PAN Reporting Changes in 2026 Affecting Real Estate, Jewellery and Cash Payments

New PAN Reporting Rules 2026 for Property, Jewellery & Cash Transactions

The Central Board of Direct Taxes (CBDT) has issued the Draft Income-Tax Rules, 2026 to facilitate implementation of the Income-Tax Act, 2025, which will come into force from 1 April 2026.

Among the key proposed changes is a significant revision in the rules governing the mandatory quoting and use of Permanent Account Number (PAN) in various financial transactions.

The objective is twofold — simplify compliance for regular financial dealings while tightening reporting requirements for high-value and trackable transactions.

🧠 Why Are PAN Requirements Being Modified?

Under the existing Income-Tax Rules, 1962, PAN quoting was required for numerous transactions, often even at relatively modest monetary limits. This created additional compliance requirements for ordinary taxpayers.

The draft rules aim to rationalise this framework by:

✔ Increasing the threshold limits for PAN quoting
✔ Removing PAN requirements for small, routine transactions
✔ Concentrating on high-value and reportable dealings
✔ Integrating with the data-driven compliance system under the new Act

These reforms form part of the broader simplification exercise under the Income-Tax Act, 2025. Once finalised and notified (expected before 1 April 2026), the revised rules will take effect from that date.

📊 Major Changes in PAN Quoting Requirements

✅ 1️⃣ Cash Deposits and Withdrawals

Existing Rule:
PAN is required if cash deposits exceed ₹50,000 in a single day with a bank or cooperative bank.

Proposed Rule:
PAN will be required only where total cash deposits or withdrawals during a financial year aggregate to ₹10 lakh or more across one or more bank accounts.

👉 This substantially reduces compliance for small and routine banking transactions.

✅ 2️⃣ Purchase of Motor Vehicles

Existing Rule:
PAN is mandatory for purchase of four-wheelers irrespective of value (generally not required for two-wheelers).

Proposed Rule:
PAN will be required only if the vehicle value exceeds ₹5 lakh, covering both cars and two-wheelers.

👉 This relaxes compliance for lower-value vehicle purchases.

✅ 3️⃣ Immovable Property Transactions

Existing Rule:
PAN is required for purchase, sale, gift, or joint development of property valued above ₹10 lakh.

Proposed Rule:
The threshold is proposed to be increased to ₹20 lakh.

👉 Smaller property transactions will no longer trigger PAN quoting obligations.

✅ 4️⃣ Hotel, Event and Lifestyle Expenditure

Existing Rule:
PAN is required where hotel or restaurant payments exceed ₹50,000, including banquet halls and event management services.

Proposed Rule:
The threshold is increased to ₹1 lakh for payments made to hotels, restaurants, banquet halls, convention centres, and event organisers.

👉 Many routine lifestyle and event payments will no longer require PAN quoting.

✅ 5️⃣ Insurance Relationships

Existing Rule:
PAN is required where annual insurance premium exceeds ₹50,000.

Proposed Rule:
PAN will be mandatory for any account-based relationship with an insurance company, irrespective of premium amount.

👉 This widens the reporting scope for insurance-related transactions.

⭐ Transactions Where PAN Remains Compulsory

The draft rules do not relax PAN requirements for tax-sensitive or high-value activities, including:

  • Filing income tax returns

  • Significant investments

  • Corporate and business compliance

  • Statutory reporting obligations

PAN continues to remain a central identifier in the Indian tax framework.

📌 Timeline for Implementation

The Draft Income-Tax Rules, 2026 were placed in the public domain for stakeholder feedback until 22 February 2026.

The Government is expected to finalise and notify the rules before 1 April 2026, coinciding with the enforcement of the Income-Tax Act, 2025.

This interim period allows taxpayers, professionals, and businesses to examine the proposed changes and prepare accordingly.

🧾 Why These Changes Are Significant

🌟 Reduced Compliance Burden

Higher thresholds mean fewer transactions will require PAN quoting, easing paperwork for common citizens.

📊 Targeted Data Collection

By focusing on larger financial transactions, the tax system can collect more meaningful and relevant information.

💼 Improved Ease of Doing Business

Streamlined PAN requirements reduce procedural friction in everyday financial dealings.

📌 Important Note

The above revisions are currently in draft form and have not yet been officially notified. They are subject to stakeholder feedback and final approval before becoming legally enforceable.

GST and Income Tax Checklist: 20 Key Compliances Before 31 March 2026

GST & Income Tax Year-End Compliance Guide

With the financial year 2025–26 drawing to a close, 31st March 2026 becomes a critical deadline for businesses, professionals, exporters, and salaried taxpayers.

Several tax planning measures, compliance requirements, and strategic decisions must be finalised before the year ends. Failure to act within the prescribed timelines may result in additional tax burden, penalties, interest costs, or loss of eligible benefits.

Below is a comprehensive checklist to help you stay compliant and tax-efficient before the financial year

PART A – INCOME TAX ACTION POINTS BEFORE 31 MARCH 2026

1️⃣ Advance Tax Payment (Where Applicable)

If your total tax liability for FY 2025–26 exceeds ₹10,000:

  • Ensure the final instalment of advance tax (due on 15 March) has been paid

  • Reassess whether any shortfall exists

  • Clear remaining dues before 31 March to minimise interest under Sections 234B and 234C

Timely review can help avoid unnecessary interest costs.

2️⃣ Year-End Tax Planning & Investments

This is the final opportunity in the current financial year to:

  • Invest under Section 80C (LIC, PPF, ELSS, etc.)

