Income Tax Updates

DRAFT RULES | CBDT

Draft Income Tax Rules 2026 — Stakeholder Feedback Period Closed

The CBDT released the Draft Income Tax Rules, 2026 on 7 February 2026, with the public consultation window closing on 22 February. The draft trims the existing 500+ rules down to 333 rules. Key proposed changes include updated exemption limits for salaried allowances: children's education and hostel allowances, car perquisites, and meal vouchers (now tax-free up to Rs. 200/day under the new regime). Final rules are expected shortly before the 1 April 2026 go-live date.

Source: ClearTax — Draft Income Tax Rules 2026

FINANCE BILL 2026 | DIRECT TAX REFORMS

Budget 2026 Direct Tax Package: TCS Cuts, MAT Finalised, Share Buyback Recast, Staggered ITR Deadlines

The Finance Bill 2026 (tabled 1 February 2026) proposes a comprehensive set of direct tax changes effective 1 April 2026. TCS rates are rationalised: LRS remittances for education/medical reduced to 2% (from 5%); overseas tour packages to 2% (from up to 20%). The revised return filing period is extended from 9 months to 12 months from end of assessment year, and the revised return deadline extended from 31 December to 31 March (with nominal fee). Staggered ITR deadlines are introduced: ITR-1/ITR-2 filers by 31 July; non-audit business/profession/partner cases by 31 August.

MAT is proposed to be made the final tax from 1 April 2026 — with no further MAT credit accumulation — and the MAT rate is simultaneously reduced from 15% to 14%. Existing brought-forward MAT credit remains available for set-off at 1/4th of new-regime tax liability. Share buybacks will henceforth be taxed as capital gains in the hands of shareholders (not as deemed dividend). Safe harbour threshold for IT services raised to Rs. 2,000 crore with automated approvals — up from Rs. 300 crore.

Sources: EY — Budget 2026-27 Highlights (PDF)  |  TaxGuru — Budget 2026 Direct Tax  |  PIB — Budget 2026-27 (Official)

NEW TAX ACT | STRUCTURAL REFORM

Income Tax Act 2025: Countdown to 1 April 2026 — What Every Taxpayer Must Know

The Income Tax Act, 2025 replaces the 60-year-old Act of 1961 from 1 April 2026. Sections reduced from 819 to 536; chapters from 47 to 23. The law introduces a unified 'Tax Year' concept replacing the FY/AY split — Tax Year 2026-27 covers 1 April 2026 to 31 March 2027. TDS provisions are consolidated under Section 393. It is a revenue-neutral structural reform, not a rate change. Employers and payroll teams must update systems for new ITR forms and TDS formats.

Sources: TaxGuru — Concept of Tax Year in IT Act 2025  |  PIB — IT Act 2025 (Official)  |  EZTax — New Rules from 1 April 2026

BUDGET 2026 | EXEMPTIONS & DISCLOSURE SCHEME

Key Exemptions and FAST-DS 2026 Amnesty Introduced in Union Budget

Budget 2026 introduced targeted relief. Interest income awarded by Motor Accident Claims Tribunals (MACT) is now fully exempt for individuals and legal heirs with no TDS. Sovereign Gold Bond (SGB) capital gains exemption applies only on original-issue SGBs held to maturity — secondary market purchases no longer qualify from 1 April 2026. The Foreign Assets of Small Taxpayers Disclosure Scheme (FAST-DS 2026) offers a time-bound amnesty for taxpayers who inadvertently missed reporting foreign income or assets. Residents buying property from a non-resident will no longer need TAN for TDS — PAN-based deduction permitted (effective 1 October 2026).

Sources: KPMG — India Budget 2026 Personal Tax  |  Income Tax Dept — Budget 2026 FAQs (Official PDF)

DRAFT IT FORMS | ICAI UPDATE

Draft IT Forms Propose New Disclosures; ICAI Mandates UDIN Validation from 1 April 2026

New draft income tax forms propose mandatory disclosure of the tenant-landlord relationship (Draft Form 124) for HRA claims, and revised PAN quoting requirements for property transactions. ICAI has announced that UDIN field-level validation based on five parameters including PAN will be mandatory for Section 44AB tax audits from 1 April 2026, with ceiling limits on UDIN generation also introduced to prevent misuse.

Sources: CAClub India — ICAI UDIN Changes

GST Updates

GST COLLECTIONS | DATA RELEASED 1 MARCH 2026

February 2026 GST Collections: Rs. 1,83,609 Crore — Up 8.1% Year-on-Year

The GST Network released February 2026 collection data on 1 March 2026. Gross GST collections stand at Rs. 1,83,609 crore — an 8.1% YoY rise over February 2025's Rs. 1,69,779 crore. Breakdown: CGST Rs. 37,473 crore | SGST Rs. 45,900 crore | IGST Rs. 1,00,236 crore. Domestic transactions grew 5.3% YoY while imports surged 17.2%. Total refunds processed: Rs. 22,595 crore. The continued 8%+ growth trajectory reinforces the robustness of India's GST compliance base heading into FY 2026-27.

