New Income Tax Rules 2026: What Businesses, Professionals and Taxpayers Need to Review Now
TL;DR 2026 is an important transition year for India’s income-tax system. The Income-tax Act, 2025 came into force from 1 April 2026, replacing the Income-tax Act, 1961 for the new tax framework. This means businesses, professionals and individual taxpayers need to understand more than just changes in tax rates. They also need to review their accounting systems, tax records, TDS processes, return filing procedures, notices, documentation and compliance workflows. The new framework also introduces changes in terminology and the structure of tax provisions. For taxpayers, the practical objective should be to identify which rules apply to the relevant tax year, update internal processes and avoid continuing with outdated assumptions from the earlier law. Why 2026 Is Different for Income-Tax Compliance The biggest change is the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025. The new Act came into force on 1 April 2026. This creates an important distinction between tax periods. For income relating to the financial year ending 31 March 2026, taxpayers generally continue dealing with the earlier framework applicable to that period. For income earned from 1 April 2026 onward, the new Income-tax Act, 2025 becomes relevant. This means businesses should not treat all 2026 tax matters as if they fall under one set of provisions. Tax Year vs Earlier Assessment-Year Terminology One of the changes taxpayers need to understand is the shift toward the concept of a Tax Year. Under the new framework, the tax year generally corresponds to the financial year in which income is earned. For example: 1 April 2026 – 31 March 2027 = Tax Year 2026–27 This is different from the familiar earlier terminology where income earned during a financial year was generally assessed in the following assessment year. Businesses should therefore review the terminology used in: Accounting software Tax reports Internal MIS Tax invoices and documentation where relevant TDS systems Return-filing processes Tax notices and correspondence Professional tax workpapers Businesses Need to Review Their Accounting Systems The transition to the new Act makes accounting-system review particularly important. Businesses should check whether their accounting and tax software is updated for the new framework. Important areas include: Tax calculation TDS Advance tax Tax depreciation Deductions Tax return preparation Tax audit reporting Employee taxation Tax notices Financial reporting An outdated system can create errors even when the underlying accounting records are correct. Review Your Tax Calculation Method Businesses and professionals should review how tax liability is being calculated under the new framework. Tax calculation should consider: Applicable tax rates Tax regime Deductions Exemptions Business income Capital gains Other income TDS credits Advance tax Tax payments Applicable surcharge and cess Taxpayers should avoid relying on calculators or spreadsheets prepared under the previous law without verifying whether the underlying provisions are still applicable. Businesses Should Review Their TDS Process TDS is one of the areas where incorrect implementation can create recurring compliance problems. Businesses should review: TDS sections Applicable rates Deduction timing Payment timelines TDS returns Certificates PAN details Vendor classification Employee TDS Contractor payments Professional fees Rent Interest payments The accounting team should ensure that the TDS configuration in accounting or payroll software reflects the provisions applicable from the relevant tax year. Employee Payroll Also Needs Attention Companies should review their payroll systems after the transition to the new income-tax framework. Payroll teams should verify: Employee declarations Tax regime selection Salary components Perquisites Allowances Deductions TDS calculations Form 16 data Taxable benefits Employees should also review their salary structure and tax declarations instead of assuming that previous-year calculations automatically remain valid. Professionals Should Review Presumptive Taxation Professionals operating as independent consultants, freelancers or eligible professionals should review the provisions applicable to their income. Areas that may require attention include: Professional receipts Business expenses Books of account Presumptive taxation Tax audit applicability Advance tax TDS credits Return filing Professionals should not automatically carry forward the previous year’s tax treatment without checking the provisions applicable to the new tax year. Businesses Should Review Tax-Deductible Expenses Companies should review whether their expense classification and supporting documentation are adequate. Important areas include: Employee expenses Professional fees