Direct Tax Updates – April 2026

Income-tax Act, 2025 comes into force with effect from 1 April 2026

The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961 which had governed India’s direct tax framework for over six decades. The new Act is a comprehensive re-drafting exercise aimed at clarity, plain language, and ease of compliance, without altering the underlying tax policy.

The Income-tax Rules, 2026 were notified by the Central Board of Direct Taxes on 20 March 2026 (Notification No. G.S.R. 198(E)) to operationalise the provisions of the new Act, condensing 500+ earlier rules into 333 rules. Corresponding new Forms have also been notified, simplified, standardised, and process re-engineered for digital compliance.

Key Notifications issued in April 2026 – Key Summary

ITR Forms for AY 2026-27 – Enhanced disclosure requirements notified by CBDT

CBDT notified ITR Forms 1 to 7, ITR-V, and ITR-U for AY 2026-27 vide Notifications No. 45 to 52/2026. Seven corrigendum notifications (No. 57 to 63/2026 dated 10 April 2026) were subsequently issued to correct errors across all ITR forms. Key changes are set out below.

• F&O trading (ITR-3, 5, 6): Turnover and income/loss from Futures and Options trading to be separately reported in Schedule Part A – Trading Account.
• Political donations (Schedule 80GGC, ITR 1 to 6): Name and PAN of the political party now required in addition to existing particulars.
• Presumptive taxpayers (ITR-4): Investment details now required under Financial Particulars of Business.
• ITR-1 eligibility tightened: Revised conditions ensure only genuinely simple income profiles use ITR-1.
• Section 234-I fee: All ITR forms now include a column to report the additional fee payable on filing a revised return.
• Schedule 80G enhanced: Transaction reference number for UPI/IMPS/NEFT/RTGS and IFSC code of bank now required.
• Schedule BBS removed from ITR-6 following shift of buyback taxation to shareholders.
• Bifurcated capital gains reporting (pre/post 23 July 2024) removed from ITR-2, 3, 5, 6, and 7.
• Section 44BBD presumptive scheme for non-residents in electronics manufacturing incorporated in ITR-3, 5, and 6.
• Secondary address field and primary/secondary contact detail structure introduced in all ITR forms.
• Auditor details rationalised: only date of furnishing, acknowledgement number, name, and PAN of firm now required.

Foreign Remittance Compliance – New Forms and Framework effective 1 April 2026

Compliance for foreign remittances is now governed by Section 393 of the Income-tax Act, 2025, replacing Section 195 of the Income-tax Act, 1961. New form numbers have been prescribed across the board.

PAN Correction Process – New forms prescribed under Rule 158(12) of the Income-tax Rules, 2026

The Directorate of Income-tax (Systems), CBDT has prescribed a revised PAN correction procedure under Rule 158(12) of the Income-tax Rules, 2026 read with Section 262(4) of the Income-tax Act, 2025.

• PAN CR-01: for individuals.
• PAN CR-02: for non-individuals (companies, firms, LLPs, and others).
• Applications can be filed online through UTIITSL or Protean eGov Technologies portals, or physically at their PAN service centres.

Minimum Alternate Tax revised to 14%; MAT credit accumulation discontinued from 1 April 2026

With effect from 1 April 2026, the rate of Minimum Alternate Tax applicable to companies has been reduced from 15% to 14%. The facility of accumulating MAT credit and carrying it forward for set-off against regular tax in future years has been discontinued. Companies should review existing MAT credit balances for utilisation or appropriate accounting treatment.

Income Tax Case Laws

1. SC holds that accumulated losses of an amalgamating company cannot be set off against the income of the amalgamated company under the Kerala Agricultural Income Tax Act.

Case: Aspinwall And Co. Ltd. Versus Inspecting Assistant Commissioner.

Court:  Supreme Court

Verdict Date: 13 April 2026

Issues: (i) whether the amalgamated company could claim set-off of accumulated losses of the amalgamating company under the Kerala Agricultural Income Tax Act, 1991; (ii) whether the approval of the amalgamation scheme and reliance on the principle recognised in Dalmia Power Ltd. entitled the appellant to such set-off; and (iii) whether the claim was barred because the losses were beyond the statutory carry-forward period of eight years.