  • Pay medical insurance premium under Section 80D

  • Contribute to NPS under Section 80CCD(1B)

  • Optimise HRA and other salary exemptions

  • Make eligible donations under Section 80G

Strategic planning before 31 March can substantially reduce overall tax liability.

3️⃣ TDS Deduction & Deposit Check

Before closing the books:

  • Confirm TDS has been deducted on all applicable payments

  • Review contractor, professional, rent, and commission payments

  • Ensure timely deposit of deducted TDS

Non-compliance may lead to:

  • 40% disallowance of expenditure

  • Interest and penalty exposure

Important – Time Limit for Old TDS Corrections:
As per Section 397(3)(f) of the Income-tax Act, 2025, correction statements relating to certain past financial years (FY 2018–19 onwards as specified) will be accepted only up to 31 March 2026. From 1 April 2026, these will become time-barred. Deductors and collectors should take necessary action immediately.

4️⃣ TCS Compliance Review

For persons required to collect TCS:

  • Verify correct collection

  • Deposit any outstanding amount

  • Reconcile TCS figures with books

This is especially important considering revised TCS rates effective from 1 April 2026.

5️⃣ Capital Gains Planning

Before the year ends:

  • Strategically plan sale of shares or property

  • Undertake tax-loss harvesting where beneficial

  • Invest in eligible exemptions under Sections 54, 54F, or 54EC

  • Deposit funds in the Capital Gain Account Scheme, if applicable

Advance planning helps lawfully optimise capital gains tax.

6️⃣ MSME Payment Compliance – Section 43B(h)

Businesses must:

  • Ensure payments to MSME vendors are made within 45 days

Failure to comply may result in disallowance of the expense in FY 2025–26. This is particularly relevant for traders and manufacturers.

7️⃣ Finalisation of Books & Reconciliation

Before 31 March, complete:

  • Bank reconciliations

  • Debtor and creditor confirmations

  • Physical stock verification

  • Cash verification

  • Loan account reconciliation

Proper year-end closure reduces audit observations and scrutiny risks.

8️⃣ Prepare for Income-tax Act, 2025 (Effective 1 April 2026)

From the next financial year:

  • The Income-tax Act, 2025 will replace the existing Act

  • New Income-tax Rules, 2026 will be notified

  • Forms will be renumbered and simplified

Professionals should:

  • Map old provisions with new ones

  • Update compliance trackers

  • Inform and educate clients

  • Upgrade systems and software

Advance preparation in March will prevent confusion in April.

PART B – GST ACTION POINTS BEFORE 31 MARCH 2026

9️⃣ Composition Scheme – Opt In / Opt Out

Eligible taxpayers must:

  • File intimation before 31 March

  • Review turnover limits

  • Ensure readiness for FY 2026–27

The option must be exercised before the new financial year begins.

🔟 Letter of Undertaking (LUT) for Exporters

Exporters should:

  • File fresh LUT for FY 2026–27 before 1 April 2026

  • Verify IEC and GST details

  • Update DSC credentials

Failure to file LUT may require payment of IGST on exports.

1️⃣1️⃣ QRMP Scheme Decision

Taxpayers with turnover up to ₹5 crore:

  • May opt in or opt out of QRMP

  • Decision deadline is 30 April, but review should be done before year-end

Turnover analysis is essential before opting.

1️⃣2️⃣ GTA – Forward Charge or Reverse Charge

Goods Transport Agencies must:

  • File required annexures

  • Choose between Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM)

  • Exercise option within prescribed timelines

This decision impacts tax collection structure for the upcoming year.

1️⃣3️⃣ Hotels – Declaration of Specified Premises

Hotels are required to:

  • Submit Annexure VII

  • Declare specified premises for GST rate determination

This directly affects GST rates applicable in the next financial year.

1️⃣4️⃣ ITC Reconciliation

Before year-end:

  • Match books with GSTR-2B

  • Reconcile GSTR-1 with GSTR-3B

  • Reverse ineligible ITC

  • Follow up with vendors for mismatches

March is ideal for cleaning ITC discrepancies.

1️⃣5️⃣ Review Reverse Charge Liability

Verify whether RCM has been correctly paid and reported for:

  • GTA services

  • Legal services

  • Director remuneration

  • Other notified categories

Ensure correct reporting in GSTR-3B.

1️⃣6️⃣ E-Invoicing Compliance Check

If turnover exceeds prescribed limits:

  • Ensure e-invoicing compliance from 1 April

  • Update ERP systems

  • Generate IRN correctly

Non-compliance attracts substantial penalties.

1️⃣7️⃣ Turnover Assessment for FY 2026–27

Review aggregate turnover to determine:

  • Eligibility for Composition Scheme

  • QRMP eligibility

  • Audit applicability

Proactive review supports smooth compliance next year.

1️⃣8️⃣ Update GST Registration Details

Before year-end, verify:

  • Bank account details

  • Business address

  • Additional place of business

  • Authorised signatory information

Accurate records help avoid future notices.

1️⃣9️⃣ Refund Review (For Exporters)

Exporters should:

  • File pending refund claims

  • Review inverted duty structure claims

  • Ensure documentation is complete

Avoid delaying claims unnecessarily.

2️⃣0️⃣ Clean Compliance Record

Before closing the year:

  • File all pending GST returns

  • Clear late fees

  • Respond to outstanding notices

  • Maintain proper documentation

A clean compliance history reduces risk under the evolving tax regime.