Interest Repairs Travel Advertising Business promotion Rent Depreciation Donations Related-party payments Statutory payments The accounting team should maintain proper supporting documentation for significant expenses. A tax deduction should not be assumed simply because an expense appears in the profit and loss account. Capital Gains Reporting Should Be Reviewed Individuals and businesses with investments should pay attention to the tax treatment of capital gains under the new framework. Taxpayers should maintain records for: Purchase date Purchase cost Sale date Sale consideration Expenses Securities transactions Property transactions Capital improvements TDS, where applicable Investment-related tax calculations should be based on the provisions applicable to the relevant tax year. AIS and TIS Still Matter Taxpayers should continue reviewing information appearing in their Annual Information Statement (AIS) and Taxpayer Information Summary (TIS). These records can contain information relating to: Interest income Dividend income Securities transactions Property transactions TDS TCS Other reported financial transactions A mismatch between AIS/TIS and the taxpayer’s own records should be investigated before filing the relevant return. Taxpayers should not automatically assume that every AIS entry is correct. Advance Tax Planning Becomes More Important Businesses and professionals should estimate tax liability during the year rather than waiting until year-end. Advance tax planning should consider: Current-year profits Capital gains Interest income Dividend income TDS already deducted Previous tax payments Expected deductions Business changes Regular tax projections can help identify underpayment before interest consequences arise. Review Your Tax Documents Businesses and professionals should maintain a structured tax-documentation system. Important records can include: Sales invoices Purchase invoices Expense bills Bank statements Investment statements Loan documents TDS certificates GST records Payroll records Property documents Capital asset records Previous tax returns Tax notices Audit reports Digital record-keeping can make future tax assessments and notices easier to manage. GST and Income-Tax Data Should Also Be Reconciled Businesses should not treat GST and income-tax compliance as completely separate systems. Differences can occur between: Books → GST returns → TDS
Section 44AB Tax Audit: Who Is Required to Get Their Accounts Audited in 2026?
Tax audit is an important compliance requirement for businesses and professionals whose income or transactions fall within the conditions prescribed under the Income-tax Act. For 2026, businesses should not determine tax-audit applicability by looking at turnover alone. The nature of business, cash receipts, cash payments, presumptive taxation provisions and other conditions can affect whether an audit is required. Section 44AB lays down the principal tax-audit requirements for specified taxpayers. Understanding these rules before filing the income-tax return can help businesses avoid incorrect reporting, missed compliance and potential penalties. What Is a Section 44AB Tax Audit? A tax audit under Section 44AB involves examination of the taxpayer’s books of account by an eligible Chartered Accountant and reporting of prescribed particulars to the Income Tax Department. The objective is to ensure that relevant financial and tax information is properly examined and reported. A tax audit is different from a statutory audit under company law. A business may need both depending on its legal structure and circumstances. Who Is Required to Get a Tax Audit in 2026? Section 44AB broadly applies to specified persons carrying on business or profession when the conditions prescribed under the Income-tax Act are satisfied. For businesses, the commonly applicable turnover threshold is ₹1 crore. However, this threshold can increase to ₹10 crore where the prescribed conditions regarding cash receipts and cash payments are satisfied. For professionals, separate gross-receipt conditions apply. There are also specific tax-audit implications for certain taxpayers using presumptive taxation provisions. Therefore, the question is not simply: “Is my turnover above ₹1 crore?” The correct question is whether the taxpayer falls within any of the tax-audit conditions applicable to their business or profession. ₹1 Crore vs ₹10 Crore Tax Audit Limit This is one of the most important points businesses should understand. General Business Threshold Where a person carries on business and total sales, turnover or gross receipts exceed ₹1 crore, tax audit provisions can generally become applicable. Increased ₹10 Crore Threshold The threshold can increase to ₹10 crore where: Aggregate cash receipts during the relevant previous year do not exceed 5% of total receipts, and Aggregate cash payments