Source: ClearTax — GST Collections February 2026 (State-wise Break-up)

GSTN ADVISORY | GSTR-3B

Interest Computation in GSTR-3B Revised; Flexible ITC Set-Off Order Unlocked

GSTN issued an advisory revising interest computation in GSTR-3B Table 5.1 to allow deduction of the minimum cash balance in the Electronic Cash Ledger from the due date until payment, aligning with CGST Rules. From the February 2026 tax period, taxpayers can utilise CGST or SGST ITC for IGST liability in any order after exhausting IGST Credit — providing meaningful cash flow flexibility. GSTN has also merged the 'Additional Notices & Orders' tab into the existing 'Notices & Orders' tab on the portal.

Sources: SAG Infotech — GSTN Latest Advisories  |  TaxGuru — Week Ending 22 February 2026

FINANCE BILL 2026 | GST AMENDMENTS

Budget 2026 GST Law Changes: Post-Sale Discounts, Provisional Refunds and Appellate Fix

Finance Bill 2026 proposes targeted GST amendments (most effective from a date to be notified via State coordination). Businesses will no longer need a pre-existing agreement to claim GST benefits on post-sale discounts (Sections 15 & 34 amended). Taxpayers claiming refunds due to an inverted duty structure will now be eligible for provisional refunds while the final refund is processed (Section 54(6) amended). The minimum refund threshold for export refunds with payment of tax is removed entirely (Section 54(14) amended). An interim appellate mechanism for advance rulings is created effective 1 April 2026 via insertion of Section 101A(1A).

Sources: ClearTax — Budget 2026 GST Compliance Changes  |  CAClub India — Simplified GST Changes Finance Bill 2026

GSTAT | HISTORIC MILESTONE

GST Appellate Tribunal Formally Commences Operations

The GST Appellate Tribunal (GSTAT) has formally commenced operations — a landmark for India's indirect tax dispute resolution. The Tribunal reported 1,029 cases filed online with the first matter already disposed of. Separately, the government has notified 30 June 2026 as the final deadline for filing appeals before GSTAT for all orders communicated to appellants before 1 April 2026. For orders on or after 1 April 2026, the standard three-month appeal window applies.

Source: TaxGuru — Week Ending 22 February 2026

SUPREME COURT | LANDMARK RULING

SC: GST Refund Payable Only if Tax Incidence Not Passed On — Torrent Power

The Supreme Court, in Union of India vs. Torrent Power Limited (10 February 2026), held that Section 54 of the CGST Act is a complete statutory code governing refunds. A refund is payable to the applicant only if the incidence of tax has NOT been passed on to any other person. Since Torrent Power had passed the tax to consumers, the Rs. 19.28 crore refund must be transferred to the Consumer Welfare Fund. Courts cannot invent new refund modalities not contemplated by statute.

Sources: TaxGuru — Week Ending 22 February 2026  |  JurisHour — GST Flashback 08-14 February 2026

HIGH COURTS | KEY RULINGS

HC Rulings: SCN Service Flaws, IBC Moratorium and Bona Fide ITC Claims

Madurai Bench of Madras HC quashed a GST assessment order where the show cause notice was recorded as received two days before its date of issuance. Delhi HC restored a GST registration cancelled retrospectively where the intent for cancellation was not stated in the SCN. Jharkhand HC ruled no additional pre-deposit is required for GSTAT appeals when the first appellate stage deposit already exceeds 20%. Tripura HC held that a bona fide purchaser cannot be denied ITC solely because the seller failed to deposit collected tax.

Source: JurisHour — GST Flashback 15-21 February 2026

AAR RULINGS | PRODUCT CLASSIFICATION

AAR: Shaving Foam vs. Cream; Medical PPE at 18%; Arbitrators Taxed at 18%

Three notable Advance Rulings this week: West Bengal AAR held that shaving foam (18% GST) and shaving cream (5% GST) are distinct products for classification purposes. The same bench ruled that EVA gloves, sterile aprons, OT shoe covers, and medical equipment covers attract 18% GST. West Bengal AAR also held that fees paid to arbitrators attract 18% GST, though the cost of arbitration awarded by a tribunal does not attract GST.

Source: JurisHour — GST Flashback 15-21 February 2026

MCA / Company Law

GENERAL CIRCULAR NO. 01/2026 | DATED 24 FEBRUARY 2026

MCA Launches CCFS-2026: 90% Waiver on Late ROC Filing Fees + Prosecution Immunity

The Ministry of Corporate Affairs issued General Circular No. 01/2026 on 24 February 2026 introducing the Companies Compliance Facilitation Scheme, 2026 (CCFS-2026) — a one-time amnesty for companies with pending statutory filings. Under normal provisions, delayed annual returns and financial statements attract Rs. 100 per day additional fee with no upper cap, creating massive burdens for MSMEs, OPCs, and startups.

