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This is a straightforward but important ruling from ITAT Delhi that every small business owner and kirana trader should know about.

Background

Ashok Kumar from Hisar, Haryana ran a small retail business selling fruits and vegetables.

The tax department received information that he had made substantial bank transactions but had not filed an ITR for AY 2017-18. A notice was issued under Section 148 to reopen the case.

In response, Ashok filed a belated return declaring total income of Rs. 2,13,177 on a turnover of Rs. 90,12,856. That works out to a profit margin of about 2.36%.

He also submitted his cash book, bank account statements, and income computation to support his declared income.

What the Tax Department said

The Assessing Officer rejected his declared income and applied presumptive taxation under Section 44AD.

Under Section 44AD, if a small business does not maintain audited books, the law presumes income at 8% of turnover (or 6% for digital receipts).

Since Ashok had not got his books audited under Section 44AB, the AO calculated income at 8% of his turnover:

• 8% of Rs. 90,12,856 = Rs. 7,21,028
• Declared income = Rs. 2,13,177
• Addition made = Rs. 5,07,851

The first appeal before CIT(A)/NFAC also upheld this addition.

What the taxpayer argued

Two key points were raised on behalf of the assessee:

First, Ashok never opted for presumptive taxation under Section 44AD. The scheme does not apply automatically just because someone is a small trader.

Second, the Assessing Officer accepted the turnover as declared and never rejected or disturbed the books of account. If the books were accepted, the profit shown in those books should also be accepted.

Additionally, since Ashok's total income did not exceed the basic exemption limit, the mandatory audit requirement under Section 44AB did not apply to him at all.

What the court decided

ITAT Delhi agreed with the assessee on both counts.

The Tribunal noted that the books of account were neither rejected nor disturbed by the department at any stage. The turnover itself was accepted.

It also confirmed that since the assessee never opted for Section 44AD, the department could not unilaterally apply presumptive taxation to override his actual books.

The entire addition of Rs. 5,07,851 was deleted.

Appeal allowed.

Key takeaway

Section 44AD is optional, not automatic. If a small business owner maintains books and does not opt into presumptive taxation, the department cannot forcibly apply the 8% rate.

If the Assessing Officer accepts your books and turnover without rejection, the declared income from those books must be accepted too.

For traders whose income falls below the taxable limit, Section 44AB audit requirements do not kick in either.

India has a new one-time disclosure scheme for foreign assets and income. It opened on 16th August 2026 and closes on 31st December 2026. If you have foreign assets that were never declared, this window matters.

Background

The scheme is called FAST-DS — Foreign Assets of Small Taxpayers Disclosure Scheme, 2026. It comes under Chapter IV of the Finance Act, 2026.

The idea is straightforward: if you have foreign bank accounts, property, shares, or other assets outside India that were never reported to the tax department, you can now come clean voluntarily, pay a fixed charge, and get immunity from prosecution under the Black Money Act, 2015.

The valuation date for all assets is 31st March 2026.

Who can declare

The scheme is open to:

• Indian residents who have undisclosed foreign assets or income
• Non-residents or RNORs, if they were resident in India either in the year the income was earned or in the year the asset was acquired

So even if you have moved abroad, you may still be eligible depending on when the asset was acquired.

What can be declared

There are two buckets.

Bucket 1: Undisclosed foreign assets or income that was never offered to tax

• Total value must not exceed ₹1 crore as on 31st March 2026
• You pay 30% tax on the value, plus an equal additional amount — effectively 60% of the declared value
• Example: ₹60 lakh in a foreign bank account plus ₹20 lakh in undisclosed income means ₹48 lakh payable

Bucket 2: Foreign assets that were already taxed but never reported in the foreign assets schedule of your ITR

• Total value must not exceed ₹5 crore
• You pay a flat fee of ₹1 lakh

How your foreign assets are valued

All values are reported in Indian Rupees, converted at RBI reference rates as on 31st March 2026.

The general rule is that fair market value (FMV) is the higher of the cost of acquisition or the open market price on the valuation date, supported by a valuer's report. If no valuation report is obtained, indexed cost of acquisition is used as FMV.

Here is how specific asset types are treated:

Foreign bank accounts: Value is the sum of all deposits made from the date the account was opened up to 31st March 2026. Withdrawals that were later re-deposited into the same account are excluded to avoid double counting. If the account was partly declared under the earlier Black Money Act window in 2015, only deposits made after that declaration are counted.

Immovable property: Higher of cost of acquisition or open market value as per a valuation report from a valuer recognized by the government of the country where the property is located.

Quoted shares and securities: Higher of cost of acquisition or the average of the lowest and highest price on the valuation date on an established securities market. If there was no trading on that date, the nearest preceding trading date is used.

Unquoted equity shares: Higher of cost of acquisition or a formula-based value derived from the company's book value and net assets.

Jewelry, bullion, artwork: Higher of cost of acquisition or open market price on the valuation date, supported by a recognized valuer's report.

Foreign partnership or LLP interest: Valued based on the net assets of the entity, allocated among partners in proportion to capital contribution and profit-sharing ratio.

One important rule on double counting: if sale proceeds from one asset were used to acquire another, the value of the original asset is reduced by the amount reinvested. This prevents the same money being counted twice.

Valuation tolerance: For assets other than bank accounts, a difference of up to 20% between your declared value and the value later determined by the tax authority will not by itself invalidate your declaration.

How the process works

• File Form 1 electronically before 31st December 2026. You can declare multiple assets in a single form. Attach documents evidencing acquisition and valuation reports where applicable.
• The tax authority issues a payment order in Form 2 within one month
• Pay within two months of receiving Form 2
• Report payment via Form 3, and receive final confirmation in Form 4

If you cannot pay in time, a further two-month extension is available with 1% simple interest per month on the amount due. Beyond that outer limit, the scheme benefit lapses entirely for that declaration.

What immunity do you get

Once you declare and pay:

• No further tax or penalty under the Black Money Act, 2015
• No prosecution for the declared assets or income
• The declared amount is not added back to your total income under the Income Tax Act or the Black Money Act

If assessment proceedings for the same asset or income are already pending, the Assessing Officer must take your declaration into account while finalizing the order.

One important restriction: once you declare, you cannot claim rectification, revision, or any relief in respect of any assessment already completed for the same income or asset.

Where the scheme does not apply

• Assets that are proceeds of crime under the Prevention of Money-laundering Act, 2002
• Assets for which assessment has already been completed under the Black Money Act, 2015

Key takeaway

The 60% charge on Bucket 1 assets is steep. But it comes with a clean slate and immunity from prosecution. For anyone sitting on unresolved foreign asset exposure under ₹1 crore, this is likely the lowest-risk path to regularization before enforcement catches up.