during the relevant previous year do not exceed 5% of total payments. For the cash-receipt condition, certain receipts by cheque or bank draft that are not account-payee may also need to be considered under the applicable provisions. Businesses should therefore analyse their actual transaction records rather than assuming that a predominantly digital business automatically qualifies. Example of the ₹10 Crore Threshold Suppose a business has annual turnover of ₹7 crore. If the prescribed cash receipt and cash payment conditions are satisfied, the business may fall within the higher ₹10 crore threshold rather than becoming subject to tax audit merely because its turnover exceeds ₹1 crore. However, if the prescribed cash conditions are not satisfied, the ₹1 crore threshold may become relevant. This makes accurate classification of cash and non-cash transactions important during year-end tax planning. Tax Audit for Professionals Professionals are subject to a separate threshold under Section 44AB. Tax audit can generally become applicable where the gross receipts from the profession exceed the prescribed limit. This can cover professionals such as: Chartered Accountants Lawyers Doctors Architects Engineers Consultants Technical professionals Other notified professionals The applicability should be checked based on the relevant provisions and the professional’s specific circumstances. Tax Audit and Presumptive Taxation Presumptive taxation can significantly affect tax-audit requirements. For example, eligible businesses may consider provisions such as Section 44AD, while eligible professionals may consider Section 44ADA. However, simply being eligible for presumptive taxation does not mean that tax audit can never apply. The consequences can depend on factors such as: Whether the taxpayer opts for presumptive taxation Whether the taxpayer declares income according to the presumptive provisions Whether the taxpayer declares income below the prescribed presumptive rate Whether the relevant conditions are satisfied Businesses and professionals should therefore examine the interaction between Sections 44AB, 44AD and 44ADA before deciding how to file their return. When Can Presumptive Taxation Create an Audit Requirement? A common situation arises when an eligible taxpayer chooses not to follow the presumptive taxation mechanism and declares income below the prescribed level. Depending on the applicable provisions, the taxpayer may need to maintain books and obtain a tax audit. This is why taxpayers should not decide on presumptive taxation purely on the basis of the tax rate. The compliance consequences should also be evaluated. What Does a Tax Auditor Examine? A tax auditor examines the taxpayer’s books and relevant supporting records. The review can cover: Sales Purchases Expenses Bank transactions Cash transactions Loans and advances Fixed assets Depreciation TDS GST records Debtors Creditors Related-party transactions Business payments Disallowable expenses Tax deductions Accounting methods Other prescribed information The auditor then reports the required particulars in the applicable tax-audit report. Important Documents for Section 44AB Audit Businesses should maintain their financial records throughout the year instead of preparing everything immediately before the audit. Important records can include: Sales invoices Purchase invoices Bank statements Cash book General ledger Journal entries Expense vouchers Fixed asset register Loan statements Debtor ageing Creditor balances GST returns TDS returns Payroll records Investment details Previous year’s financial statements Previous tax-audit report, where applicable Proper documentation can make the audit process substantially smoother. GST and Tax Audit Reconciliation GST data should also be reviewed as part of year-end financial reconciliation. Businesses should compare: Books of account → GST returns → Bank records → Tax return information Differences can arise because of: Credit notes Debit notes Advances Exempt supplies Export transactions Timing differences Rounding differences Revenue recognition differences Identifying these differences before the tax audit can reduce unnecessary queries and corrections. TDS Compliance During Tax Audit TDS is another area that requires attention. A business should review: TDS deducted TDS deposited TDS returns filed Form 26AS TDS certificates Expenses subject to TDS PAN details Late deduction or payment Incorrect TDS treatment can result in tax disallowances and additional interest or other consequences. What Happens If a Tax Audit Is Required
AGM 2026 Compliance: Key Documents, Deadlines and Mistakes Companies Should Avoid
