The Finance Bill 2026 has introduced a stringent graded fee system, placing significant financial weight on audit compliance. Under the proposed Section 428, taxpayers who fail to furnish mandated audit reports now face heavy penalties starting at Rs 75,000, scaling up to Rs 1,50,000 for prolonged delays.

The new framework categorises defaults into distinct tiers, prioritising audit and accountant reports with the highest fee structures. Under Section 63 of the legislation, if a taxpayer fails to get accounts audited or furnish the report, a fee of Rs 75,000 applies for delay of even a day. This doubles to Rs 1,50,000 if the failure continues beyond 30 days.

Under Section 172, a failure to furnish the required report from an accountant will attract a fee of Rs 50,000 for the first month, rising to Rs 1 lakh thereafter.

For standard returns of income, the fee is capped at Rs 1,000 for those with a total income up to Rs 5,00,000. For all other cases, the fee is set at Rs 5,000.

These rules are set to take effect from April 1, 2026, applying to the tax year 2026-2027 and all subsequent years. By replacing discretionary penalties with a fixed, “graded” fee mechanism, the government aims to provide taxpayers with absolute certainty regarding the cost of non-compliance.

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How did the Income Tax Department complete the “mammoth” task of rationalising and simplifying the huge Income Tax Act 1961 in just about six months, and then implementing the Select Committee’s voluminous suggestions in just one month? By cramming in 75,000 man-hours of work in that time and even putting probationers on the job, that’s how. 

The result was the hugely condensed and significantly more user-friendly Income Tax Act 2025.

“The announcement by the honourable Finance Minister was made on July 23, 2024 that within six months the entire process of simplification of the law, to make it more lucid, clear, and precise will be achieved,” R.N. Parbat, the Central Board of Direct Taxes (CBDT) member in charge of legislation, told The Hindu. “The task was given to the Department of Revenue and the CBDT. It was to be done in-house.” 

By August 14, the drafting committee under Chief Commissioner of Income Tax V.K. Gupta was formed, and that’s when the work began in earnest. Subcommittees were formed to look at every aspect of the law with a view to remove redundant sections and review the rest.

As the scope of the work became more clear — the original 1961 Act had 819 sections — the number of subcommittees also grew. By the end of it, there were 26 different subcommittees, according to Mr. Parbat. 

Apart from this, the process also incorporated a review committee that was tasked with reviewing the work done by the drafting subcommittees. 

“Once the review committee completed its work, it came to the Tax Policy and Legislation [TPL] division of the CBDT,” Mr. Parbat explained. “And after that, when a draft was formed, it was reviewed by another set of senior officers of the CBDT.” 

Throughout this, the Revenue Secretary and the Finance Minister took regular briefings with the drafting committee and the TPL, while the Ministry of Law was also consulted.  

“The work was broadbased, with more than 150 officers of the Department working on it,” Mr. Parbat said. “That included our Chairman, who was from the 1988 batch. At the same time, the junior-most person on the team was from the 2018 batch. Officers from all over India were selected for this purpose. We also involved our probationers who were undergoing training in Nagpur involved in the process.”

The draft of the Bill was laid before Parliament on February 13, 2025, six months after the drafting committee was formed. The number of chapters has been slashed from 47 to 23 and the number of sections from 819 to 536.

The new Bill included 57 tables as explanations, up from 18 and 46 formulae compared to the previous six. The language was greatly simplified, jargon and archaic words such as ‘notwithstanding’ were removed as far as possible, and examples were provided where needed.

To put this in context, the Parliamentary Select Committee that was tasked with reviewing these changes took five months to submit its report. 

“They forwarded around 1,312 suggestions to us, so again our TPL division officers along with the core committee members of the drafting committee formulated the written replies and submitted them to the Select Committee,” Mr. Parbat said. 

After receiving the written and oral replies from the revenue secretary, the chairman of the CBDT, Mr. Parbat and his team, along with the core members of the drafting committee, the Standing Committee submitted its report to Parliament on July 16, 2025.

The revised Bill was then passed in Parliament on August 12, 2025 — just one year after the drafting committee was formed. With the U.K. and Australia having completed similar exercises in more than four years, did the CBDT need more time? 

“The process was started and completed within the time given to us, so there is no question any longer of whether we would have preferred more time to do it,” Mr. Parbat said. “It was a mammoth task that involved 75,000 man-hours, so whether you put it in two years or six months, that is the amount of work that was needed.”

Published – August 31, 2025 03:26 pm IST

New Delhi:

The Direct Tax Code – a new income tax bill meant to simplify compliance for individual taxpayers – will be introduced separately, and not as part of the Union Budget 2025 to be delivered by Finance Minister Nirmala Sitharaman on Saturday morning, sources have told NDTV.

There had been reports the new tax code, or DTC, would be read out with the budget speech.

Talk of a new direct tax code emerged when Ms Sitharaman presented the full 2024/25 budget in July; then she had said the goal was to make current income tax laws simpler to read and understand, and reduce the number of pages of the I-T Act of 1961 by a staggering 60 per cent.

The 1961 Act – which deals with imposition of direct taxes, i.e., personal and corporate tax, as well as those on securities transactions, gifts, and wealth – has 23 chapters and 298 sections.

It is also expected to calculating tax amount and filing returns easier and, among the biggest likely changes, will also scrap the concept of financial year (FY) vis-a-vis accounting year (AY).