The window is open until 31st December 2026 and the entire process is online.

FAQs document can be accessed from here: https://www.incometaxindia.gov.in/documents/81799/15520974/FAST-DS-FAQs.pdf

India has a new one-time disclosure scheme for foreign assets and income. It opened on 16th August 2026 and closes on 31st December 2026. If you have foreign assets that were never declared, this window matters.

Background

The scheme is called FAST-DS — Foreign Assets of Small Taxpayers Disclosure Scheme, 2026. It comes under Chapter IV of the Finance Act, 2026.

The idea is straightforward: if you have foreign bank accounts, property, shares, or other assets outside India that were never reported to the tax department, you can now come clean voluntarily, pay a fixed charge, and get immunity from prosecution under the Black Money Act, 2015.

The valuation date for all assets is 31st March 2026.

Who can declare

The scheme is open to:

• Indian residents who have undisclosed foreign assets or income
• Non-residents or RNORs, if they were resident in India either in the year the income was earned or in the year the asset was acquired

So even if you have moved abroad, you may still be eligible depending on when the asset was acquired.

What can be declared

There are two buckets.

Bucket 1: Undisclosed foreign assets or income that was never offered to tax

• Total value must not exceed ₹1 crore as on 31st March 2026
• You pay 30% tax on the value, plus an equal additional amount — effectively 60% of the declared value
• Example: ₹60 lakh in a foreign bank account plus ₹20 lakh in undisclosed income means ₹48 lakh payable

Bucket 2: Foreign assets that were already taxed but never reported in the foreign assets schedule of your ITR

• Total value must not exceed ₹5 crore
• You pay a flat fee of ₹1 lakh

How your foreign assets are valued

All values are reported in Indian Rupees, converted at RBI reference rates as on 31st March 2026.

The general rule is that fair market value (FMV) is the higher of the cost of acquisition or the open market price on the valuation date, supported by a valuer's report. If no valuation report is obtained, indexed cost of acquisition is used as FMV.

Here is how specific asset types are treated:

Foreign bank accounts: Value is the sum of all deposits made from the date the account was opened up to 31st March 2026. Withdrawals that were later re-deposited into the same account are excluded to avoid double counting. If the account was partly declared under the earlier Black Money Act window in 2015, only deposits made after that declaration are counted.

Immovable property: Higher of cost of acquisition or open market value as per a valuation report from a valuer recognized by the government of the country where the property is located.

Quoted shares and securities: Higher of cost of acquisition or the average of the lowest and highest price on the valuation date on an established securities market. If there was no trading on that date, the nearest preceding trading date is used.

Unquoted equity shares: Higher of cost of acquisition or a formula-based value derived from the company's book value and net assets.

Jewelry, bullion, artwork: Higher of cost of acquisition or open market price on the valuation date, supported by a recognized valuer's report.

Foreign partnership or LLP interest: Valued based on the net assets of the entity, allocated among partners in proportion to capital contribution and profit-sharing ratio.

One important rule on double counting: if sale proceeds from one asset were used to acquire another, the value of the original asset is reduced by the amount reinvested. This prevents the same money being counted twice.

Valuation tolerance: For assets other than bank accounts, a difference of up to 20% between your declared value and the value later determined by the tax authority will not by itself invalidate your declaration.

How the process works

• File Form 1 electronically before 31st December 2026. You can declare multiple assets in a single form. Attach documents evidencing acquisition and valuation reports where applicable.
• The tax authority issues a payment order in Form 2 within one month
• Pay within two months of receiving Form 2
• Report payment via Form 3, and receive final confirmation in Form 4

If you cannot pay in time, a further two-month extension is available with 1% simple interest per month on the amount due. Beyond that outer limit, the scheme benefit lapses entirely for that declaration.

What immunity do you get

Once you declare and pay:

• No further tax or penalty under the Black Money Act, 2015
• No prosecution for the declared assets or income
• The declared amount is not added back to your total income under the Income Tax Act or the Black Money Act

If assessment proceedings for the same asset or income are already pending, the Assessing Officer must take your declaration into account while finalizing the order.

One important restriction: once you declare, you cannot claim rectification, revision, or any relief in respect of any assessment already completed for the same income or asset.

Where the scheme does not apply

• Assets that are proceeds of crime under the Prevention of Money-laundering Act, 2002
• Assets for which assessment has already been completed under the Black Money Act, 2015

Key takeaway

The 60% charge on Bucket 1 assets is steep. But it comes with a clean slate and immunity from prosecution. For anyone sitting on unresolved foreign asset exposure under ₹1 crore, this is likely the lowest-risk path to regularization before enforcement catches up.

The window is open until 31st December 2026 and the entire process is online.

FAQs document can be accessed from here: https://www.incometaxindia.gov.in/documents/81799/15520974/FAST-DS-FAQs.pdf

This case is a hard reminder that FEMA rules do not bend for good intentions, and NRIs dealing with Indian property need to get a few things right from the start.

Background

The case is Martin Jebarathna Doss vs RBI, decided by the Delhi High Court on 11 September 2024.

Martin, an NRI, sold agricultural land in India and received ₹1.62 crore as sale consideration.

Two FEMA violations were identified:

• Purchase of agricultural land without prior RBI approval
• Cash component accepted as part of the sale consideration

Final penalty imposed: ₹41,04,675

Martin argued he had acted in good faith. The Delhi HC was not convinced. It held that RBI had followed its own Master Direction correctly and dismissed the petition. Ignorance of FEMA is not a valid defence.

What went wrong

The two violations here are worth understanding separately.

On buying agricultural land

• NRIs and OCIs cannot purchase agricultural land, plantation property, or farmhouse in India
• This restriction exists under FEMA and requires specific RBI approval, which is rarely granted
• The purchase itself was the first violation, regardless of what happened at the time of sale

On the cash component

• Property transactions must be conducted through banking channels
• Accepting any cash as part of the sale price is a FEMA violation
• This applies even if the cash portion looks small relative to the total deal value

What the court decided

Delhi HC upheld the penalty in full.

• RBI had correctly applied the Master Direction on FEMA
• Martin's claim of good faith was not a sufficient ground for relief
• Petition dismissed

Eight things NRIs must get right when dealing with Indian property:

1. Check your real returns in the right currency

Indian property can look attractive in dollar terms because of the rupee's depreciation. But when sale proceeds are converted back, the actual returns in the currency you spend in can look very different. Always evaluate returns in your home currency.