The Annual General Meeting (AGM) is one of the most important annual compliance requirements for companies in India. It gives shareholders an opportunity to review the company’s financial performance, statutory matters and other important corporate decisions. For companies preparing their 2026 AGM, compliance involves more than simply conducting a meeting. Companies need to properly plan the AGM date, issue notice, prepare financial statements and reports, maintain statutory records, conduct the meeting according to applicable requirements and complete the required post-AGM filings. Missing an important step can result in additional compliance work, penalties and difficulties with future corporate transactions. What Is an AGM? An Annual General Meeting is a meeting of the members of a company held annually to conduct specified statutory and shareholder-related business. Under the Companies Act, 2013, companies generally use the AGM to consider matters such as: Adoption of financial statements Board’s report Auditor’s report Appointment or ratification of auditors, where applicable Declaration of dividend, where applicable Appointment or retirement of directors Other ordinary or special business The exact business depends on the company’s structure and circumstances. AGM 2026 Deadline: When Should Companies Hold It? One of the first compliance points companies should check is the applicable AGM deadline. For a company other than a One Person Company, the first AGM generally needs to be held within nine months from the close of the first financial year. For subsequent AGMs, the meeting is generally required to be held within six months from the close of the financial year, with not more than 15 months between two AGMs. For companies following the financial year ending 31 March 2026, the normal deadline for a subsequent AGM would generally fall by 30 September 2026. However, the specific deadline should be checked based on the company’s circumstances, including whether it is conducting its first AGM and whether any valid extension has been granted. Can the AGM Deadline Be Extended? In certain circumstances, the Registrar of Companies may extend the time for holding an AGM. The extension is generally subject to the applicable provisions and prescribed conditions. Companies should not assume that an extension is automatic. If management expects that the AGM cannot be conducted within the statutory period, the company should evaluate the extension process well before the deadline. Key Documents Required for AGM 2026 Proper documentation is one of the most important aspects of AGM compliance. 1. Notice of AGM The company should prepare and issue the AGM notice containing the required information. The notice generally includes: Date Day Time Venue Business to be transacted Explanatory statement where applicable Relevant resolutions Voting-related information Proxy information where applicable 2. Financial Statements The financial statements to be placed before members should be properly prepared and completed according to applicable requirements. These may include: Balance Sheet Statement of Profit and Loss Cash Flow Statement, where applicable Statement of Changes in Equity, where applicable Notes to Accounts 3. Board’s Report The Board’s Report should contain the information required under the Companies Act and applicable rules. Depending on the company, this can include information relating to: Financial performance State of affairs Directors Corporate governance matters Loans and investments Related-party transactions Risk management CSR Energy and technology matters Other prescribed disclosures 4. Auditor’s Report The statutory auditor’s report should be completed before the financial statements are presented to members. Companies should ensure that the financial statements and auditor’s report are properly coordinated before issuing the AGM notice. 5. Register of Members The company should maintain its statutory registers and ensure that member information is properly updated. 6. Attendance and Minutes The company should maintain appropriate records of: Members attending Proxies, where applicable Directors Auditors Chairman Resolutions Proceedings AGM minutes AGM Notice Period Companies need to pay close attention to the statutory notice period. Generally, an AGM requires at least 21 clear days’ notice to members, subject to the applicable provisions and permitted shorter-notice arrangements. The calculation of “clear days” is important. Companies should not calculate the notice period casually by simply counting calendar days. The date on which notice is sent and the date of the meeting need to be considered correctly under the applicable rules. What Business Is Usually Conducted at an AGM? The ordinary business of an AGM generally includes matters such as: Adoption of Financial Statements Members consider the company’s financial statements along with the Board’s and auditor’s reports. Declaration of Dividend Where applicable, shareholders consider dividend-related matters. Appointment of Directors