Analysis(i) Section 12 of the Kerala Act permits carry forward of loss only by the person who sustained it and limits such carry forward to eight years. Section 54, dealing with succession to business, does not create any express right in favour of an amalgamated company to claim set-off of losses suffered by the amalgamating company. The Court also noted that the Kerala Act contains provisions for legal representatives and other specific situations, but none extends the benefit sought by the appellant to an amalgamated company.(ii) The scheme clause relied upon by the appellant could not override the statutory framework of the Kerala Act. The facts were held distinguishable from the earlier amalgamation case because no notice of the amalgamation proceedings had been issued to the State of Kerala, and there was no statutory requirement in the relevant scheme under the Companies Act, 1956, comparable to the notice regime relied upon in the appellant’s precedent. The absence of objection to the scheme therefore did not confer a substantive tax benefit not provided by the Kerala Act.(iii) The Court accepted the factual finding that the losses sought to be carried forward related to a period beyond eight years. Under Section 12 of the Kerala Act, no loss can be carried forward beyond that period. As the assessment years in the remaining appeals were later in time, the bar operated against the claim.

Conclusion: (i) The appellant had no entitlement under the Kerala Act to claim set-off of the amalgamating company’s losses.(ii) Reliance on the amalgamation scheme and the earlier precedent did not assist the appellant.(iii) The claim was barred by the statutory eight-year limitation.

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2. SC dismisses Revenue’s SLP, affirming that Coursera’s receipts from online course access are not taxable as fees for included services under the India–USA DTAA.

Case: Commissioner Of Income Tax (International Taxation) -1, New Delhi Versus Coursera Inc.

Court:  Supreme Court

Verdict Date: 01 April 2026

Issue: A. Whether the customized services provided by the Assessee qualify as “Make Available” under Article 12 of the India-USA Double Taxation Avoidance Agreement (DTAA), thereby constituting fees for included services (FIS) chargeable to tax. B. Whether the user services provided by the Assessee, which involved a high degree of human intervention and a training element, satisfy the “Make Available” criterion under Article 12 of the India-USA DTAA.

Analysis: The legal framework revolves around Section 9(1)(vii) of the Income Tax Act, 1961, which deals with the taxation of fees for technical services (FTS), and Article 12 of the India-USA DTAA, which defines “Royalties and fees for included services.” Article 12(4) defines fees for included services as payments for rendering technical or consultancy services, including through technical personnel, if such services either (a) are ancillary and subsidiary to the enjoyment of rights or property or (b) make available technical knowledge, experience, skill, know-how, or processes, or involve development and transfer of technical plans or designs.

“Make Available” is a crucial concept, implying that the service provider transfers technical knowledge or skills enabling the recipient to use them independently without further assistance.

Court’s Interpretation and Reasoning:

The Assessee, a US-incorporated company operating a global online learning platform, argued that its receipts were not taxable as royalty or FTS because it did not “make available” any technical knowledge or skills. The Assessee’s platform hosts courses created by third-party universities and companies; it merely facilitates access to content without creating or transferring technical know-how.

The Assessing Officer (AO) contended that the Assessee provided two types of services: content services and user services. User services included customized landing pages, user engagement reports, payment solutions, enterprise-level support, and training for platform use. The AO argued these services involved a high degree of human intervention and were specific to users, thus constituting technical services making available technical knowledge or skills.

The Dispute Resolution Panel (DRP) directed the AO to verify the Assessee’s contentions with respect to the agreement with one educational institution (Gandhi Institute of Technology and Management), emphasizing a need for a reasoned order based on documents on record without fresh inquiry.

However, the AO did not conduct a fresh factual examination but reiterated earlier findings and passed the final assessment order taxing the entire receipts as FTS.

The Income Tax Appellate Tribunal (ITAT) found no merit in the Revenue’s contention. It held that the Assessee acted solely as an aggregator or facilitator, providing access to course content developed by third parties. The ITAT noted that the AO himself acknowledged the Assessee was not a content creator but an aggregator. The AO’s contradictory stance-that the Assessee was both an aggregator and a technical service provider-was not supported by evidence.

