India's apex authority has been told by the court to step in amid a flurry of orders across the country demanding tax on bonuses and performance-driven remunerations received by partners of large tax, audit, consultancy and other professional partnership firms, including some belonging to Big 4 members.

Those grappling with such orders argue that the Income tax (I-T) department stands on flimsy ground as their firms have already paid tax on such payments.

Nonetheless, tax offices in Delhi, Mumbai, Chennai, Indore, Bhubaneshwar and few other cities have pursued the issue.

A partner with S R Batloi & Co (SRB), the audit arm of EY, and a partner of a Big 4 firm have separately moved the Delhi High Court, challenging the actions of the tax officers.

The nation's income tax system has undergone significant changes with the introduction of new forms under the Income Tax Rules, 2026. In addition, the launch of an integrated payment module on the e-Filing portal has added immense value to tax filers. With the old Income Tax Act, 1961, officially repealed from 1 April 2026, taxpayers must now shift their focus to navigating a dual-framework transition while ensuring clarity on compliance.

One of the biggest improvements is the introduction of updated forms aligned with the new Income Tax Act, 2025. It hence becomes indispensable for taxpayers to carefully select forms, especially for the assessment year 2026-27.

This is because both legacy and new systems will coexist briefly during the transition.

The Income Tax Department has clarified that taxation depends on the date of payment, not when the salary is earned. Salary paid by March 31, 2026, will fall under the Income-tax Act, 1961, while payments from April 1, 2026, will be taxed under the new Income Tax Act, 2025, as TDS applies at the time of payment.

Tax rules 2026: As India transitions from the Income-tax Act, 1961, to the new Income Tax Act, 2025, from April 1, 2026, salaried employees are likely to see immediate changes in how their salary is taxed. One of the most important—and often misunderstood—aspects of this shift is how Tax Deducted at Source (TDS) will be applied during the transition period.

Payment date

According to the Income Tax Department, the key factor is not when the salary is earned, but when it is paid.

Salary for March 2026, if paid on or before March 31, 2026, will be governed by the Income-tax Act, 1961
Salary for April 2026, paid on or after April 1, 2026, will fall under the Income Tax Act, 2025

More than 1.3 lakh taxpayers are currently waiting for their income tax refunds, not because of scrutiny or errors but due to something as basic as an inoperative PAN, Parliament was informed recently by the government.

The Finance Ministry informed that refunds worth over Rs 340 crore have been withheld in such cases, highlighting how a simple compliance lapse can delay taxpayers’ money.

The details were shared in a written reply in the Lok Sabha, making it clear that PAN-Aadhaar linking is now critical for smooth tax processing.

What the government told Parliament
The issue came up through a set of questions raised by MPs Shri Karti P Chidambaram, Shri Dr Amar Singh, and Shri Benny Behanan in the Lok Sabha.

Responding to this, Minister of State for Finance Shri Pankaj Chaudhary provided detailed data on PAN inoperability, refunds, and grievances.

The Central Board of Direct Taxes (CBDT) on Tuesday issued updated guidelines for referencing computer-generated Document Identification Numbers (DIN) in income-tax communications. It states that any correspondence such as notices, letters, orders, draft orders, or summons issued by income-tax authorities to taxpayers must reference a DIN. The circular also lists practical exceptions where DIN referencing may not be possible, including technical difficulties, field enquiries outside the office, or system unavailability. In such cases, the communication must explicitly state the reason and require post-facto approval within 15 days by a competent authority.

The concept of Document Identification Number in income-tax proceedings was introduced by the CBDT in 2019 to ensure transparency, accountability, and an audit trail in departmental communications. It mandated that every notice, order, summons, or letter issued by the Income-tax Department must carry a computer-generated DIN, failing which such communication would be treated as invalid or deemed never to have been issued, except in limited specified circumstances.
Various high courts interpreted the circular strictly and quashed several reassessment notices and orders purely on technical grounds. Taxpayers relied heavily on this as a jurisdictional defect, while the tax department argued that DIN was only a procedural requirement and that minor lapses such as non-mention or incorrect mention should not invalidate otherwise lawful proceedings.

Today marks the beginning of the new financial year FY2026-27, which also means that the new Income-tax Act, 2025 has kicked in and replaced the decades-old Act rolled out in 1962. Meanwhile, the government has also notified all income tax return (ITR) forms for Assessment Year (AY) 2026-27, setting the stage for the upcoming filing season.

The Central Board of Direct Taxes (CBDT) has released ITR-1 to ITR-7, along with ITR-U and ITR-V, under the Income-tax Rules, 1962. These forms will be used to file returns for income earned in FY 2025-26.

Importantly, even though the new Income-tax Act, 2025 and revised rules will come into force from April 1, 2026, taxpayers will continue to file returns for this assessment year under the existing legal framework.

The Central Board of Direct Taxes said income from the transfer of investments made before April 1, 2017 will remain outside the ambit of general anti-avoidance rules (GAAR), providing clarity and relief to investors holding legacy assets.