Certain director-related matters may be considered depending on the company’s circumstances. Appointment of Auditors Auditor-related matters are considered where required under the applicable provisions. Other matters can constitute special business and may require an explanatory statement and appropriate resolution. Ordinary Business vs Special Business Understanding this distinction is important when preparing the AGM notice. Ordinary business generally covers prescribed routine AGM matters. Special business refers to other matters proposed to be considered at the meeting. For special business, the notice generally needs to contain an explanatory statement providing members with relevant information about the proposed resolution. Companies should therefore identify the nature of every agenda item before preparing the AGM notice. AGM 2026 Compliance Checklist Compliance Area What Companies Should Check AGM Date Confirm statutory deadline AGM Venue Verify permitted location Notice Prepare and issue correctly Notice Period Check 21 clear days requirement Financial Statements Finalise before AGM Board’s Report Complete prescribed disclosures Auditor’s Report Obtain before AGM Registers Update statutory records Shareholders Verify member details Directors Confirm attendance/eligibility Resolutions Prepare required resolutions Proxy Include applicable proxy information Minutes Record proceedings properly Filing Complete post-AGM ROC filing Records Preserve AGM documentation Important Post-AGM Compliance The compliance process does not end when the AGM is completed. Companies need to complete the required post-meeting filings and statutory record updates. One of the most important filings is Form AOC-4, used for filing financial statements and applicable documents with the Registrar. The company may also need to file the applicable annual return through MGT-7 or MGT-7A, depending on its eligibility and legal requirements. The relevant filing
MSME Reporting in Form 3CD: A Practical Guide to Clause 22 and Clause 26
TL;DR This note sets out the reporting requirements for Micro, Small and Medium Enterprises (MSME) dues under Clause 22 and Clause 26 of Form 3CD, the statutory basis for each clause, and the audit points relevant to compiling them. Statutory Background The Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”) requires a buyer to pay a registered micro or small supplier within the timeline prescribed under section 15, failing which compound interest accrues automatically under section 16. The Finance Act, 2023 inserted clause (h) in section 43B of the Income-tax Act, 1961, with effect from Assessment Year 2024-25. Under this provision, any sum payable to a micro or small enterprise beyond the section 15 timeline is deductible only in the year of actual payment, on a cash basis, rather than on accrual. Form 3CD was amended to give effect to this change. Following an initial notification and a corrigendum issued in March 2024 (CBDT Notification No. 27/2024 dated 5 March 2024, corrected by Notification No. 34/2024 dated 19 March 2024), the reporting is structured as follows: Clause 22 covers the interest disallowance under the MSMED Act and the principal disallowance under section 43B(h); Clause 26 is confined to the remaining categories under section 43B, clauses (a) to (g). Applicability — Micro and Small Enterprises Sections 15 and 16 of the MSMED Act, and the disallowance under section 43B(h), apply to suppliers registered as micro or small enterprises on the Udyam portal. Medium enterprises are outside the scope of this specific provision, although they are covered by the MSMED Act for other purposes. Classification under the MSMED Act is based on investment in plant, machinery or equipment together with annual turnover: micro enterprises are those with investment up to ₹1 crore and turnover up to ₹5 crore; small enterprises are those with investment up to ₹10 crore and turnover up to ₹50 crore. Retail and wholesale traders were included under Udyam registration for the limited purpose of priority sector lending. On this basis, trader-suppliers are generally not treated as covered by the delayed-payment protection under sections 15 and 16. The registration category of each supplier should be verified before applying this treatment. Payment Timeline — Section 15 of the MSMED Act Section 15 prescribes the payment timeline for dues to a micro or small supplier: in the absence of a written agreement, payment is due within 15 days from the date of acceptance (or deemed acceptance) of the goods or services; where a written agreement specifies a credit period, payment may be deferred, subject to a maximum of 45 days from that date. This 45-day limit cannot be extended by agreement. Where payment is not made within this timeline: (i) compound interest accrues under section 16, computed at three times