30 APR 2026 MSME Form-1 — half-yearly return for Oct 2025–Mar 2026 (specified companies with MSME dues >45 days) · NDH-3 — Nidhi Companies half-yearly return	15 JUL 2026 CCFS-2026 CLOSES Last day of Companies Compliance Facilitation Scheme 2026. After this date, full additional fees and risk of prosecution apply.
31 JUL 2026 ITR-1 & ITR-2 due date for AY 2026-27 — non-audit individuals and HUFs · DIR-3 KYC for all active DINs	31 AUG 2026 ITR-3 & ITR-4 due date for AY 2026-27 — non-audit business and professionals. New extended date from Budget 2026.
31 OCT 2026 ITR filing due date for tax audit cases (companies and audit-required entities) for AY 2026-27	31 MAR 2027 Revised return deadline for AY 2026-27 (extended from 31 Dec under Budget 2026) · Updated return window: 48 months from end of AY

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