Final Thoughts

31 March 2026 is more than just the end of a financial year. It is:

✔ The final window for tax planning
✔ The deadline for key GST decisions
✔ An opportunity to rectify compliance gaps
✔ The preparation phase for the Income-tax Act, 2025

Ignoring these action points may result in:

  • Higher tax outgo

  • Interest and penalties

  • Loss of eligible benefits

  • Increased compliance burden in the next financial year

Renumbering of Income Tax Forms as per ITA 2025 and Income-tax Rules, 2026

Income-tax Forms Revamped under ITA 2025 & Draft Income-tax Rules, 2026

The Government has initiated one of the most significant compliance overhauls in the history of Indian direct taxation with the introduction of the Income-tax Act, 2025 and the Draft Income-tax Rules, 2026.

A major component of this reform is the comprehensive restructuring, simplification, and renumbering of Income-tax Forms.

👉 Click here to get …

This article covers:

  • The reason behind the change in forms

  • Key forms that have been renumbered

  • The impact on taxpayers and professionals

  • What lies ahead

Background of the Reform

The proposed Income-tax Act, 2025, expected to come into force from 1 April 2026, seeks to:

  • Simplify drafting and terminology

  • Minimise litigation

  • Eliminate redundant provisions

  • Strengthen technology-based compliance

To align with the new legislation, the Government has released the Draft Income-tax Rules, 2026 for public consultation.

Extent of Rationalisation

Particulars Old Rules (1962) Draft Rules (2026)
Number of Rules 511 333
Number of Forms 399 190

The reduction has been achieved through consolidation, elimination of repetitive disclosures, and standardisation of reporting requirements.

1️⃣ Audit & Reporting Forms – Fully Reorganised

Audit and reporting formats have been merged and logically restructured.

Earlier Form Purpose New Form
3CA / 3CB / 3CD Tax Audit Report Form 26 (55 segmented clauses)
3CEB Transfer Pricing Audit Form 48
29B MAT Audit Report Form 66
10FA Tax Residency Certificate Form 42
10F DTAA Details (u/s 90 / 90A) Form 41

🔎 Key Change:
Multiple audit formats are consolidated into structured, segment-wise forms, reducing duplication and interpretational issues.

2️⃣ Charitable Trusts & NGOs – Streamlined Compliance

Compliance requirements for trusts and NGOs, previously considered complex, have been simplified and renumbered.

Earlier Form Purpose New Form
10A Provisional Registration Form 104
10AB Registration / Renewal Form 105
Form 10 Accumulation of Income Form 109
10B / 10BB Audit Report Form 112
10BD Donee Statement Form 113
10BE Donor Certificate Form 114

🔎 Key Change:
Distinct segregation between registration, audit, accumulation, and donation reporting reduces the risk of technical rejections.

3️⃣ TDS / TCS Compliance – Rationalised & Standardised

TDS/TCS forms have been logically renumbered and aligned for improved automation.

Earlier Form Purpose New Form
Form 13 Lower / NIL TDS Application Form 128
Form 16 Salary TDS Certificate Form 130
24Q TDS Return – Salary Form 138
26Q TDS Return – Residents Form 140
27Q TDS Return – Non-Residents Form 144
27EQ TCS Return Form 143

🔎 Key Change:
Enhanced design supports automated validation, reconciliation, and centralised processing — reducing mismatches and notices.

4️⃣ Other Significant Renumbered Forms

Several widely used compliance forms have also been reassigned:

Earlier Form Purpose New Form
Form 26AS Annual Tax Statement Form 168
15CA Foreign Remittance Form 145
15CB CA Certificate for Remittance Form 146
61A SFT Reporting Form 165

5️⃣ Philosophy Behind the New Structure

The new Rules and Forms reflect the same guiding principles as the Income-tax Act, 2025:

✔ Simpler Drafting

Clear and accessible language to avoid ambiguity.

✔ Uniform Data Fields

Standardised disclosures across forms to prevent repetitive reporting.

✔ Intelligent Forms

Designed with:

  • Pre-filled information

  • Built-in validations

  • Automated reconciliation

✔ Technology-Led Administration

Facilitates:

  • Centralised processing

  • Data analytics

  • Improved taxpayer services

6️⃣ Public Consultation & Participative Reform

The Draft Rules and Forms were placed in the public domain for 15 days (up to 22 February 2026).

Two comparative navigators have been provided:

  • Old Rules vs New Rules Mapping

  • Old Forms vs New Forms Mapping

Stakeholders can submit feedback rule-wise and form-wise, ensuring transparency and participative policymaking.

7️⃣ Implications for Stakeholders

For Taxpayers

  • Fewer forms to interpret

  • Reduced repetitive disclosures

  • More intuitive filing experience

For Professionals

  • Short-term adjustment phase

  • Long-term efficiency gains

  • Lower litigation and compliance risks

For the Tax Administration

  • Cleaner and structured data

  • Improved analytics

  • More predictable compliance environment

Conclusion

The restructuring and renumbering of Income-tax Forms under the Income-tax Act, 2025 and Draft Income-tax Rules, 2026 goes far beyond mere renaming.

It marks a structural shift toward a simplified, digitised, and taxpayer-centric compliance framework, laying the foundation for a modern and technology-driven direct tax regime in India.