the bank rate notified by the Reserve Bank of India, with monthly rests; and (ii) if the amount remains unpaid as at the end of the previous year, the corresponding expense is disallowed for that year under section 43B(h). The starting point for this timeline is the “day of acceptance” or “day of deemed acceptance”, as defined in section 2(b) and section 2(c) of the MSMED Act. Day of acceptance means the day of actual delivery of goods or rendering of services, or, where the buyer raises a written objection to the goods or services within 15 days of delivery, the day on which the supplier removes that objection. Day of deemed acceptance means the day of actual delivery, where no written objection is raised by the buyer within 15 days of delivery. In practice, the 15-day or 45-day clock runs from one of these two dates, not from the invoice date, and the two can differ where goods are received before the invoice is raised, or where an objection is recorded. Illustrative Computation of Interest under Section 16 The following illustrates the computation of interest under section 16 for a single delayed payment, assuming no written agreement on credit period (statutory limit of 15 days applies) and a notified bank rate of 6.50% per annum (three times the bank rate = 19.50% per annum, compounded with monthly rests): Date of acceptance of goods: 1 January Due date for payment (15 days from acceptance): 16 January Invoice value: ₹10,00,000 Actual date of payment: 15 April (89 days beyond the due date) Interest accrues from 17 January to 15 April at 19.50% per annum, compounded monthly, on ₹10,00,000 Approximate interest for the period (89 days, monthly compounding): ₹47,000, subject to exact computation based on the number of days in each monthly rest This interest amount is disallowed in full under section 23 of the MSMED Act, whether or not it is paid, and whether or not it has been provided for in the books of account. Firms should maintain a standard working paper — supplier-wise and invoice-wise — recomputing this interest at year end for every MSE payable that crossed the due date, rather than relying on amounts (if any) booked by the client. Transitional Treatment — Dues Pertaining to Earlier Previous Years Section 43B(h) applies in relation to Assessment Year 2024-25 and subsequent years, that is, previous year 2023-24 onward. Interest under section 16 and its disallowance under section 23 are not new — these have applied since the MSMED Act came into force in 2006 — and continue to apply to delayed payments outstanding in any year. The principal disallowance under section 43B(h), however, is prospective. A commonly encountered situation is a sum relating to a purchase made in an earlier previous year (for example, 2022-23), where the expense was already claimed as a deduction on accrual basis in that year under the normal provisions, and the amount remains unpaid as at the end of previous year 2023-24 or a later year. Since the deduction for that expense stands allowed in the year it was incurred, section 43B(h) does not operate to disallow it again merely because it remains unpaid in a subsequent year — the provision
TDS on Rent Paid to an NRI Landlord
Section 195 (Income-tax Act, 1961) → Section 393(2) (Income-tax Act, 2025) If you’re renting a home or an office from a landlord who is a Non-Resident Indian (NRI), there’s one compliance step that’s easy to miss but important to get right: deducting tax at source (TDS) before you pay the rent. The good news is that once you understand the rule, it’s a simple, routine part of your monthly rent payment — and with the new Income-tax Act, 2025 coming into effect from 1 April 2026, the framework you already know is simply getting a fresh section number, not a fresh set of headaches. Why TDS applies at all Under Indian tax law, a tenant paying rent to an NRI landlord is treated as a person responsible for paying income to a non-resident. That brings the payment within the scope of the TDS provisions for non-residents — currently Section 195 of the Income-tax Act, 1961, and from 1 April 2026, Section 393(2) of the Income-tax Act, 2025. Unlike rent paid to a resident landlord (where TDS under Section 194-I kicks in only above a threshold), TDS on rent to an NRI applies from the very first rupee, regardless of the amount. The position under the Income-tax Act, 1961 (Section 195) Here’s what a tenant needs to keep in mind today: Rate of TDS: The default rate is 30% of the rent, plus applicable surcharge (based on the landlord’s income level) and 4% health and education cess — commonly worked out to an effective 31.2% where no surcharge applies. This is a headline rate; a lower rate may apply under a Double Taxation Avoidance Agreement (DTAA) or a certificate from the Assessing Officer. TAN, not just PAN: The tenant must obtain a Tax Deduction Account Number (TAN) — a