The ITAT emphasized that even if the services were technical in nature, mere technical service provision does not suffice to attract tax under Article 12(4) unless the “make available” condition is satisfied. The burden was on the Revenue to prove that the Assessee transferred technical knowledge or skills enabling independent use by the recipient. This burden was not discharged.

Key Evidence and Findings:

• The Assessee’s platform hosts courses created by universities and companies, not by the Assessee itself.
• The Assessee provides access to content, customized user interfaces, and user support but does not transfer technical know-how or skills.
• The agreement with Gandhi Institute of Technology and Management was not properly examined by the AO despite directions from the DRP.
• The AO’s final order ignored DRP’s directions and reiterated earlier observations without fresh factual verification.
• The ITAT found the AO’s findings self-contradictory and unsupported by evidence.

Application of Law to Facts:

The Court accepted the ITAT’s factual findings that the Assessee did not provide technical services that “make available” technical knowledge or skills under Article 12(4) of the DTAA. Since the services did not satisfy the “make available” condition, the receipts could not be taxed as fees for included services or FTS under the Income Tax Act or the DTAA.

Treatment of Competing Arguments:

The Revenue’s argument that the user services involving human intervention and training constituted technical services making available technical knowledge was rejected due to lack of evidence and failure to comply with DRP directions. The AO’s contradictory acknowledgment of the Assessee as an aggregator was noted. The Court upheld the ITAT’s approach that the burden lay on the Revenue to prove the “make available” element, which was not met.

Conclusion: The Court concluded that the ITAT correctly held that the Assessee’s receipts were not taxable as FIS under Article 12 of the Indo-US DTAA. The services provided did not amount to making available technical knowledge or skills. Therefore, no tax liability arose under the relevant provisions.

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3. Madras HC holds that replacement of machinery resulting in enduring benefit constitutes capital expenditure and cannot be treated as ‘current repairs’.

Case: The Commissioner of Income Tax, Coimbatore Versus M/s. Super Spinning Mills Ltd.

Court:  MADRAS HIGH COURT

Verdict Date: 09 April 2026

Issues: Whether expenditure incurred for replacement of machinery was allowable as revenue expenditure under the head of current repairs, or was capital expenditure requiring separate treatment.

Analysis: The Tribunal had allowed the assessee’s claim by following an earlier jurisdictional precedent, but that precedent had since been overruled. The governing test, as applied by the Court, is that replacement of machinery cannot automatically be treated as current repairs merely because it relates to the manufacturing process. The assessee must establish with material that the replacement falls within the permissible scope of repairs and does not amount to bringing into existence an independent capital asset. The Court applied the later Supreme Court-guided position and held that the matter required fresh examination on proper materials rather than acceptance of the Tribunal’s conclusion based on the reversed precedent.

Conclusion: The Tribunal’s order allowing the claim was set aside and the issue was remitted to the appellate authority for fresh consideration in the light of the prevailing legal position.The dispute on allowability of replacement expenditure was not finally decided on merits in favour of the assessee, and the matter was sent back for reconsideration under the correct legal test.

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4. Delhi HC holds that buy-back of shares is a capital reduction and not an acquisition of property, and therefore cannot be taxed under Section 56(2)(x).

Case: Pr. Commissioner of Income Tax, Central – II, New Delhi Versus M/s. Globe Capital Market Ltd.

Court:  Delhi HIGH COURT

Verdict Date: 07 April 2026

Issues: Whether section 56(2)(x) of the Income-tax Act, 1961 read with Rule 11UA of the Income-tax Rules, 1962 applies to a company’s buy-back of its own shares, so as to treat the difference between the buy-back price and fair market value as taxable income.

Analysis: The transaction was a lawful buy-back undertaken under section 68 of the Companies Act, 2013, pursuant to the prescribed approvals and procedure. A buy-back of a company’s own shares is not a purchase of an asset in the ordinary sense, but a statutory reduction of share capital, followed by extinguishment and destruction of the bought-back shares. The premise of section 56(2)(x) is acquisition of property at less than fair market value; that premise fails where the very shares bought back cease to exist on completion of the transaction. The Revenue’s broad reading of the provision was held to be inconsistent with the corporate law character of buy-back and with the underlying tax hypothesis of acquisition of property.