2. Know your bank account type before routing funds

• NRE or FCNR accounts: full repatriation allowed, no annual cap
• NRO account: repatriation capped at USD 1 million per year
• Capital gains proceeds also fall within this USD 1 million limit for NRO accounts

3. Route sale proceeds correctly

Sale proceeds from Indian property must be credited to your NRO account. This is RBI's consistent regulatory position. Routing proceeds to an NRE account directly is not the standard path and can trigger FEMA scrutiny.

4. Understand TDS before you sell

• NRI seller: LTCG rate of 12.5% (post 23 July 2024 Budget), plus surcharge and cess
• Resident seller: 1% TDS under Section 194-IA on sales above ₹50 lakh
• Buyers may deduct TDS on the full sale value unless the NRI holds a lower or nil TDS certificate under Section 197

5. Know your options when transferring property to family

A sale deed is not the only route. Depending on the situation, a gift deed, relinquishment deed, or family settlement deed may be more efficient from a tax and stamp duty perspective. Rules vary by state.

6. Get your Power of Attorney in order

• Attestation must happen at an Indian embassy, consulate, or through apostille
• The POA must then be registered at the sub-registrar's office in India
• An unregistered POA may not hold up legally for property transactions

7. If you are renting out your Indian property

• The tenant must deduct 30% TDS before paying rent to an NRI landlord, plus surcharge and cess
• A lower rate may apply if a Tax Residency Certificate and Form 10F are submitted to claim DTAA benefit
• Tenants who miss this TDS deduction face interest and penalties

8. Keep these documents ready

• PAN card (absence triggers higher TDS under Section 206AA)
• Original sale deed or certified copy
• Legal heir certificate if the property was inherited
• Freehold conversion deed if applicable
• TRC for DTAA claims

Key takeaway

FEMA does not care about intent. Buying restricted categories of property or accepting cash in a property deal can result in a penalty that runs into lakhs, and courts have consistently upheld RBI's authority here.

If you are an NRI planning to buy, sell, rent, or transfer Indian property, the compliance steps are non-negotiable. A qualified tax expert and property lawyer are worth consulting before the transaction, not after.

This is a recent ITAT Ahmedabad ruling that draws an important line between under-reporting and misreporting of income under Section 270A.

Background

Kaushal Taparia, a taxpayer from Vadodara, filed his return for AY 2019-20 declaring income of Rs. 7,13,850. He had claimed a deduction of Rs. 1,00,000 under Section 80GGC for a donation made to a political party called Yuva Jan Jagriti Party.

Later, a search operation was conducted on several Registered Unrecognized Political Parties (RUPPs). Yuva Jan Jagriti Party was one of them. The findings suggested these parties were issuing bogus donation receipts as accommodation entries.

Based on this, the case was reopened under Section 148 and the deduction was disallowed. Total income was reassessed at Rs. 8,13,850.

What the Tax Department said

The Assessing Officer did not stop at disallowing the deduction. Penalty proceedings were also initiated under Section 270A.

The penalty was levied at 200% of tax on the under-reported income of Rs. 1,00,000, working out to Rs. 41,602.

The basis for the 200% rate was that this was treated as misreporting of income, not just under-reporting.

The CIT(A) upheld this penalty when the taxpayer appealed.

What the taxpayer argued

The taxpayer's position was that the deduction had been claimed openly in the return. There was no concealment or false particulars. The claim was made on the belief that the donation qualified under Section 80GGC.

Just because the Assessing Officer later rejected the deduction does not mean there was misreporting.

Also, the fact that the taxpayer did not fight the quantum addition separately should not be read as an admission of guilt.

What the court/authority decided

The Tribunal relied on a coordinate bench ruling in Hiro Mulchand Tanwani vs. ITO (ITA No. 110/AHD/2026, dated 15.05.2026) which had dealt with an identical set of facts.

The key findings were:

Section 270A draws a clear distinction between under-reporting and misreporting. Misreporting applies only in specific situations listed under sub-section (9), such as suppression of facts, false entries, or fabricated documents.

In this case, the donation was disclosed in the return. The deduction was claimed transparently. There was no material to show the taxpayer had suppressed anything or submitted false evidence.

A deduction claim that turns out to be inadmissible is not the same as misreporting.

The Tribunal also noted a procedural lapse: the Assessing Officer had not specified which limb of Section 270A(9) was being invoked to treat this as misreporting. That by itself was enough to make the penalty unsustainable.

The penalty of Rs. 41,602 was deleted.

Key takeaway

A disallowed deduction does not automatically become misreporting.

For a 200% penalty under Section 270A to stick, the department must show deliberate concealment, false particulars, or suppression of facts, not just that a claim was rejected.

If a deduction is claimed openly in the return and the only issue is whether it qualifies, that falls at most under under-reporting, not misreporting.

Not challenging a quantum addition in assessment does not mean the taxpayer admits to concealment for penalty purposes.

A lot of Indians are quietly building US stock portfolios through platforms like Groww, INDmoney, and Vested. Apple, Nvidia, SPY, QQQ. The returns have been good. What most people haven't thought about is what happens to that money when they are no longer around.

Background

The US levies a federal estate tax on assets held by non-resident aliens at the time of death.

The rules are straightforward but brutal for Indian investors:

• Exemption threshold: just $60,000
• Tax rate above that: progressive, going up to 40%
• Assets covered: US corporate stocks (Apple, Microsoft, Tesla, etc.), US-domiciled ETFs (SPY, VOO, QQQ, VTI), US mutual funds, US real estate, and any tangible property physically located in the US

These are called "US-Situs" assets. If you hold them at death, the IRS has a claim.

What the tax actually looks like

Take a $200,000 US portfolio (roughly ₹1.65 crore at current rates).

• First $60,000: exempt
• Remaining $140,000: taxed at progressive rates
• Estimated estate tax: approximately $45,000 or more
• Effective loss to your heirs: nearly 23% of the total portfolio value

For a ₹1 crore US portfolio, the hit can be ₹25 to 30 lakh. That money does not go to your family. It goes to the US Treasury.

Why India does not protect you here

Two facts that most investors are not aware of:

• India abolished its own estate tax back in 1985, so there is no domestic equivalent to worry about
• There is no US-India estate tax treaty in place

This matters because tax treaties are what give residents of one country reduced exposure to another country's estate or inheritance taxes. Countries like the UK, Germany, Japan, and Australia have such treaties with the US. India does not.

Indian investors face the full weight of US federal estate tax rules, with only the $60,000 exemption to fall back on. The legal basis for this is US Internal Revenue Code Section 2101, which specifically governs estate tax on non-resident aliens.

What investors can do

The workaround that cross-border tax advisors commonly recommend is Ireland-domiciled UCITS ETFs.