Budget 2026 Income Tax Slab Rates for FY 2026-27 | AY 2027-28

Income Tax Rates as per Budget 2026 – FY 2026-27 (AY 2027-28)

No Change in Old Tax Regime Slab Rates

Union Budget 2026 has not made any changes to the income tax slab rates under the normal (old) tax regime. The slab structure applicable for FY 2026-27 continues to remain identical to FY 2025-26 for individuals, HUFs, companies, firms, and other assessees.

However, the new tax regime under Section 115BAC continues to apply with the revised slab rates introduced earlier, along with an enhanced rebate under Section 87A, making it the default regime for individuals.

1. Income Tax Rates – Individuals, HUF, AOP, BOI & AJP

(Old / Normal Tax Regime)

1.1 Individuals (Below 60 Years)

Net Income Tax Rate
Up to ₹2,50,000 Nil
₹2,50,001 – ₹5,00,000 5%
₹5,00,001 – ₹10,00,000 20%
Above ₹10,00,000 30%

✔ Rates unchanged for AY 2026-27 and AY 2025-26

1.2 Resident Senior Citizens (60–79 Years)

Net Income Tax Rate
Up to ₹3,00,000 Nil
₹3,00,001 – ₹5,00,000 5%
₹5,00,001 – ₹10,00,000 20%
Above ₹10,00,000 30%

1.3 Resident Super Senior Citizens (80 Years & Above)

Net Income Tax Rate
Up to ₹5,00,000 Nil
₹5,00,001 – ₹10,00,000 20%
Above ₹10,00,000 30%

1.4 HUF / AOP / BOI / Artificial Juridical Person

Net Income Tax Rate
Up to ₹2,50,000 Nil
₹2,50,001 – ₹5,00,000 5%
₹5,00,001 – ₹10,00,000 20%
Above ₹10,00,000 30%

2. Surcharge – Individuals, HUF, AOP & BOI

Total Income Surcharge
₹50 lakh – ₹1 crore 10%
₹1 crore – ₹2 crore 15%
₹2 crore – ₹5 crore 25%
Above ₹5 crore 37%

Important Clarifications

  • Higher surcharge not applicable on:

    • Dividend income

    • Capital gains under Sections 111A, 112, 112A & 115AD

  • Surcharge on such income capped at 15%

  • Marginal relief available at each surcharge slab

3. Health & Education Cess

  • Levied at 4% on income tax plus surcharge

  • Not applicable to specified funds under Section 10(4D) (in notified cases)

4. Rebate under Section 87A – Old Regime

  • Available to resident individuals

  • Total income up to ₹5,00,000

  • Maximum rebate: ₹12,500

  • Result: Nil tax liability

5. Alternate Minimum Tax (AMT)

  • Applicable where regular tax is less than 18.5% of adjusted total income

  • AMT rate for IFSC units earning foreign exchange income: 9%

6. New Tax Regime – Section 115BAC

(Default from AY 2024-25)

6.1 Slab Rates – AY 2026-27

Total Income Tax Rate
Up to ₹4,00,000 Nil
₹4,00,001 – ₹8,00,000 5%
₹8,00,001 – ₹12,00,000 10%
₹12,00,001 – ₹16,00,000 15%
₹16,00,001 – ₹20,00,000 20%
₹20,00,001 – ₹24,00,000 25%
Above ₹24,00,000 30%

6.2 Section 87A Rebate – New Regime

  • Available up to ₹12,00,000 income

  • Maximum rebate: ₹60,000

  • Marginal relief available

  • AMT not applicable under the new regime

7. Partnership Firms & LLPs

  • Flat tax rate: 30%

  • Surcharge: 12% if income exceeds ₹1 crore

  • Cess: 4%

  • AMT: 18.5% (9% for IFSC units)

8. Local Authorities

  • Tax rate: 30%

  • Surcharge, cess, and AMT same as partnership firms

9. Domestic Companies – Tax Rates

Category Tax Rate
Turnover ≤ ₹400 crore (FY 2023-24) 25%
Other domestic companies 30%

Special Tax Regimes

  • Section 115BAA: 22%

  • Section 115BAB (Manufacturing): 15%

  • Surcharge: Flat 10%

🔴 Major MAT Changes Introduced in Budget 2026

(Applicable from FY 2026-27 / AY 2027-28)

Key Reforms in Minimum Alternate Tax

(A) Reduction in MAT Rate

  • MAT rate reduced from 15% to 14%

  • Applicable to all companies except IFSC units

  • Surcharge and cess continue as applicable

(B) MAT to Become Final Tax under Old Regime

  • MAT paid under old regime will be treated as final tax

  • No fresh MAT credit allowed going forward

(C) Restriction on MAT Credit Set-off

  • Domestic Companies (New Regime):

    • MAT credit set-off limited to 25% of total tax liability

  • Foreign Companies:

    • Set-off allowed only to the extent normal tax exceeds MAT

10. Foreign Companies

Nature of Income Tax Rate
Royalty / FTS (old agreements) 50%
Other income 35%

  • Surcharge: 2% / 5%

  • Cess: 4%

  • MAT applicable unless exempted

11. Co-operative Societies

Normal Rates

Income Tax Rate
Up to ₹10,000 10%
₹10,001 – ₹20,000 20%
Above ₹20,000 30%

Optional Regimes

  • Section 115BAD: 22%

  • Section 115BAE (Manufacturing): 15%

  • AMT not applicable once opted

GSTR-3B Changes from Feb 2026: New GST ITC Rules Bring Relief to Taxpayers

To reduce taxpayer hardship, the GST Portal will roll out a major change in ITC utilisation from the January 2026 return period, relaxing the rigid utilisation sequence followed earlier.