one-time, straightforward registration on the Protean (formerly NSDL) portal — before deducting and depositing TDS. PAN of the landlord: If the NRI landlord does not have a PAN, Section 206AA can push the deduction rate higher, so it’s always worth requesting the landlord’s PAN upfront. Lower or nil deduction certificate: If the landlord’s actual tax liability is lower than the flat TDS rate, they can apply under Section 197 for a certificate permitting deduction at a reduced rate — this is a very common and perfectly legitimate route for NRI landlords. DTAA relief: Where India has a tax treaty with the landlord’s country of residence, a lower treaty rate may apply, generally supported by a Tax Residency Certificate (TRC) and Form 10F from the landlord. Forms 15CA and 15CB: Where the rent (or the TDS-net amount) is being remitted abroad, the tenant or the remitting bank will typically need Form 15CA (self-declaration) and, where applicable, Form 15CB (a chartered accountant’s certificate) before the transfer. Depositing TDS: The deducted tax must be deposited with the government by the 7th of the following month (for March, the due date is 30 April). Quarterly TDS return: The tenant must file Form 27Q every quarter, reporting the payment and the tax deducted. TDS certificate: A Form 16A certificate must be issued to the landlord within 15 days of the due date for filing Form 27Q, so they can claim credit for the tax deducted. A practical tip we give our clients: agree with the NRI landlord, in the rent agreement itself, on who bears the TDS — net or gross of tax — and collect PAN, TRC and Form 10F at the very start of the tenancy. It saves back-and-forth later. What changes under the Income-tax Act, 2025 The Income-tax Act, 2025 takes effect from 1 April 2026 and reorganises India’s direct tax law into a cleaner, more consolidated structure. For TDS on payments to non-residents — including rent to an NRI landlord — the reassuring message is one of continuity: New section reference: Section 195 of the 1961 Act is now Section 393(2) of the 2025 Act (Table 2, Serial No. 17 of the consolidated TDS table). Rates and principles unchanged: The 2025 Act does not change the rate of TDS applicable to rent paid to a non-resident, or the underlying principle that TDS applies from the first rupee. It simply houses the same rule under a new, consolidated numbering system. DTAA benefits continue: Treaty relief and the process of claiming a lower rate under a DTAA remain unaffected by the recodification. Familiar forms, new numbers: As part of the same consolidation, some forms have been renumbered — Form 15CA becomes Form 145, Form 15CB becomes Form 146, and Form 27Q becomes Form 144. The underlying filing process and information required stay materially the same. In short: if you are already deducting TDS correctly on rent paid to an NRI landlord, you are already compliant with the spirit of the 2025 Act. The transition mainly means quoting the new section and form numbers in your paperwork from 1 April 2026 onwards. At a glance: 1961 Act vs 2025 Act Aspect Income-tax Act, 1961 Income-tax Act, 2025 Governing provision Section 195 Section 393(2), Table 2, Sl. No. 17 Effective from Currently in force 1 April 2026 TDS rate on rent to NRI 30% + surcharge (if any) + 4% cess Unchanged Threshold for deduction None — from the first rupee Unchanged Remittance declaration Form 15CA / 15CB Form 145 / 146 Quarterly TDS return Form 27Q Form 144 DTAA / lower deduction relief Available (Sec 197, TRC + Form 10F) Available, unaffected A quick checklist for tenants Confirm your landlord’s residential status and obtain their PAN, TRC and Form 10F at the start of the tenancy. Apply for a TAN before the first rent payment, if you don’t already have one. Deduct TDS at the applicable rate (checking for any Section 197 certificate or DTAA benefit) before each rent payment. Deposit the TDS by the 7th of the following month and file Form 27Q (Form 144 from FY 2026-27 onwards) every quarter. Issue Form 16A to your landlord promptly, so they can claim credit
Taxation of HUF: Income Tax Act, 1961 vs. Income Tax Act, 2025
Taxation of HUF Income Tax Act, 1961 vs. Income Tax Act, 2025 — what stays, what changes, and what it means for your family’s tax planning The Hindu Undivided Family (HUF) has been one of the most trusted tax-planning structures available to Indian families for decades — a separate taxable ‘person’ with its own PAN, its own exemption limit, and its own set of deductions. With India moving from the Income Tax Act, 1961 to the new Income Tax Act, 2025 (effective 1 April 2026), many families are asking a fair question: does my HUF still work the way it used to? The short answer is yes — and this blog walks you through exactly what has been renumbered, what has been genuinely modernised, and what remains untouched. 