In a notification issued late Tuesday night, the CBDT amended a Rule 128 of the Income-tax Rules, 2026, grandfathering gains from investments made before April 2017.

The amended rules state that GAAR provisions will apply to any arrangement that yields tax benefits on or after that date, regardless of when the arrangement was originally entered into.

The move is significant as it draws a clearer line between protected investments and arrangements open to tax scrutiny.

Several important income tax changes are scheduled to go into effect on April 1, 2026, providing taxpayers with a combination of relief and increased compliance requirements. However, it's important to note that these new tax rules, 2026 are applicable from Tax Year 2026-27 onwards. As for AY 2026-27 (FY 2025-26), income tax return (ITR) needs to be filed on or before July 31, 2026 by following the old tax rules, 1962 and old tax act, 1961.

For Tax Year 2026-27 i.e. from April 1, 2026 new rules like revised TDS and TCS provisions to changes in return filing timelines, buyback taxation, and new reporting formats, the updates will have a direct impact on tax planning and compliance for Tax Year 2026-27. Notably, concepts like the introduction of a "Tax Year", revamped income tax forms, and updated deduction limits signal a shift towards a more streamlined tax regime.

On March 26, 2026, the Income Tax Department clarified that one of the changes made through the government's amendments to the Finance Bill, 2026 introduces a surcharge on the additional income-tax that promoters have to pay on capital gains arising from buyback, in accordance with Section 68 of the Companies Act, 2013. The surcharge is set at 12%.

The Income Tax Department said on X (formerly Twitter): "It is clarified that Section 69 of the Income-tax Act, 2025 provides for tax rates only in respect of additional income tax on promoters in respect of capital gains on such buyback. Therefore, the rate of 12% will apply only on additional income-tax to be paid by the promoters on aforesaid capital gains mentioned in Section 69(2) (b)."

What does this mean for individuals who are not promoters of a listed company?
This means that for individuals who are non-promoters, surcharge as per normal provisions will apply, if applicable on such capital gains.

The income tax department on Monday said "banking company" governed by the provisions of the Banking Regulation Act, 1949, will deduct TDS on interest income beyond the prescribed threshold.

Under the Income Tax law, the tax is to be deducted at source if the interest income from bank/post office deposits exceeds Rs 50,000 for ordinary citizens, or Rs 1 lakh for senior citizens, in a financial year.

In a post on X, the income tax department said under Section 402 of the new Income Tax Act, 2025, a "banking company" refers to a company to which the provisions of the Banking Regulation Act, 1949, apply.

The Central Board of Direct Taxes has directed all Income Tax offices across the country to remain open on March 31, 2026, despite it being the holiday on account of Mahavir Jayanti.

The order, issued under Section 119 of the Income-tax Act, 1961, is primarily administrative but significant. March 31 marks the last day of the financial year 2025-26, a crucial deadline for both taxpayers and the department.

Officials said the decision is meant to clear pending assessments and departmental work, ensure smooth closure of accounts and facilitate last-minute compliance actions.

In simple terms, it’s a ‘no backlog’ push before the books close for the year.
Why March 31 matters so much

Every year, March 31 becomes a high-pressure deadline in the tax ecosystem. This is when advance tax payments must be fully settled, tax-saving investments are finalized and pending notices or compliance actions are addressed.

For the tax department, it’s also the time to wrap up scrutiny, reconcile data, and complete administrative targets.

A key provision in the newly notified Income-tax Rules, 2026 — effective April 1 — has brought back focus on the powers of tax officers to estimate a taxpayer’s income in certain situations.

Under Rule 9 of the new rules, the Assessing Officer (AO) can step in and determine income where it cannot be “definitely ascertained”, particularly in cases involving non-residents with income linked to India.

This includes income arising from assets, property, or business connections in India, where clarity is missing or records are insufficient.
What exactly has changed While the concept is not entirely new, the latest rules give it a more structured and simplified framework.

As Mihir Tanna, Associate Director of Direct Tax at SK Patodia & Associate LLP, explains: “If a taxpayer fails to file a return, ignores statutory notices (like the notice for scrutiny), the AO can make best judgment assessment wherein estimation will be done.”

He adds that in cases involving non-residents: “If a non-resident’s income from Indian operations (business connections, property, or assets) cannot be ‘precisely calculated,’ in case adequate are not available or satisfactory reply is not provided, the AO can estimate income using a percentage basis of receipts, global profit ratios, or other reasonable methods.”

Importantly, he notes: “The same was applicable earlier as well. The new rules are just more structured, non-repititive and simpler.”

The Finance Bill, 2026, which was passed by the Lok Sabha on Wednesday, has proposed a flat 12% surcharge on income from share buybacks, resulting in a higher effective tax rate for those with up to Rs 1 crore taxable income.

The Bill seeks to overhaul buyback taxation by shifting the tax burden to shareholders and treating proceeds as capital gains under Section 69 of the Income-tax Act, 2025. But it is the move towards a uniform surcharge—irrespective of income slabs—that is drawing the most attention.