These track the same underlying indices:

• CSPX tracks the S&P 500 (iShares Core S&P 500 UCITS ETF)
• VUSA tracks the S&P 500 (Vanguard S&P 500 UCITS ETF)
• IWDA tracks the MSCI World (iShares MSCI World UCITS ETF)

Because these funds are legally domiciled in Ireland and not in the US, they are not classified as US-Situs assets. There is no US estate tax exposure on them for Indian investors.

There is also a dividend tax benefit. Direct US holdings attract 25% withholding tax on dividends for Indian investors. Because of the US-Ireland tax treaty, Ireland-domiciled ETFs bring that down to 15%. Better after-tax returns on top of the estate tax protection.

These ETFs are listed on the London Stock Exchange and are accessible to Indian investors through the Liberalized Remittance Scheme (LRS) route.

Key takeaway

If your US portfolio crosses $60,000, you already have an estate tax exposure that your family will have to deal with.

Shifting new investments to Ireland-domiciled UCITS ETFs eliminates US estate tax on those holdings entirely, while still giving you exposure to the same indices.

For anyone holding existing US-Situs assets, restructuring needs careful planning. Consult a cross-border tax advisor before making any moves.

A lot of people assume that paying or receiving money through UPI, NEFT, RTGS or IMPS puts them on the Income Tax Department's radar. That is not how it works. The payment method itself is not the trigger. What actually matters is whether the transaction can be explained using the income you have declared in your ITR.

Background

Digital transactions do not automatically lead to an income tax notice. Scrutiny usually arises when the value or frequency of transactions does not match the income reported in the ITR.

Tax experts say the Income Tax Department is increasingly using data from multiple sources to identify discrepancies between a taxpayer's reported income and financial activity. The focus is not on the payment method but on whether the transaction can be explained and reconciled with the taxpayer's declared financial position.

What can actually attract scrutiny

A common trigger is when substantial amounts are credited to a bank account but are not reflected as business receipts, professional income, investment proceeds or other legitimate sources in the ITR.

Other common situations that can raise questions:

• Frequent or sizeable digital credits that appear inconsistent with the turnover or income reported by a business or professional
• A high-value property purchase funded through NEFT or RTGS where the taxpayer cannot establish the source of funds
• Transactions where TDS has been deducted and reported in Form 26AS or the AIS, but the corresponding income has not been disclosed appropriately in the tax return
• Capital gains from shares, mutual funds or other investments reported by brokers and depositories that do not match what the taxpayer has declared in the ITR

How the department tracks this

The tax department receives information under the Statement of Financial Transactions framework from banks, financial institutions, mutual funds, property-related authorities and other specified reporting entities. This information is matched electronically against the taxpayer's PAN and other identifiers. The department then compares information appearing in AIS and Form 26AS with the income disclosed in the ITR.

Scrutiny can also involve comparing property purchases with declared income and sources of investment, while business receipts can be checked against GST information, TDS returns and banking transactions.

What taxpayers can do

• Review AIS and Form 26AS before filing the ITR. If information in AIS is incorrect, use the available feedback mechanism.
• Maintain a clear source-of-funds trail, particularly for large investments and payments. Bank statements, investment records and supporting documents can help establish the origin of funds if questions arise.
• Keep personal and business transactions separate wherever possible. Businesses and professionals should maintain dedicated accounts to make reconciliation easier.
• Ensure that income, TDS, capital gains, investments and other reportable transactions are accurately reflected in the ITR.

Key takeaway

The payment method is never the problem. The mismatch between what the department sees in AIS or Form 26AS and what you have reported in your ITR is what leads to notices.

If your books are clean and your filings are accurate, digital transactions of any size should not be a concern. The risk is almost always a paperwork and disclosure issue, not a technology one.

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This is a landmark ruling from ITAT Bengaluru (July 2026) that draws a clear line between two very different tax treatments for stock options. The case is Pramod Kumar Jain vs DCIT (ITA 3034/BANG/2025).

Background

Pramod Kumar Jain was an employee of Flipkart Internet Private Limited (FIPL), an Indian subsidiary of Flipkart Singapore.

Between FY16 and FY20, he was granted 40,536 stock options under the FSOP 2012 scheme.

In August and September 2019, Flipkart offered to repurchase vested options directly from employees.

Out of his total options, 2,653 were repurchased by Flipkart for ₹2.33 crore.

Critically, these options were never exercised. No shares were ever allotted to Pramod.

He declared the ₹2.33 crore as Long Term Capital Gains in his return, taxable at 20%.

What the Tax Department said

His Form 16 showed the same amount as a perquisite under Section 17(2), which attracts tax at 30%.

The Assessing Officer relied on the Form 16 and the Letter of Offer to treat the entire payout as salary income.

The case was reopened under Section 148A on the grounds that income was offered at 20% instead of the applicable 30%.

An addition of ₹2.33 crore was made as salary or perquisite under Section 17(2)(vi).

CIT(A) confirmed the tax officer's position.

The core argument was simple: the employer showed it as a perquisite, so it must be taxed as salary.

What the taxpayer argued

Section 17(2)(vi) applies only when a "specified security" is transferred to an employee.

The explanation under this section calculates value based on the "date of exercise" of the option.

In this case, the options were never exercised. No shares were ever allotted. So no specified security ever came into existence.

Without a valid computation mechanism, the charging section simply cannot apply.

On the capital gains side, the right to receive the buyback amount qualifies as a capital asset under Section 2(14).

The Karnataka High Court in Dasannacharya had already confirmed that stock options are capital assets.

The buyback of these rights is a transfer under Section 2(47), making the gain taxable under Section 45 as capital gains.

The employer's Form 16 or TDS deduction does not determine final tax liability. TDS is only a collection mechanism, not the final word on the nature of income.

What the court decided

ITAT Bengaluru ruled in favor of the taxpayer.

Since the options were never exercised, no specified security came into existence. Section 17(2)(vi) simply could not apply.

The Tribunal held that Form 16 or TDS deduction cannot override this fundamental legal principle.

The gain was correctly treated as capital gains, not salary.

The appeal was allowed and the addition of ₹2.33 crore as salary was deleted.

Key takeaway

The exercise step is everything in ESOP taxation.

If options are exercised and shares are allotted, the perquisite value gets taxed as salary under Section 17(2)(vi) in the year of exercise.

If options are never exercised and are instead repurchased directly by the company, the gain is capital gains, not salary.

Your employer's Form 16 or TDS treatment does not bind you. If the legal characterization of your income is different, you have the right to declare it correctly in your return.

For ESOP holders who have been through a buyback without exercising options, this ruling is directly relevant. Worth discussing with your tax advisor.

This comes up every ITR filing season and most people dismiss it as a myth. It is not. Eligible residents of Sikkim are fully exempt from income tax, regardless of how much they earn. Here is how that actually works.

