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Mar 28, 2026
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Ignore ITR or notices Income tax department may now estimate your income under new rules
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.”
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