CCFS-2026 runs strictly from 15 April to 15 July 2026 (non-extendable). Three relief options:

▸	Option 1 — Clear Pending Filings: Pay only 10% of accumulated late fees and file all overdue e-forms (MGT-7, AOC-4, ADT-1, FC-3, FC-4 and others). Effective 90% waiver.
▸	Option 2 — Dormant Company Status: Apply via Form MSC-1 at 50% of normal filing fees to stay registered with minimal compliance obligations.
▸	Option 3 — Voluntary Strike-Off: Apply for closure via Form STK-2 at just 25% of normal filing fees.

Prosecution Immunity: Companies that complete filings before issuance of an adjudication notice, or within 30 days of such notice, receive full immunity from penalty under Sections 92 and 137 of the Companies Act. After 15 July 2026, Registrars of Companies will initiate prosecution against all remaining defaulters.

Sources: TaxGuru — CCFS-2026 Complete Analysis  |  CAClub India — CCFS-2026 Launch  |  EFileTax — CCFS-2026 Guide

RBI & Financial Sector

RBI DIRECTIONS | CAPITAL MARKET BROKERS

RBI Tightens Bank Credit Norms for Stock Brokers — Effective 1 April 2026

The RBI issued the Commercial Banks Credit Facilities Amendment Directions, 2026, effective 1 April 2026, establishing a dedicated framework for lending to Capital Market Intermediaries (brokers, clearing members, custodians, market makers). Key changes: all credit facilities to brokers must be fully secured; mandatory minimum haircuts on equity collateral; strict restrictions on using bank funds for proprietary trading.

Source: INDmoney — RBI 2026 Credit Norms for Brokers

RBI | BANKING LAW AMENDMENTS

RBI Amends CRR/SLR Directions Following Banking Laws Amendment Act 2025

Following enactment of the Banking Laws (Amendment) Act, 2025 and publication of Banking Regulation Rules in January 2026, the RBI issued amended CRR/SLR Directions for both commercial banks and rural cooperative banks on 14 February 2026 with immediate effect. The amendments update definitions to incorporate new categories of development financial institutions (NABFID and SIDBI under revised nomenclature) as defined under the RBI Act, 1934.

Sources: Banking Finance — RBI Circulars February 2026  |  TaxGuru — Week Ending 22 February 2026

INDIA-FRANCE | DTAA PROTOCOL

India-France Tax Treaty Amended: MFN Clause Deleted; Capital Gains Rules Revised

The Governments of India and France signed an Amending Protocol to the Double Taxation Avoidance Convention (DTAC), deleting the Most Favoured Nation (MFN) clause and revising capital gains and dividend provisions. This aligns India's treaty network with its evolving bilateral policy following Supreme Court rulings on MFN clause interpretation. Taxpayers with Indo-French cross-border structures, equity holdings, or royalty arrangements should urgently review their positions.

Source: TaxGuru — Week Ending 22 February 2026 (Income Tax Section)

Labour Codes & Payroll Compliance

LABOUR CODES | ACTIVE SINCE NOVEMBER 2025

Four Labour Codes Now Active: Immediate Payroll Restructuring Required Before 1 April 2026

The four national Labour Codes have been active since November 2025, creating a twin transformation deadline with the IT Act 2025. Under the Code on Wages, Basic Pay (including Dearness Allowance) must now constitute at least 50% of total CTC. This cascades into higher EPF contributions, revised ESI eligibility thresholds, increased gratuity and overtime liabilities, and higher leave encashment payouts. Employers relying on high-allowance, low-basic structures must immediately audit and restructure. Payroll systems must also be updated for the new TDS Section 393 format, new ITR forms, and staggered due dates from Finance Bill 2026.

Sources: Tribune India — Payroll Compliance Changes 2026  |  India Briefing — March 2026 Compliance Calendar

KEY COMPLIANCE DEADLINES — MARCH & APRIL 2026

7 MARCH 2026 TDS/TCS payment for February 2026 transactions	10 MARCH 2026 GSTR-7 & GSTR-8 for February 2026
11 MARCH 2026 GSTR-1 (monthly filers) for February 2026	15 MARCH 2026 4th Advance Tax instalment — 100% of total liability for FY 2025-26
20 MARCH 2026 GSTR-3B (monthly) for February 2026	31 MARCH 2026 Scrutiny notice responses  |  LUT filing FY 2026-27  |  CMP-02 Composition Scheme  |  ITR Updated Return AY 2022-23 expires permanently
15 APRIL 2026 CCFS-2026 scheme opens — 90% ROC filing fee waiver window begins	1 APRIL 2026 IT Act 2025 & IT Rules 2026 effective  |  Revised TCS rates  |  MAT at 14%  |  RBI broker credit norms effective

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This bulletin is compiled for informational purposes only and does not constitute legal, tax, or financial advice.
Verify all items with primary sources before acting. Consult your CA / legal advisor.