Background

Sikkim was not always part of India. It was an independent monarchy called the Kingdom of Sikkim. After a referendum in 1975, it became India's 22nd state.

When it merged with India, Article 371F was added to the Constitution to protect the rights of local people and the laws already in force there.

The income tax exemption itself traces back even further, to 1948, when Sikkim's then ruler, the Chogyal, had put in place a local income tax rule under which residents were not taxed.

When Sikkim joined India, it was decided this exemption would continue. That promise was eventually codified into law.

What the law says

Eligible persons of Sikkimese origin were granted income tax exemption under Section 10(26AAA) of the Income-tax Act, 1961.

This is not a scheme or a budget announcement. It is a permanent statutory exemption backed by a constitutional provision.

Who can actually claim it

Initially, the exemption was available only to those who held a Sikkim Subject Certificate (SSC), treated as the state's original residents.

Later, after a Supreme Court ruling, the scope widened. The court held that people of Indian origin who were permanently residing in Sikkim up to 26 April 1975, the day before Sikkim became part of India, would also qualify as original residents.

After this ruling, nearly 95% of the state's population came within the scope of the income tax exemption.

Who does not get the benefit

If a person has moved to Sikkim from another state and does not fall into either category, normal income tax rules apply. Such a person will also have to file an ITR if their income requires it.

Simply living in Sikkim does not make you eligible. The exemption is tied to origin and residency as of a specific historical date, not current address.

Key takeaway

The Sikkim income tax exemption is not a loophole or a temporary relief. It is a constitutional protection built into the merger agreement of 1975.

To claim it, you need to either hold a Sikkim Subject Certificate or prove you were a permanent resident of the state before 26 April 1975, or descend from someone who was.

If you are not from Sikkim originally, moving there does not help your tax situation in any way.

If you missed filing your income tax return for AY 2026-27, you are not out of options. But the window is narrowing and the costs are real.

Background

Under Section 139(4) of the Income Tax Act, a belated return for AY 2026-27 can be filed on or before December 31, 2026, or before the completion of the assessment, whichever is earlier.

The process itself is not complicated. Taxpayers need to log in to the income tax e-filing portal, select AY 2026-27, choose the appropriate ITR form, select the belated return option under Section 139(4), fill in the required details, pay any pending tax and applicable late fee, and complete e-verification.

What it will cost you

Filing late is allowed, but it comes with consequences.

Under Section 234F, the late filing fee is ₹1,000 if total income does not exceed ₹5 lakh, and ₹5,000 in all other cases.

Beyond the fee, there are other implications:

• Interest applies on any unpaid tax under applicable provisions
• Tax refunds get delayed
• You lose the ability to carry forward certain losses, including business and capital losses

Can you still claim a refund?

Yes, taxpayers can claim a refund through a belated return. However, missing the original deadline may limit some options. Certain taxpayers may not be able to change their tax regime after the due date, which could affect their overall tax liability and refund amount.

Can a belated return be revised?

Yes. A belated return can be revised if required, provided it is done within the permitted timeline, which for AY 2026-27 is December 31, 2026.

What if you miss December 31 as well?

Taxpayers who miss the belated return deadline may be eligible to file an Updated Return (ITR-U) under Section 139(8A), subject to prescribed conditions. However, ITR-U cannot be used to claim additional deductions, reduce tax liability, or increase a refund. Additional tax may also apply.

Key takeaway

Missing July 31 does not mean you are done. But every day you wait past that deadline costs you more, whether in fees, interest, or lost benefits like carry-forward of capital losses.

If you are still to file, do it before December 31. And do it early in that window. Filing early helps prevent issues caused by technical glitches, missing documents, or last-minute errors.

The July 31 deadline for ITR-1 and ITR-2 has passed. Now some salaried taxpayers are considering a workaround: declare a small business income of ₹100 or ₹500, switch to ITR-3 or ITR-4, and buy extra time. On paper it sounds clever. In practice, it is a compliance risk that is not worth taking.

Background

ITR-1 and ITR-2 are meant for salaried individuals, those with interest income, capital gains, and similar sources.

ITR-3 and ITR-4 are for taxpayers with actual business or professional income.

The due dates for these two categories are different. This gap has led some people to ask: what if I just report a nominal business receipt and switch forms?

The idea is not new. But it is now being discussed more openly after July 31 has passed for AY 2026-27.

What is the actual risk

The Income Tax Department does not just look at what you report. It cross-checks with multiple data sources.

Annual Information Statement (AIS) captures most financial transactions

TDS data and bank information is already available with the department

Your filing history from previous years is on record

If you reported zero business income for the last five years and suddenly declare ₹100 under Section 44AD this year, that inconsistency can get flagged.

More importantly, if a scrutiny notice lands, the officer will ask basic questions.

• What is the nature of your business?
• When did it start?
• What are the receipts for?
• Where are the invoices or bank entries?

If there are no real answers, the return itself can be treated as defective or incorrect.

What the law actually says

Eligibility for a particular ITR form depends on the taxpayer's actual sources of income, not the form they choose to file.

A business does not come into existence just because someone types ₹100 in a field on the portal. The law requires commercial activity, intention to carry on business, transactions, and records to support it.

Simply selecting ITR-4 does not make someone a business taxpayer.

What should you actually do

If you missed the July 31 deadline for ITR-1 or ITR-2, you still have options.

• File a belated return by December 31, 2026 (for AY 2026-27) with a late fee of ₹1,000 or ₹5,000 depending on income
• Pay any outstanding tax dues along with interest
• Do not file under an incorrect form just to avoid the fee

The late fee is a small and legal cost. An incorrect return can invite scrutiny, penalties, or worse.

Key takeaway

Switching to ITR-3 or ITR-4 without genuine business income is not a deadline workaround. It is misreporting.

The department's systems are now data-driven and flag unusual patterns. A nominal business receipt with no supporting evidence is exactly the kind of thing that gets noticed.

If you missed the deadline, file the belated return correctly. That is the only option that does not create a bigger problem down the road.

Today is the last day to file your ITR for AY 2026-27. If you have already filed, you are done. If you have not, read this before you panic.

The July 31 deadline applies to individuals who are eligible to file ITR-1 or ITR-2. Missing it does not mean you are in legal trouble immediately, but it sets off a chain of consequences that get worse the longer you wait. Here is what each stage looks like.

Stage 1: Belated Return (August 1 to December 31, 2026)

Under Section 139(4), taxpayers who miss the due date can file a belated return by December 31, 2026, or before the completion of the assessment, whichever is earlier.