1. Earlier ITC Set-Off Rule – Compliance Challenge

Statutory Position (Earlier Framework)

Under the earlier GST law and portal system, Input Tax Credit utilisation was subject to a strict and compulsory sequence:

  • IGST ITC was required to be utilised first:

    • Against IGST liability

    • Then against CGST liability

    • Then against SGST liability

  • CGST ITC could be utilised only:

    • Against CGST liability

    • Then against IGST liability

  • SGST ITC could be utilised only:

    • Against SGST liability

    • Then against IGST liability

❌ Direct cross-utilisation between CGST and SGST was not permitted.

Practical Difficulty for Taxpayers

Because of this rigid utilisation order, taxpayers often had to make cash payments, even when sufficient ITC was available under a different tax head. This resulted in blocked credits and avoidable cash outflow.

Illustration – Earlier Rule (Before January 2026)

Output Tax Liability

  • IGST: ₹1,00,000

  • CGST: ₹40,000

  • SGST: ₹40,000

Available ITC

  • IGST ITC: ₹1,00,000

  • CGST ITC: ₹50,000

  • SGST ITC: ₹50,000

Utilisation as per Earlier Rules

  • IGST ITC of ₹1,00,000 adjusted fully against IGST liability

  • CGST liability of ₹40,000 paid using CGST ITC

  • SGST liability of ₹40,000 paid using SGST ITC

✔ In this scenario, no hardship arose.

Problem Scenario Under Earlier Rules

  • Output IGST Liability: ₹80,000

  • Available ITC:

    • CGST ITC: ₹60,000

    • SGST ITC: ₹20,000

Under the old system:

  • CGST ITC could not be used to pay SGST

  • SGST ITC could not be used to pay CGST

➡ Result:
Despite total ITC being sufficient, cash payment became unavoidable due to utilisation restrictions. This was a common and recurring compliance issue.

2. New ITC Utilisation Rule – Effective from January 2026

What Has Changed?

🔹 System-level modification in Table 6.1 of GSTR-3B

From the January 2026 tax period onwards, once IGST ITC is fully exhausted, the GST Portal will allow utilisation of CGST and SGST ITC for payment of IGST liability in any sequence.

📌 This flexibility is enabled through the GST Portal system, without changing the basic statutory framework.

3. Salient Features of the New Rule

  • Applicable only after full utilisation of IGST ITC

  • CGST and SGST ITC can be used in any order

  • Cross-utilisation permitted only for IGST liability

  • Implemented through automated portal logic in GSTR-3B

  • Reduces cash outflow and accumulation of idle ITC

4. Illustration – New Rule (From January 2026)

Output IGST Liability: ₹80,000

Available ITC

  • IGST ITC: Nil

  • CGST ITC: ₹60,000

  • SGST ITC: ₹20,000

Utilisation under New Rule

  • CGST ITC utilised: ₹60,000

  • SGST ITC utilised: ₹20,000

➡ IGST liability fully discharged through ITC, with no cash payment

✔ Earlier: Cash payment was mandatory
✔ Now: Entire liability settled via ITC

5. Practical Impact on Taxpayers

✅ Significant Relief

  • Eliminates unnecessary cash payments

  • Prevents ITC pile-up under a single tax head

  • Improves liquidity and working capital efficiency

✅ Easier Compliance

  • System-driven utilisation suggestions

  • Reduced chances of manual errors

  • More logical and business-friendly ITC usage

6. Important Points to Remember

  • Direct cross-utilisation between CGST and SGST is still not allowed

  • Flexibility is permitted only for IGST liability

  • Applicable prospectively from January 2026

  • Taxpayers should analyse ITC balances before filing GSTR-3B

Budget 2026 Relief for Taxpayers: Penalty on Tax Audit Delay Removed from April 2026

Budget 2026 introduces a major compliance relief by replacing penalties with fixed mandatory fees for select procedural and technical lapses under the Income-tax Act.

The Government has recognised that penalties imposed for procedural or technical delays often result in avoidable litigation, even in situations where there is no revenue loss or any mala fide intent. To address this concern and provide greater certainty to taxpayers, Budget 2026 proposes to replace penalties for certain compliance failures with fixed or graded mandatory fees.

These amendments will come into force from 1 April 2026 and will apply from Tax Year 2026-27 onwards.

1. Change in Late Fee for Tax Audit – Section 446

Earlier Provision (Before Budget 2026)

Under Section 446, failure to get accounts audited or to obtain the audit report (without reasonable cause) attracted a discretionary penalty, being the lower of:

  • 0.5% of total sales / turnover / gross receipts, or

  • ₹1,50,000

Since the penalty was discretionary and turnover-linked, it frequently led to litigation, especially in cases involving minor or unintentional delays.

Proposed Amendment – Penalty Converted into Fee

Budget 2026 proposes to:

  • Omit the penalty provision under Section 446, and

  • Introduce a mandatory fee under proposed Section 428(c).

New Graded Fee Structure for Tax Audit Delay

Nature of Default Proposed Fee
Delay up to specified period ₹75,000
Delay beyond specified period ₹1,50,000

📌 The fee is mandatory, non-discretionary, and not linked to turnover or receipts, ensuring certainty in compliance.

Important Note:
While Section 446 has been removed for tax audit defaults, it has been re-purposed to deal with penalties related to failure to furnish or furnishing incorrect information on crypto asset transactions.

