Revised Income Tax Bill 2026: Key Changes and Their Impact

 The Indian Parliament has replaced the previous Income Tax Bill with a revised version, aimed at removing ambiguities and aligning the law with the existing Income Tax Act. The new bill is expected to simplify the complex tax structure and reduce compliance burdens. Here's an overview of some important provisions in the revised bill, effective from April 1, 2026:

Significant changes to note

·       Residential Status for Indian Citizens: The second condition for determining residency, specifically for crew members of Indian ships with income exceeding INR 15 Lakhs, has been removed. The revised conditions for residency are 182 days or more in India or 365 days in the previous four years.

·       Expanded Definition of Royalty: The term "royalty" now explicitly includes the "grant" of all or any such right, encompassing a broader range of intellectual property usage.

·       Broadened Scope of Business Connection: The definition of "business connection" now encompasses "significant business economic presence" and even "partial business connection", which could expand the taxability of non-residents operating in India.

·       Indirect Transfer Definition Includes Assets and Business Connections: The definition of indirect transfer has been expanded to include any assets and business connections, potentially affecting a wider range of transactions involving indirect transfer of assets.

·       Reinstatement of 80M Deduction: The Section 80M deduction for inter-corporate dividends is now available for companies taxed at 22%, which can help reduce the tax burden for holding companies and corporate groups.

·       Mandatory Bookkeeping for Individuals & HUFs: Individuals and Hindu Undivided Families (HUFs) with turnovers exceeding INR 25 Lakhs are now required to maintain books of accounts.

·       Reduced Time Limit for Revised E-TDS Returns: The deadline for filing revised E-TDS returns has been shortened from six years to two years, promoting faster reconciliation and potentially reducing errors.

·       Mandatory ITR Filing for Non-Individuals & Non-HUFs: All persons other than Individuals and HUFs are now mandatorily required to file income tax returns before the due date, irrespective of whether they have taxable income or not.

·       Pre-Intimation Communication Mechanism: A separate pre-intimation communication mechanism has been introduced, where a draft intimation is provided to the taxpayer, requiring a response within 30 days. This is intended to offer greater transparency and provide taxpayers with an opportunity to address potential discrepancies before final assessments are made.

 

Note: Tax Team is currently reviewing the new Income Tax Bill and will provide further updates on its potential impact on the group and its employees as more detailed information becomes available.