The cost of filing late:

• Under Section 234F, a late filing fee of up to Rs 5,000 applies. For those with total income below Rs 5 lakh, the maximum fee is Rs 1,000.
• Interest under Section 234A applies if there is any outstanding tax payable. This runs at 1% per month from August 1 onwards.
• Losses from capital gains or business cannot be carried forward if you file a belated return. This is the part most people miss and regret later.
• If you filed on time, you can revise your return if you spot an error. Filing late restricts this ability.

Stage 2: Updated Return or ITR-U (After December 31, 2026)

If you miss December 31 as well, one last option remains: an updated return. But it only lets you pay more tax, never less. It cannot get you a refund, and it cannot bring back a lost loss.

What the department can do if you do not file at all:

For those required to file ITR who fail to do so entirely, the Income Tax Department may send scrutiny or compliance-related notices. That is a separate headache you do not want.

Key takeaway

Missing July 31 is not the end of the world, but every day you wait after today adds interest to whatever tax is due. File a belated return as soon as you can, and no later than December 31. It stops the interest from building and keeps your record clean.

If you made a capital loss this year, be especially strict about filing before December 31. That carry-forward benefit is gone the moment you cross that date.

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The Income Tax Department just put out a reminder that over 5 crore returns have already been filed for AY 2026-27, and the deadline is July 31.

The deadline to file ITR-1 or ITR-2 for AY 2026-27 (FY 2025-26) is July 31, 2026.

As of July 27, over 4 crore returns had been filed. That number has now crossed 5 crore.

What the department is saying

• File now, do not wait for the last day
• Reconcile your documents before submitting, including Form 16, AIS, Form 26AS, and bank statements
• Portal traffic and technical issues tend to spike close to the deadline
• CBDT has already notified revised ITR forms for AY 2026-27 with updated disclosure requirements around long-term capital gains, share buyback losses, and certain trading transactions

Why this matters

Every year, lakhs of taxpayers wait until July 30 or 31 to file. The portal slows down. Submissions fail. Some people miss the deadline entirely and end up filing a belated return, which comes with late fees and interest.

Filing now takes the same effort. The only difference is you avoid the chaos.

What you need before filing

• Form 16 from your employer
• AIS and Form 26AS from the income tax portal
• Bank statements for interest income
• Capital gains statements if you sold stocks or mutual funds this year
• Details of any other income earned in FY 2025-26

Key takeaway

The deadline is not changing. The portal will get busier. If your documents are in order, there is no reason to wait.

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This is a straightforward ITAT Chennai case that settles an important question: can a genuine mistake by your accountant attract penalty under Section 270A?

Background

S. Saroja, a senior citizen aged 81, filed her income tax return for AY 2017-18 through a hired accountant.

Two errors crept in:

• The accountant reported the annual value of house property at Rs. 5.40 lakh instead of the correct Rs. 8.40 lakh
• Interest income was declared under "income from business" instead of "income from other sources"

The assessee later revised her return, but the errors carried forward into the revised filing as well.

When the case was picked up for scrutiny, the AO noticed both discrepancies.

What the Tax Department said

The AO completed the assessment under Section 143(3) and made the following additions:

• Rs. 3 lakh towards the difference in annual value of house property
• Rs. 8,000 as interest income under the correct head

So far, reasonable. The assessee accepted both.

But the AO then initiated penalty proceedings under Section 270A, treating this as underreporting of income by misreporting.

Penalty levied: Rs. 1,92,192

The CIT(A) upheld the penalty.

What the taxpayer argued

The assessee's counsel made a simple and honest case.

• The taxpayer is 81 years old and engaged an accountant specifically to handle the filing
• The wrong annual value was an inadvertent error by the accountant, not a deliberate omission
• The interest income was classified under business income in good faith, not to evade tax
• The moment the AO pointed out the errors, the assessee fully accepted them and paid the taxes
• There was no attempt to hide income or gain any unfair advantage

What the court decided

The ITAT B Bench, Chennai deleted the penalty entirely.

On the house property error:
An inadvertent mistake by an accountant in reporting the annual value does not amount to misreporting of income. It cannot attract penalty under Section 270A.

On the interest income classification:
The assessee had a bonafide belief that interest income should be classified under business income. More importantly, the tax impact was the same either way. When there is no difference in tax and no mala fide intent, there is no basis for penalty.

Appeal allowed. Penalty of Rs. 1,92,192 deleted.

Key takeaway

Section 270A penalty is not automatic just because assessed income is higher than returned income.

For penalty to apply under misreporting, there has to be intent or deliberate suppression. A genuine mistake, especially one admitted immediately and voluntarily, is not misreporting.

If you are a senior citizen or someone who relies on an accountant for filing, document your instructions clearly. If an error does happen and you accept it upfront, courts have consistently taken a lenient view.

With July 31 just days away, one field on the income tax return form has become one of the most searched tax queries on Google this year. It is not about income slabs or deductions. It is simply this: "Are you filing the income tax return for any of the following reasons?"

Sounds simple. But a lot of taxpayers are stuck on it.

Background

This field has emerged as one of the fastest-rising income tax-related searches on Google over the past three months.

Many taxpayers are worried that selecting the wrong option may result in scrutiny or delay their refund.

The confusion is not about tax calculations. It is about understanding what the question is actually asking.

Why taxpayers are confused

The uncertainty comes from a mismatch between what a taxpayer is trying to do and the language used in the Income Tax Act. Words like "Seventh Proviso to section 139(1)" look intimidating, and most people have no idea what they mean in practical terms.

The options also sound technical on the surface but apply to very different situations. Someone filing because their income crossed the basic exemption limit is in a completely different category from someone filing only because of a mandatory condition under the law.

Another common misconception is that there is only one correct answer. In reality, the field is largely intended to identify the statutory basis that makes filing necessary, not to flag anything problematic.

What the three options actually mean

The form shows exactly three choices:

Option 1: Taxable income is more than basic exemption limit
Pick this if your total taxable income exceeds the basic exemption limit for the year. This is the most common reason for most salaried taxpayers.

Option 2: Filing due to Seventh Proviso to Section 139(1)
Pick this if your taxable income is below the exemption limit but you are still required to file because of any of these:

• Deposited more than Rs 1 crore in one or more current accounts during the year
• Spent more than Rs 2 lakh on foreign travel for yourself or someone else
• Paid more than Rs 1 lakh as electricity bill during the year
• Any other condition prescribed under clause (iv) of the Seventh Proviso

Option 3: Others
Pick this if none of the above apply but you still want to file, for example to claim a refund or carry forward a loss.

Key takeaway

This field does not affect your tax liability. It simply establishes the legal reason behind your filing.