2. Change in Penalty for Transfer Pricing Audit Report – Section 447

Earlier Provision

Failure to furnish the accountant’s report under Section 172 (relating to international and specified domestic transactions) attracted a fixed penalty of ₹1,00,000 under Section 447.

Proposed Amendment

Budget 2026 proposes to:

  • Convert the penalty into a fee, and

  • Shift the provision to Section 428(4).

New Graded Fee Structure

Period of Delay Proposed Fee
Shorter delay ₹50,000
Longer delay ₹1,00,000

This change introduces proportionality and fairness, particularly for procedural delays without deliberate non-compliance.

3. Change in Penalty for Statement of Financial Transactions – Section 454(1)

Earlier Provision

Failure to furnish a Statement of Financial Transactions (SFT) or reportable account attracted a penalty of:

  • ₹500 per day for the period of default.

Proposed Amendment

Budget 2026 proposes to:

  • Convert the penalty into a mandatory fee, and

  • Shift the provision to Section 427(3).

This reflects the Government’s intent to treat technical reporting delays as compliance lapses rather than offences.

4. Capping of Penalty under Section 454(2)

Earlier Provision

If SFT was not furnished even after notice, a penalty of:

  • ₹1,000 per day was leviable

  • No maximum limit was prescribed

Proposed Relief

Budget 2026 introduces:

  • An upper cap of ₹1,00,000 on the penalty under Section 454(2)

This ensures certainty and prevents excessive penalties for prolonged but technical defaults.

5. Rationale Behind the Amendments

The Government has clearly stated that:

  • Penalties for technical defaults cause unnecessary litigation

  • Conversion into mandatory fees ensures certainty

  • Non-discretionary fees reduce arbitrary assessments

  • The reforms align with a trust-based, taxpayer-friendly tax administration

6. Effective Date & Applicability

  • Effective from: 1 April 2026

  • Applicable for: Tax Year 2026-27 onwards

  • Defaults relating to earlier tax years will continue under the old provisions

Penalties Converted into Fees – Summary Table

(Effective from 01.04.2026 | Tax Year 2026-27 onwards)

Nature of Default Earlier Penalty New Fee (Budget 2026)
Failure to get accounts audited Lower of 0.5% of turnover / receipts or ₹1,50,000 ₹75,000 / ₹1,50,000 (graded based on delay)
Failure to furnish TP Report (Sec 172) ₹1,00,000 ₹50,000 / ₹1,00,000 (graded fee)
Failure to furnish SFT / reportable account ₹500 per day (no cap) Fee under Section 427(3), capped at ₹1,00,000
Failure to furnish information (Sec 466) ₹1,000 ₹25,000 (fixed fee)
Budget 2026 Updates: Major Changes in GST Law

GST Changes Announced in Budget 2026 – Key Amendments Explained

The Finance Bill, 2026 proposes several significant amendments to the Central Goods and Services Tax Act, 2017 (CGST Act) with the intent of simplifying GST compliance, reducing litigation, and strengthening refund and appellate mechanisms.

Unless specifically stated otherwise, these amendments will become effective from a date to be notified, simultaneously with corresponding amendments by the States and Union Territories.

1. Amendment to Section 15(3): Post-Sale Discounts

Earlier Position

Post-sale discounts were allowed to be excluded from the value of supply only if:

  • The discount was agreed upon before or at the time of supply, and

  • The recipient reversed proportionate Input Tax Credit (ITC).

This condition led to frequent disputes where commercial discounts were offered after supply without explicit prior agreements.

Amendment Proposed (Finance Bill, 2026 – Clause 137)

  • The requirement of linking discounts to a pre-existing agreement has been removed.

  • Section 15(3) now allows exclusion of discounts based on issuance of a credit note under Section 34, subject to reversal of corresponding ITC by the recipient.

Impact

✔ Greater commercial flexibility
✔ Reduced valuation-related litigation
✔ Better alignment with real-world business practices

2. Amendment to Section 34: Credit Notes

Earlier Position

Section 34 did not explicitly link credit note provisions with valuation rules under Section 15, resulting in interpretational challenges.

Amendment Proposed (Clause 138)

  • Section 34 is amended to expressly reference Section 15.

Impact

✔ Clear legal linkage between valuation and credit notes
✔ Strengthens validity of post-sale discount adjustments
✔ Reduces objections during audits and assessments

3. Amendment to Section 54(6): Provisional Refund for Inverted Duty Structure

Earlier Position

Provisional refund of 90% was primarily available for zero-rated supplies, while refunds arising from Inverted Duty Structure (IDS) were excluded.

Amendment Proposed (Clause 139)

  • Provisional refund provisions are extended to IDS-related refunds.

Impact

✔ Improved cash flow for manufacturers
✔ Reduced working capital blockage
✔ Major relief for sectors with higher input tax rates

4. Amendment to Section 54(14): Removal of Refund Threshold Limit

Earlier Position

A threshold limit applied for sanctioning refunds, leading to procedural delays—especially for small exporters.

Amendment Proposed (Clause 139)

  • Threshold limit removed for refund claims relating to export of goods with payment of tax.

Impact

✔ Uniform refund processing
✔ Faster refunds for small exporters
✔ Reduced administrative discretion

5. Insertion of Section 101A(1A): Interim National Appellate Mechanism

Earlier Position

Conflicting Advance Ruling decisions were appealable to the National Appellate Authority (NAA), which was never constituted—leaving taxpayers without remedy.

