Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals

The Finance Bill, 2026 introduces important refinements to the direct tax regime with a clear focus on easing compliance and reducing avoidable disputes. These changes are designed to offer taxpayers greater clarity, flexibility, and confidence while navigating income-tax procedures.

1. Updated Return: Expanded Scope and Greater Flexibility for Taxpayers

Current Position
Under the existing provisions, an updated return cannot be filed if it results in a loss declaration, nor can it be filed after the initiation of reassessment proceedings.

Proposed Amendments
The Finance Bill, 2026 significantly expands the scope of filing updated returns by allowing taxpayers to:

• • File an updated return where the quantum of loss is reduced compared to the original return,
  • File an updated return even after receipt of a reassessment notice, provided it is filed within the time specified in such notice.

Additional Tax Implications

• • In cases where an updated return is filed after issuance of a reassessment notice, an additional 10% tax will be levied over and above the existing additional tax,
  • For example, where the additional tax was earlier 25%, the total additional tax would increase to 35%.

Key Relief

• Income disclosed in such updated returns will not be subject to penalty for under-reporting or mis-reporting of income.

2. Time Limit for Assessments under DRP Route Clarified

A long-standing controversy existed regarding whether DRP timelines are included within, or in addition to the assessment time limits under section 153.

Finance Bill Clarification

• • Section 153 applies to issuance of draft assessment order
  • Section 144C (DRP) timelines apply for finalisation of assessment; DRP timelines operate over and above section 153.

Section 153 Timeline
|————————-|
Assessment → Draft Order

            Section 144C (DRP) Timeline
            |---------------------------|
            DRP Proceedings → Final Order

3. Jurisdiction for Issuing Reassessment Notices (Sections 148 & 148A)

Existing Issue

Conflicting High Court rulings on whether Jurisdictional AO, or NFAC / Faceless AO should issue reassessment notices in international and central charge cases.

Proposed Clarification

• Only the Jurisdictional Assessing Officer can issue notices and conduct proceedings under sections 148 and 148A.

4. Clarification on Time Limit for Transfer Pricing Orders

Issue

There was ambiguity on how to compute the 60-day period available to the TPO for passing TP orders.

Proposed Solution (As per IT Act, 2025)

5. Clarification on Document Identification Number (DIN)

Proposed Amendment

Assessment orders will not be invalidated merely due to Mistake, defect, or omission in quoting DIN as long as the order is referenced by DIN in any manner.

Effective Date

• Intended to apply retrospectively from 1 October 2019.

Conclusion

The Finance Bill, 2026 marks a decisive step towards bringing clarity and certainty to the assessment and appeals framework under direct tax laws.

Print