FINANCE BILL, 2026

Summary of Proposed Income Tax Amendments

As proposed in Lok Sabha

The Finance Bill, 2026, as introduced in the Lok Sabha, proposes several significant amendments to the Income Tax Act, 1961. These changes encompass retrospective clarifications, procedural reforms, tax reliefs, and extension of incentives. Set out below is a structured summary of each key proposal.

A.  RETROSPECTIVE AMENDMENTS & PROCEDURAL REFORMS

1.  Retrospective Clarification on Approvals — New Section 292BC (w.e.f. 01.04.2021)
A new Section 292BC is being inserted to clarify that approvals granted by a higher authority under the Income Tax Act are purely administrative in nature. Accordingly, no assessment shall be held invalid merely on account of such approval. The approvals under Section 153D and similar provisions are thereby confirmed to be administrative and not substantive requirements.

2.  Amendment to Section 150 — Lifting Limitation Bar (Retrospective w.e.f. 01.02.2026)
Section 150 is being amended retrospectively to lift the bar of limitation under Section 149 for reopening assessments that are a consequence of any order passed under the Income Tax Act whereby an earlier assessment was quashed. Additionally, in all cases covered under Section 150, a specific time limit of 3 months from the end of the quarter in which the court order is received by the Principal Commissioner of Income Tax (PCIT) has been prescribed for issuance of notice under Section 148.

3.  Minimum 30 Days to File Return Under Section 148
A statutory minimum of 30 days has been prescribed for an assessee to file a return of income in response to a notice issued under Section 148. This ensures adequate time for taxpayers to respond to reopening notices.

4.  Removal of TRO's Power to Arrest Assessee-in-Default
The power of the Tax Recovery Officer (TRO) to arrest an assessee and detain them in prison in cases where the assessee is deemed to be an assessee-in-default has been removed. This is a significant taxpayer-friendly measure aimed at decriminalising tax recovery proceedings.

5.  Digital Transmission of ITAT Orders (Effective 01.10.2026)
With effect from 01.10.2026, orders passed by the Income Tax Appellate Tribunal (ITAT) shall be transmitted to the Jurisdictional PCIT/CIT through a designated portal, in place of physical transmission. This amendment addresses limitation-related issues arising from the decision in the Odeon Builders case and ensures timely receipt of ITAT orders.

B.  TAX RATES & LEVY

1.  Surcharge on Buyback — Standardised at 12%
The rate of surcharge applicable on buyback transactions has been fixed at a uniform 12%. This replaces the earlier slab-based surcharge structure and brings greater uniformity and predictability for corporate taxpayers undertaking share buybacks.

C.  INCENTIVES & DEDUCTIONS

1.  Eligible Start-Up Deduction — Turnover Limit Increased to ₹300 Crores
The turnover limit for start-ups eligible to claim deduction under the relevant provisions has been raised from ₹100 crores to ₹300 crores. This amendment gives effect to the revised DPIIT Notification dated 04.02.2026 and is intended to widen the scope of the start-up tax incentive regime.

2.  Extension of Section 80LA Deduction for Offshore Banking Units
The benefit of deduction under Section 80LA for Offshore Banking Units (OBUs) has been extended for an additional 10 years, even in cases where the initial 10-year period under the earlier law expired on 31.03.2025. Note: A similar extension for units operating in the International Financial Services Centre (IFSC) appears to be absent from the current amendment, which may need to be addressed.

D.  EXEMPTIONS

1.  Exemption of Income of New Development Bank

The income of the New Development Bank (NDB) has been exempted from income tax. This is in line with the treatment accorded to other international financial institutions and bilateral development banks operating in India.

2.  Exemption for Individual/HUF — Land Transfer Under Andhra Pradesh Land Pooling Scheme
Income arising to an individual or Hindu Undivided Family (HUF) from the transfer of land held as on 02.06.2014 under the Andhra Pradesh Land Pooling Scheme has been exempted from income tax. This provides relief to those who had pooled their land under the scheme for the development of Amaravati and allied areas.