Amendment Proposed (Clause 140)

  • New Section 101A(1A) empowers the Government to notify an existing authority or tribunal to hear such appeals until NAA is constituted.

  • Sub-sections (2) to (13) of Section 101A will not apply in such cases.

  • Explanation clarifies that “existing authority” includes a tribunal.

📌 Effective Date: 1 April 2026

Impact

✔ Resolves long-standing appellate vacuum
✔ Provides certainty in advance ruling disputes
✔ Strengthens GST dispute resolution framework

6. IGST Act Amendment: Place of Supply for Intermediary Services

Earlier Provision

Under Section 13(8)(b) of the IGST Act, intermediary services were deemed supplied at the location of the service provider, making overseas services taxable in India.

Amendment Proposed (Clause 141)

  • Section 13(8)(b) is omitted.

  • Place of supply will now be determined as per Section 13(2)—i.e., location of the recipient.

Impact

✔ Intermediary services to foreign clients qualify as export of services (subject to conditions)
✔ GST generally not applicable on such transactions
✔ Major relief for service exporters and consultants
✔ Long-pending litigation expected to subside

Conclusion

The GST amendments proposed in the Finance Bill, 2026 mark a decisive move toward taxpayer-friendly, litigation-free, and business-aligned GST administration. Key reforms in valuation, refunds, appellate remedies, and cross-border services are expected to significantly improve compliance efficiency and certainty.

Businesses and professionals should closely evaluate these changes and prepare for implementation once notified.

Budget 2026 Update: Changes in TDS and TCS from 1 April 2026

Budget 2026: Key Amendments in TDS & TCS Framework (Effective from 1 April 2026)

The Union Budget 2026 has introduced wide-ranging reforms in the TDS and TCS provisions under the Income-tax Act, 2025. These measures are aimed at rate rationalisation, simplification of compliance, removal of ambiguities, taxpayer relief, and selective decriminalisation of offences.

Unless specifically mentioned otherwise, all amendments will come into force from 1 April 2026 and apply from Tax Year 2026–27 onwards.

1. Rationalisation of TCS Rates – Section 394(1)

Earlier, Section 394(1) prescribed multiple and inconsistent TCS rates across different categories of transactions. Budget 2026 proposes to standardise TCS rates wherever feasible, while also granting rate relief in select cases.

Revised TCS Rate Structure

Sl. No. Nature of Receipt Existing Rate Proposed Rate
1 Sale of alcoholic liquor for human consumption 1% 2%
2 Sale of tendu leaves 5% 2%
3 Sale of scrap 1% 2%
4 Sale of minerals (coal, lignite, iron ore) 1% 2%
5(a) LRS remittance – education / medical treatment exceeding ₹10 lakh 5% 2%
5(b) LRS remittance – other purposes 20% 20% (unchanged)
6 Overseas tour programme package Tiered (5% / 20%) 2% flat

2. Overseas Tour Programme Package – Significant Relief

Earlier Regime

  • 5% TCS on amounts up to ₹10 lakh

  • 20% TCS on amounts exceeding ₹10 lakh

Budget 2026 Change

  • Uniform TCS rate of 2%

  • ₹10 lakh threshold removed

  • Applicable irrespective of transaction value

Impact

  • Substantial reduction in tax burden on travellers

  • Prevents diversion of business to foreign tour operators

  • Simplifies compliance for Indian tour operators

3. Liberalised Remittance Scheme (LRS) – Rate Reduction

For remittances under RBI’s LRS:

Purpose Earlier TCS Revised TCS
Education / Medical treatment (above ₹10 lakh) 5% 2%
Other purposes 20% No change

This amendment provides notable relief to students and individuals remitting funds for medical treatment abroad.

4. Electronic Filing for Lower / Nil TDS Certificates – Section 395

Earlier Position

  • Manual application before the Assessing Officer

  • Lengthy and compliance-intensive process

Amendment under Budget 2026

  • Payees can now apply electronically

  • Application to be made before a prescribed income-tax authority

  • Certificate may be:

    • Issued electronically, or

    • Rejected if conditions are not met or details are incomplete

Benefit

  • Faster processing

  • Improved transparency

  • Major compliance relief for small and medium taxpayers

5. TDS on Supply of Manpower – Ambiguity Clarified

Issue Earlier

Confusion existed on whether manpower supply should be classified as:

  • Contract work (1% / 2%), or

  • Technical / professional services (up to 10%)

Budget 2026 Clarification

  • Supply of manpower is explicitly included under “work” in Section 402(47)

Applicable TDS Rates

  • 1% – where payee is Individual or HUF

  • 2% – in all other cases

Outcome

  • Uniform tax treatment

  • Reduced litigation and interpretational disputes

6. Deduction Allowed to Non-Life Insurance Business for Delayed TDS

Earlier Issue

  • Expenses were disallowed if TDS was not deducted or paid on time

  • No explicit provision for allowing deduction in a subsequent year

Budget 2026 Amendment

  • Schedule XIV amended

  • New provision allows deduction in the year in which TDS is deducted and paid

Applicability

  • Non-life insurance businesses

  • Effective from AY 2026–27 onwards

7. Decriminalisation and Rationalisation of TDS/TCS Offences

Fully Decriminalised Defaults

Failure to deposit TDS relating to:

  • Lottery or crossword puzzle winnings

  • Benefits or perquisites arising from business or profession

➡️ No imprisonment prescribed

Revised Punishment Structure (Selected Cases)

Applicable to:

  • Online gaming winnings

  • Virtual Digital Asset (VDA) transactions

Amount of TDS Default Punishment
Above ₹50 lakh Imprisonment up to 2 years / fine / both
₹10 lakh – ₹50 lakh Imprisonment up to 6 months / fine / both
Other cases Fine only

Wholly in-kind transactions involving online gaming or VDAs are excluded from prosecution.