Under the current framework, surcharge on capital gains is linked to income levels of individuals, with no surcharge up to Rs 50 lakh and 10% between Rs 50 lakh and Rs 1 crore. The proposed flat 12% levy would override this structure, leading to a higher effective tax rate for a wide base of individual shareholders.

The Lok Sabha on March 25 passed the Finance Bill, 2026, with key changes to income-tax litigation thresholds and compliance provisions, including a sharp increase in monetary limits for filing appeals and an expansion of the updated return framework.

“So these kind of changes which are brought through this Finance Bill, we are making it easier and greater ease of doing business for businesses and also for taxpayers,” finance minister Nirmala Sitharaman said in the Lok Sabha. She was responding to the Opposition’s claims that the finance ministry responsible for 27 percent of the Centre’s litigation.

Appeal thresholds raised

The monetary limits for filing I-T appeals has been raised across judicial forums.

The threshold for the Income Tax Appellate Tribunal (ITAT) has been increased to Rs 60 lakh from Rs 50 lakh, for high courts to Rs 2 crore from Rs 1 crore and for the Supreme Court to Rs 5 crore from Rs 2 crore, the minister said .

Income tax refund delays have once again become a talking point among taxpayers in FY 2025-26, with many still waiting for their money to hit their bank accounts months after filing returns.

The latest official data highlights the scale of the issue — even as the system has processed a majority of returns, a sizeable backlog continues to hold up refunds.

What the latest ITR data shows
As of March 24, 2026, 8,89,20,822 income tax returns have been filed and 8,77,86,233 returns have been verified. Of these, 8,50,59,270 verified returns have been processed.

This effectively leaves over 27 lakh verified returns yet to be processed, which directly impacts refund timelines for lakhs of taxpayers.

The Income Tax department on Monday said its e-filing portal will facilitate compliance under the old and Income Tax Acts, and all assessments, appeals, and other proceedings relating to earlier years will continue to be conducted under the old Act until their final resolution.

In a set of FAQs issued days before the implementation of the new Income Tax Act, 2025, the I-T department said taxpayers filing returns for AY 2026-27 (pertaining to the period governed by the old Act) in July 2026 will do so using the forms prescribed under the old Act.
At the same time, advance tax payments for Tax Year 2026-27, commencing from June 2026, will be made in accordance with the new Act.

The income-tax (I-T) department will roll out the new Income-Tax Act, 2025 from April 1 with only 54 of the 190 Forms, required under the new law, operational initially to ensure a smooth transition.

The remaining forms will be introduced in phases during financial year 2026-2027 (FY27), according to the 30th report of the Standing Committee on Finance tabled in both the Houses of Parliament last week.

Income-Tax Act 2025 Rollout
'Critical and time-sensitive requirements will be completed and made operational by March 31,' the Department of Revenue (DOR) said in its submission to the parliamentary panel chaired by Bhartruhari Mahtab.

On September 1, 2021, Mr Srinivasan had set up a private trust for his family. Throughout the year, the trust received shares worth Rs 15.78 crore as a contribution from Mr Srinivasan, and because of this, the trust treated this transaction as not taxable due to an exception in Section 56(2)(x) the Income Tax Act 1961.

From these shares, the trust earned a dividend of Rs 5,900 and reported this income in its income tax return (ITR) for AY 2022-23. However, the case was flagged for scrutiny with a tax notice issued under Section 143(2) dated June 1, 2023
The Income Tax officer, in the course of assessment, noted the shares received by the private trust through contribution from Mr Srinivasan and thereafter issued a show-cause notice on February 27, 2024, suggesting that the receipt of these assets should be classified as income from other sources' u/s 56(2)(x).

The Central Board of Direct Taxes on Friday notified the Income-tax Rules, 2026, laying down the operational framework for the revamped Income-tax Act, 2025, which comes into force from April 1.

The new rules introduce enhanced tax benefits for salaried individuals claiming house rent allowance (HRA), while simultaneously tightening disclosure norms by making it mandatory to declare the landlord-tenant relationship to avail deductions.

“These rules may be called the Income-tax Rules, 2026. They shall come into force on April 1, 2026,” the government said in a gazette notification.

India’s net direct tax collections grew 7.19% year-on-year to Rs 22.80 lakh crore as of March 17, 2026, according to the latest provisional data released by the tax department.

The overall net direct tax mop-up includes net corporate tax of Rs 10.91 lakh crore, non-corporate tax of Rs 11.32 lakh crore and securities transaction tax (STT) of Rs 55,717 crore.

Advance tax collections during the period rose 6.42% to Rs 11.13 lakh crore, with the increase partly moderated by weaker growth in non-corporate tax payments.

Before adjusting for refunds, gross direct tax collections stood at about Rs 27.15 lakh crore as of March 17, marking a 4.86% increase from Rs 25.89 lakh crore collected during the same period a year earlier.