Conclusion: Section 56(2)(x) and Rule 11UA do not apply to buy-back of a company’s own shares, and the addition made on that basis was unsustainable. The assessee succeeds on this issue.

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5. Advance tax interest under section 234C cannot apply to instalments due before a newly set-up business begins operations.

Case: Capgemini IT Solutions India Private Limited Versus ACIT Circle-15 (1) (2), Mumbai

Court:  ITAT MUMNAI

Verdict Date: 30 April 2026

Issues: Whether interest under section 234C of the Income-tax Act, 1961 was leviable for the first and second instalments of advance tax where the assessee’s business commenced only on 17.10.2019 and no business income existed before that date.

Analysis: Section 234C provides for interest on deferment of advance tax, but its proviso carves out an exception where the shortfall arises because income under the head “Profits and gains of business or profession” could not be estimated and such income arises for the first time during the year. Section 3, by its proviso, treats the previous year of a newly set-up business as commencing from the date of setting up. On the admitted facts, the assessee’s business began only upon approval in October 2019, and there was no business activity or source of income before that date. In such a situation, there was no occasion to estimate business income for the June and September instalments, and the statutory exception applied.

Conclusion: Interest under section 234C for the instalments falling due before the commencement of business was not sustainable, and the assessee was entitled to recomputation excluding those instalments.

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6. Benami property law: cash routed through a third-party account was treated as benami consideration and attachment upheld in principle.

Case: Smt. Sheetal Chandna Versus The Initiating Officer, ACIT Benami Prohibition Unit, Kanpur

Court:  APPELLATE TRIBUNAL UNDER SAFEMA, NEW DELHI

Verdict Date: 30 April 2026

Issues: Whether cash handed over for deposit in a third party account, followed by retransfer through banking channels, constituted benami property and a benami transaction under the Prohibition of Benami Property Transactions Act, 1988, so as to justify attachment of the bank balance.

Analysis: The Tribunal held that cash falls within the wide definition of property under the Act and can constitute consideration for purposes of a benami arrangement. It found that the cash was handed over by the beneficial owner to the proprietor of the concern, who deposited it in his account and thereafter returned the amount to the appellant through banking channels. On that reasoning, the proprietor was treated as a benamidar who lent his name, and the transaction was held to satisfy both elements of the statutory definition of benami transaction, namely transfer or holding of property for another’s benefit and provision of consideration by another person. The Tribunal distinguished the authorities relied upon by the appellant and rejected the submission that the transaction was merely sham and outside the Act.

Conclusion: The transaction was held to be benami, and the attachment was upheld in principle, though the quantum was modified.

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7. Chapter VI-A deduction computation must follow the Supreme Court method; 80-IB and 80-HHC were remanded for recomputation.

Case: Tata International Limited Versus The Assistant Commissioner of Income-Tax, Vellore

Court:  MADRAS HIGH COURT

Verdict Date: 30 April 2026

Issues: Whether deduction under Section 80-IB of the Income-tax Act, 1961 was required to be reduced from business profits before computing deduction under Section 80-HHC of the Income-tax Act, 1961, and whether the matter required remand for fresh computation in accordance with the Supreme Court’s dictum.

Analysis: The assessment had computed the export deduction after first giving effect to the industrial undertaking deduction, but the Court found that the impugned demand was not based on proper computation of income. Relying on the governing principle laid down by the Supreme Court on the manner of computing deductions under Chapter VI-A, the Court held that the deductions had to be recomputed in accordance with that dictum. Since the existing computation was contrary to the approved method, the assessment order could not be sustained and the matter had to go back to the Assessing Officer for fresh determination.

Conclusion: Deduction under Section 80-IB was to be given effect in the reassessment, and the claim under Section 80-HHC was to be recomputed thereafter in accordance with law; the matter was remanded to the Assessing Officer. The assessee succeeded in having the assessment set aside and the income recomputed afresh, but the taxable deduction issue was left for reconsideration on remand.

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