8. TDS on Sale of Immovable Property by Non-Residents – Procedural Ease

Earlier

  • Buyer was required to obtain TAN for TDS compliance

Now

  • TDS can be deposited using PAN-based challan

  • No TAN required

Impact

  • Simplified property transactions with NRIs

  • Reduced compliance burden for resident buyers

Effective Date

✔ 1 April 2026
✔ Applicable from Tax Year 2026–27 onwards

Closing Note

With these comprehensive reforms, Budget 2026 significantly reshapes the TDS–TCS landscape, balancing automation, relief, and enforcement. Taxpayers, professionals, tour operators, insurers, and businesses engaged in manpower supply or cross-border remittances should realign systems, contracts, and compliance processes well ahead of 1 April 2026.

New Income Tax Slab Rates in Budget 2026: FY 2026-27 (AY 2027-28), ITR Deadlines & TDS/TCS Rules

Key Income Tax & ITR Updates – Budget 2026

  • No change in income tax slab rates under either tax regime.

  • Simplified ITR forms will be introduced shortly to ease compliance.

📅 Revised ITR Due Dates (Non-Audit Cases)

  • Business & Trust cases: Due date extended from 31 July to 31 August

  • Other non-audit cases: Due date continues to be 31 July

🔁 Revised Return – Section 139(5)

  • Time limit to file a revised return extended from 31 December to 31 March of the relevant assessment year.

🔄 TDS & TCS Updates

  • TDS and TCS rates rationalised to reduce complexity and mismatches.

🏠 Property Purchase from NRI – Key Relief

  • TAN requirement removed for buyers of property from an NRI.

  • A PAN-based challan system has been introduced for payment of TDS, simplifying the compliance process.

    Income Tax Slab Rates – Default (New) Tax Regime

    The following income tax slab rates will apply to individuals opting for the default new tax regime for FY 2026-27 (AY 2027-28):

    Total Income Tax Rate
    Up to ₹4,00,000 Nil
    ₹4,00,001 – ₹8,00,000 5%
    ₹8,00,001 – ₹12,00,000 10%
    ₹12,00,001 – ₹16,00,000 15%
    ₹16,00,001 – ₹20,00,000 20%
    ₹20,00,001 – ₹24,00,000 25%
    Above ₹24,00,000 30%

    These slab rates apply uniformly to all individuals, including salaried taxpayers, with no age-based differentiation.

    Key Features of the New Tax Regime

    1️⃣ Rebate under Section 87A

    Budget 2026 has enhanced tax relief through Section 87A:

    • Individuals with net taxable income up to ₹12,00,000 are eligible for a 100% tax rebate.

    • Consequently, the total tax liability becomes NIL for such taxpayers under the default regime.

    • This change significantly improves affordability for middle-income earners.

    2️⃣ Standard Deduction for Salaried Taxpayers

    • Salaried individuals can claim a standard deduction of ₹75,000 under the new tax regime.

    • Because of this deduction, effective tax-free income can extend up to ₹12.75 lakh.

    • This makes the default regime even more beneficial for salaried employees.

    Old Tax Regime (Optional)

    The old tax regime continues as an optional choice and follows a different slab structure. It allows various deductions and exemptions, such as HRA, Section 80C, Section 80D, and others.

    Income Tax Slabs under the Old Regime

    Income Slab Tax Rate
    Up to ₹2,50,000 Nil
    ₹2,50,001 – ₹5,00,000 5%
    ₹5,00,001 – ₹10,00,000 20%
    Above ₹10,00,000 30%

    While deductions are permitted under the old regime, it does not provide the higher rebate threshold available under the new tax regime. As a result, it may be less beneficial for taxpayers with limited deductions.

    Which Tax Regime Is Better for You?

    • Taxpayers with minimal deductions or exemptions may benefit more from the new default tax regime due to lower slab rates, higher rebate, and standard deduction.

    • Taxpayers who claim substantial deductions, such as housing loan interest, insurance premiums, and eligible investments, may still find the old regime more suitable.

    • It is advisable to perform a comparative tax calculation before choosing the appropriate regime.

Budget 2026: Budget Speech, Highlights and Official Government Documents

The Union Budget 2026 is not limited to the Budget Speech delivered in Parliament. To fully understand the intent, scope, and legal implications of the Budget proposals, it is important to review the supporting documents released by the Government. These include the Budget Speech, the Memorandum explaining the provisions of the Finance Bill, and the Finance Bill, 2026 itself. Each of these documents has a specific purpose, and together they provide a complete picture of policy announcements, tax changes, and their practical implementation.

📄 Access all Budget Documents here: indiabudget.gov.in

While the Budget Speech outlines the Government’s vision and direction, the detailed impact of Budget 2026 is reflected in the Memorandum and the Finance Bill. Taxpayers and professionals should not rely solely on headlines or summaries but refer to these official documents for accurate information and compliance planning. Reviewing all Budget 2026 documents carefully is crucial to understanding tax implications, policy amendments, and their application in the upcoming financial year.