For most salaried individuals, Option 1 is the correct choice. If your income is below the limit but you crossed any of the thresholds in Option 2, select that instead. If you are filing only to claim a refund or carry forward losses, go with Others.

A slower read before answering is all it takes.

Many people received an unexpected email from the Income Tax Department on 24 July 2026 with the subject line mentioning "Reporting of Foreign Assets and Foreign Income." If you got one, this is not a notice and not the beginning of scrutiny. But it is also not something to ignore.

Background

The Income Tax Department has activated a new Foreign Assets Information (FAI) report inside the AIS Compliance Portal, following a CBDT order dated 8 July 2026.

For the first time, taxpayers can log in and see the same foreign bank accounts, investment details, dividends, interest and other income that other countries have already reported to India under the Automatic Exchange of Information (AEOI) framework.

Data currently visible covers Calendar Years 2022, 2023 and 2024.
CY 2025 data is expected to become available around September to October 2026.

The email you received is simply the Department nudging you to go look at this report.

What does the FAI report show?

The report has two parts.

Part A: Your PAN and name.

Part B: The actual foreign asset and income data, broken down country-wise and account-wise. This includes:

• Name of the reporting foreign financial institution
• Account number
• Currency
• Dividends, interest, gross proceeds and any other payments (in foreign currency and converted to INR)
• Account balance

Each entry has a feedback option where you can mark it as Correct, Does Not Pertain to Me, Partially Correct, or Incorrect, with a remarks field of up to 400 characters. The feedback option only becomes active after you download the PDF.

How does the Department already have this data?

India receives this information every year through two international frameworks.

CRS (Common Reporting Standard), under which India currently receives data from around 111 countries.
India-US FATCA arrangement, which covers US-based accounts separately.

Countries that regularly report include UAE, Singapore, US, UK, Switzerland, Hong Kong, Canada, Australia, and most of the EU.

This is why the Department sometimes seems to know about accounts that taxpayers had forgotten they held, or accounts linked to ESOPs from a foreign employer, old NRI accounts, or custodial accounts opened abroad.

Is there a scheme to fix past non-disclosure?

Yes. The Finance Bill 2026 has introduced the Foreign Assets of Small Taxpayers Disclosure Scheme (FAST-DS) 2026, though the formal Gazette notification is still pending as of now.

Key points of the proposed scheme:

• A one-time six-month window to disclose previously unreported foreign assets
• Tax rate of 30% on fair market value of the undisclosed asset, plus an additional 30% charge in place of penalty (totaling 60%)
• This compares much more favorably to the potential 120% liability (tax plus up to 300% penalty) under the Black Money Act if caught
• Small taxpayers with aggregate undisclosed foreign assets up to Rs 1 crore as on 31 March 2026 get complete immunity from penalty and prosecution
• A separate carve-out for assets under Rs 20 lakh provides retrospective protection from 1 October 2024

What should you do now?

If you hold foreign assets: Pull the FAI report, gather your account statements and records, and speak to your CA before doing anything on the portal. Fields like dormant accounts, joint holdings, ESOP valuations, and currency conversion have enough nuance that an incorrect disclosure can cause more problems than the original gap. For past years where the revised return window has already closed, wait for FAST-DS 2026 to be formally notified before attempting to correct those years.

If you do not think you hold any foreign assets: Still log in and check the report. Some disclosures relate to accounts people genuinely forgot about, old NRI accounts, joint holdings, or employer-linked accounts. If something shows up that is not yours, use the feedback option but run it past your CA first before submitting anything.

Key takeaway

For years, the Department had foreign asset data while taxpayers did not. That dynamic has now changed. India already has data pipelines from over 100 countries, and this new report effectively shows taxpayers what the Department can see.

The email is not a threat. It is an early warning. And with FAST-DS 2026 expected to provide a relatively low-cost correction window for small taxpayers, the incentive to act now is stronger than it has ever been.

This is a significant ruling from the Allahabad High Court delivered on July 21, 2026, and it raises a serious question: can the income tax department pursue reassessment against someone who has already passed away?

Background

Sanjay Dubey, a government officer in Lucknow, passed away on January 7, 2024. Before his death, he had purchased a flat in Grand Omaxe, Lucknow in October 2020. A search by the Income Tax Department on the Omaxe Group in April 2021 flagged an alleged cash transaction of around Rs. 27 lakh linked to his name.

After his death, his wife filed his income tax return for AY 2024-25 in his name, verifying it using his Aadhaar OTP. The department, unaware of his passing (or ignoring it), issued a reassessment notice under Section 148 in March 2025, more than a year after he had died.

When the widow raised objections, the department rejected them and passed an assessment order adding Rs. 69 lakh to income, with a tax demand of nearly Rs. 40 lakh.

What the Tax Department argued

The department took the position that it had acted in good faith, since the return was filed in the deceased's name and verified through his Aadhaar OTP, giving no indication of death.

It argued that the notice was a curable defect under Section 292B, that Section 159 allows proceedings to continue against legal heirs, and that the wife's participation in the proceedings amounted to a waiver of her objections. The department also argued it could issue a fresh notice to the legal heir by invoking Section 150, which overrides normal limitation periods.

What the petitioner argued

The widow's legal team argued that a notice issued to a dead person is void from inception. It is not a procedural irregularity but a jurisdictional defect, meaning no authority exists to proceed at all.

Section 159, they said, only applies when proceedings were validly initiated during the person's lifetime. It cannot rescue proceedings that were never valid to begin with. Similarly, Section 292B covers technical mistakes, not foundational errors of jurisdiction. And participation in proceedings by a legal heir cannot confer jurisdiction that the statute itself does not permit.

What the court decided

The Allahabad High Court, speaking through a Division Bench, ruled clearly in favor of the widow and quashed the notice along with all subsequent proceedings and demands.

The court held that a notice under Section 148 must be issued to a living person. Issuing it to a dead person is not a technical defect but a jurisdictional nullity. Section 159 cannot validate proceedings that were void at inception. Section 292B cannot cure a foundational error. The legal heir's participation, including filing returns and replying to notices, does not amount to consent or waiver of jurisdiction.

On the widow's act of filing the return in the deceased's name, the court acknowledged it was improper and may attract penal action under Section 277. But it said the department cannot use an illegal act by the taxpayer to justify its own illegal act. Two wrongs do not create jurisdiction.

On Section 150, which the department hoped to use to issue a fresh notice despite limitation, the court held that the High Court's order quashing the notice does not constitute a "finding or direction" under Section 150(1). There was no valid proceeding to begin with, so nothing is revived.

Key takeaway

A reassessment notice issued after the death of an assessee is void from the start. The income tax department must initiate proceedings directly against the legal heir within the limitation period. Failure to do so forecloses the reassessment entirely.