It is further expected that income from mutual funds and from investments in the Life Insurance Corporation of India, or LIC, will be taxed at five per cent. Both are exempted as of now.

There is also talk of a flat 15 per cent tax on dividends earned.

Sources then had said the new revised law would be introduced in the next Budget session of Parliament, i.e., which begins Friday with the tabling of the annual economic survey.

Before Ms Sitharaman had announced the overhaul of the I-T Act, the CBDT, or Central Board of Direct Taxes set up an internal committee to oversee the review; this included establishing 22 specialised sub-committees to evaluate various aspects of the old law.

Also, in October the centre invited members of the public, including stakeholders and subject experts, to offer their views and recommendations. By January, some 7,000 were received.

With input from agencies

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Today, March 15, 2024, marks the final deadline for taxpayers in India to settle their fourth and final installment of advance tax for the financial year 2023-24. Missing this deadline can result in penalties and interest charges.

Advance tax allows taxpayers to spread out their income tax payments throughout the year, rather than paying a large sum at the end of the financial year. This system ensures a steady flow of tax revenue for the government.

Who Needs to Pay Advance Tax?

Salaried individuals, freelancers, and businesses: If your total tax liability is expected to be more than Rs 10,000 for the financial year, you are required to pay advance tax.

Senior citizens: Those aged 60 and above who do not have business income are exempt. However, senior citizens with business income must pay an advance tax.

Presumptive income taxpayers: Businesses and professionals under the presumptive taxation scheme (sections 44AD and 44ADA) have the option to pay their entire advance tax in one go by March 15th or by March 31st.

How To Pay Advance Income Tax?

Eligible taxpayers are required to make advance income tax payments in four installments throughout the financial year, typically in June, September, December, and March. These payments can be made conveniently online via either the official website of the Income Tax Department (incometaxindia.gov.in) or the National Securities Depository.

Act Now To Avoid Penalties

The Income Tax Department urges all taxpayers to settle their advance tax dues before the deadline.
Failure to do so can lead to interest charges under sections 234B and 234C of the Income Tax Act.

For more information on advance tax and how to calculate your liability, taxpayers can visit the Income Tax Department’s website.

Minister of State for Finance Pankaj Choudhary. File

The number of Hindu Undivided Families (HUFs) availing tax benefits under the Income Tax Act stood at almost 8.76 lakh in 2022-23, the lowest in at least five years. The impact on their tax treatment under a Uniform Civil Code (UCC) has not yet been examined, the Finance Ministry informed Parliament on July 25.

Responding to a query on whether the Government has assessed the impact of Uniform Civil Code on tax benefits to HUFs in the country from Janata Dal MP Ram Nath Thakur, Minister of State for Finance Pankaj Choudhary said there has been no such assessment “as there is no such Code at present.”

Under the Income Tax Act, an HUF is treated as a ‘person’ and is assigned a separate entity for the purpose of assessment. Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. Jain and Sikh families, even though they are not governed by the Hindu Law, are also treated as HUFs under the Act.

While there were more than 9.25 lakh HUFs who availed tax benefits in 2020-21, this number dropped to around 8.77 lakh in 2021-22 and further to a little under 8.76 lakh families last year.

A salesman watches TV screens during the live telecast of Union Budget 2023 by Finance Minister Nirmala Sitharaman in Ahmedabad on Wednesday.
| Photo Credit: VIJAY SONEJI

The Union Budget 2023-24 has proposed certain changes to the Income Tax search and seizure provisions in view of the increased use of technology and digitisation in the management and maintenance of accounts, digitisation of data, cloud storage and other associated aspects.

Section 132 of the Income-Tax Act pertains to the procedure for the search and seizure to be followed by the agency.

The document said: “In the recent past, due to the increased use of technology and digitisation in every aspect including management and maintenance of accounts, digitisation of data, cloud storage etc., the procedure for search and seizure has become complex, requiring the use of data forensics, advanced technologies for decoding data etc., for complete and proper analysis of accounts.”

Similarly, “there is an increasing trend of undisclosed income being held in a vast variety of forms of assets or investments in addition to immovable property. Valuation of such assets and decryption of information often require specific domain experts like digital forensic professionals, valuers, archive experts etc. In addition to this, services of other professionals like locksmiths, carpenters etc., are also required in most of the cases, due to typical nature of the operations”.

Accordingly, the government has proposed to amend the relevant provisions of the section to ensure that during the course of I-T searches, the authorised officer may be able to requisition the services of any other person or entity, as approved by the Principal Chief Commissioner or the Chief Commissioner, the Principal Director General or the Director-General, in accordance with the procedure prescribed by the Board in this regard, for assistance during the search.

It has also been proposed that during or post search, the officer may make a reference to any person, entity or authorised valuer to estimate the fair market value of the property in the manner prescribed and submit a report within 60 days from the receipt of reference.

If approved, the amendment will take effect from April 1.

“Consequent to the changes in 2021, the assessment or reassessment in consequence to search is now performed under Section 147 of the Act and provisions of Sections 153A and 153B are no longer applicable. The timelines for completing assessment or reassessment in search cases are linked to the execution of the last of the authorisations during such procedure, in order to establish the day of conclusion of search proceedings, and what constitutes as last authorisation is provided in Section 153B,” it said.

As the provisions of Section 153B are no longer applicable, the government has proposed to provide the meaning of execution of last authorisation under Section 132 itself. “This amendment will take effect retrospectively from the April 1, 2022,” it said.