The court also noted a lacuna in the law and has directed a copy of the judgment to the Ministry of Finance, recommending that Parliament consider amending the Act to address situations where legal heirs file returns in the name of the deceased without informing the department.

The court's parting remark is worth noting: "To tax the dead is, in the rudimentary sense, a contradiction in terms."

A recent ITAT Bangalore case clears up a confusion that catches many taxpayers off guard, what happens to your capital loss carryforward when you file a revised return after the original?

Background

Balachandra Joshi, a Bengaluru-based individual taxpayer, filed his original return for AY 2021-22 on 5 October 2021, well within the due date of 31 December 2021.

In the original return, he reported a capital loss of ₹5.26 lakh to carry forward.

He later filed a revised return on 31 March 2022, reporting additional short-term capital gain of ₹4.64 lakh and long-term capital gain of ₹2.27 lakh, and also claimed a revised long-term capital loss of ₹2.99 lakh to carry forward.

He paid additional self-assessment tax on the extra income.

What the tax department said

The CPC processed his revised return but denied the carryforward of the ₹2.99 lakh capital loss.

Their position: if a return of income shows a loss, it must be filed within the due date under Section 139(1) to be eligible for carryforward.

Since the revised return was filed on 31 March 2022 (after the original due date), they treated it as not qualifying.

The CIT(A) upheld this view, saying the revised return had to independently meet the Section 139(1) deadline.

What the taxpayer argued

The original return was filed on 5 October 2021, which was within the prescribed due date.

A revised return under Section 139(5) does not stand alone. It relates back to and substitutes the original return.

Denying the carryforward based on the date of the revised return ignores the fact that the original return, filed on time, had already reported losses.

He also pointed to a CBDT circular supporting this interpretation.

What ITAT Bangalore decided

The Tribunal sided with the taxpayer.

The original return was filed on 5 October 2021, within the due date of 31 December 2021.

Filing a revised return later does not erase the fact that the original was filed on time.

The revised return substitutes the original, it does not create a new, independent filing for the purpose of loss carryforward eligibility.

The Assessing Officer was directed to allow the carryforward of ₹2.99 lakh in capital loss.

The appeal was fully allowed.

Key takeaway

If you filed your original return on time and later revised it, your loss carryforward eligibility is determined by the date of the original return, not the revised one.

The CPC often mechanically denies such claims. This ruling gives you a clear basis to challenge that denial.

If you are in a similar situation, it is worth filing a rectification request or an appeal citing this order.

This is a recent ITAT Pune case from July 2026 that many salaried and retired government or PSU employees should know about.

Background

Bharat Shengar retired from Maharashtra State Power Generation Company Ltd. on 31 January 2020 after long service.

On retirement, he received leave encashment of Rs. 8,49,501.

He filed his return claiming exemption on this amount under Section 10(10AA) of the Income Tax Act, which covers leave encashment received at the time of retirement.

The problem? His employer did not reflect this exemption in Form 16.

What the Tax Department said

The Assessing Officer denied the exemption entirely, citing one reason: the leave encashment was not visible in Form 16 issued by the employer.

Based on this, total income was assessed at Rs. 13,17,221 instead of the declared Rs. 4,67,720.

The CIT(A) also upheld this disallowance, even after the taxpayer submitted documentary proof.

What the taxpayer argued

The taxpayer approached ITAT Pune with additional documents:

• Retirement order dated 31.01.2020
• Leave encashment slip and payslip
• Bank statement showing the credit of Rs. 8,49,501
• Income tax return
• Relevant case law

The core argument was straightforward: Section 10(10AA) is a statutory exemption. Whether the employer mentions it in Form 16 or not does not change the nature of the payment. Leave encashment received at retirement is exempt by law, not by employer's reporting.

The taxpayer also cited a Delhi ITAT ruling where a Canara Bank employee was allowed the same exemption despite similar Form 16 issues.

What the Tribunal decided

ITAT Pune admitted the additional documents, noting they go to the root of the issue.

The Tribunal agreed that the assessee is entitled to exemption under Section 10(10AA) on leave encashment received at retirement.

However, instead of granting a fixed amount directly, the case was sent back to the Assessing Officer to verify the exact quantum of leave encashment from the retirement order, payslip, and bank records.

The AO was directed to give the taxpayer a proper opportunity of hearing.

The appeal was allowed for statistical purposes.

Key takeaway

Section 10(10AA) exemption on leave encashment is a statutory right at the time of retirement. It does not depend on whether your employer correctly filled out Form 16.

If your Form 16 is missing this entry, document everything: your retirement order, pay slip, and bank statement. That evidence can override a denial at the appellate stage.

A clerical gap on your employer's side should not cost you a legitimate tax exemption.

A small but important change has been made to the ITR forms this year. The Income Tax Department has made it mandatory for taxpayers to disclose their secondary address, if applicable, in addition to their primary address, in the ITR for AY 2026-27. In previous years, the forms required only one address.

Background

The e-filing portal now provides a separate field for the secondary address. When filing, taxpayers are first required to furnish their primary address. After that, the portal asks whether the secondary address is the same as the primary address.

If you select "Yes", the secondary address field is automatically filled with the primary address details. If you select "No", you are required to provide the complete details of the secondary address.

This new field has been included in the general information section of the ITR forms. The requirement applies to commonly used forms such as ITR-1, ITR-2, ITR-3, and ITR-4.

What the department has also added

Along with the secondary address, the department has added separate fields for primary and secondary mobile numbers and email IDs.

Why this change was made

The main aim is to reduce communication problems. If the department is unable to contact a taxpayer through the primary address or contact details, it can use the secondary address or alternate contact information.

This is particularly relevant for people who receive scrutiny notices or refund-related correspondence. A wrong or outdated address has historically been a reason taxpayers miss important communications from the department.

Who does this affect most

The rule benefits people who live at more than one location, such as those staying in rented accommodation while keeping a permanent home elsewhere.

Think of a salaried employee working in Bengaluru but whose permanent address on PAN is their hometown in UP or Bihar. Earlier, there was no clean way to reflect both. Now there is.

What you should do before filing

Before filing their ITR, taxpayers should check that their primary and secondary addresses, mobile numbers, and email IDs are correct and up to date.

Also make sure the email ID and mobile number linked to your e-filing account are ones you actively use. The department sends notices, intimations under Section 143(1), and refund updates to these contact details.

Key takeaway

This is not a change that affects your tax liability. But it affects how reliably the department can reach you.

Missing a notice because of a wrong address can lead to ex-parte assessments or demands you did not even know about. Updating your secondary address and contact details is a simple step that can save a lot of trouble later.