1. HUF Taxation Under the Income Tax Act, 1961 This is the framework that still governs your return for FY 2025-26 (AY 2026-27), and it continues to apply to every past assessment year and pending dispute even after the new law takes effect. Here is how it works: A recognised, separate taxpayer Under Section 2(31), an HUF is treated as a distinct ‘person’ for tax purposes — separate from its Karta and its members. It holds its own PAN, can open its own bank account, and files its own return, provided it is backed by a proper HUF deed and a genuine source of ancestral property, inheritance, or gifts. Karta: the senior-most member, who manages the HUF’s finances and represents it legally. Coparceners: members who acquire a right in the property by birth and can demand partition. Members: family members (such as a member’s spouse) who share in the family but do not hold coparcenary rights. Slab rates, exemption and rebate An HUF is taxed on the same slab rates as an individual, with its own basic exemption of ₹2,50,000 under the old regime. Crucially, the Section 87A rebate — which can zero out tax for resident individuals with modest incomes — is not available to an HUF, so this is one planning point where an HUF and its Karta genuinely differ. Deductions the HUF can claim in its own right Under the old regime, an HUF gets an independent set of Chapter VI-A deductions, separate from what its individual members claim on their own returns: Section 80C: up to ₹1.5 lakh for life insurance, PPF, ELSS and similar investments made in the HUF’s name. Section 80D: health insurance premiums for HUF members. Section 24(b): home loan interest — up to ₹2 lakh for a self-occupied property, uncapped for a let-out one. These deductions are only available if the HUF opts for the old regime; the default new-regime slabs (introduced by the Finance Act, 2026) apply if no deductions are claimed. Clubbing and partition — the two guardrails Clubbing (Section 64(2)): if a member transfers their own self-acquired property to the HUF without adequate consideration, the income from that asset is taxed back in the transferor’s hands, not the HUF’s — this stops families from shifting income into the HUF purely to save tax. Partition (Section 171): only a complete partition is recognised for tax purposes. Any partial partition claimed after 31 December 1978 is disregarded, and the HUF continues to be assessed as undivided until the Assessing Officer formally records the partition. Property division on a recognised partition is also not treated as a ‘transfer’ under Section 47, so no capital gains tax arises purely on account of the split. Filing and audit An HUF cannot use the simple ITR-1; depending on its income sources it files ITR-2, ITR-3 or ITR-4. A tax audit under Section 44AB becomes mandatory once business turnover crosses ₹1 crore (or ₹10 crore where at least 95% of receipts and payments are digital). 2. What Changes Under the Income Tax Act, 2025 The new Act takes effect from 1 April 2026 and governs income from FY 2026-27 (AY 2027-28) onward. FY 2025-26 returns, and every past assessment, continue exactly as before under the 1961 Act — so nothing about the return you are filing this season changes because of this new law. A leaner, renumbered statute — not a new tax philosophy The headline change is structural rather than substantive. The Act has been compressed from well over 700 sections to 536 sections, organised across 23 chapters and 16 schedules, with plain, sequential numbering — so references like ‘80C’ or ‘44AB’ give way to a single running number. The stated goal is to cut litigation and make the law easier to navigate, for professionals and Karta alike, not to rewrite how Hindu law concepts are taxed. One less date to track: the ‘Tax Year’ The long-standing ‘Previous Year’ / ‘Assessment Year’ distinction is replaced by a single, unified Tax Year — simply the financial year in which income is earned and reported. For an HUF’s compliance calendar this is a welcome simplification rather than a substantive change. HUF stays a first-class taxpayer The new default (simplified) tax regime under Section 202 explicitly lists HUFs — alongside individuals, associations of persons and bodies of individuals — as eligible assessees. The slab structure carried forward from the Finance Act, 2026 stays the same for an HUF as for an individual: Income Slab Rate Up to ₹4,00,000 Nil ₹4,00,001 – ₹8,00,000 5% ₹8,00,001 – ₹12,00,000 10% ₹12,00,001 – ₹16,00,000 15% ₹16,00,001 – ₹20,00,000 20% ₹20,00,001 – ₹24,00,000 25% Above ₹24,00,000 30% The rebate mechanism is retained under Section 156 (up to ₹60,000 where total income does not exceed ₹12 lakh), mirroring the old Section 87A. As under the 1961 Act, this rebate has historically been reserved for resident individuals, so HUFs should plan on the same basis as before rather than building it into projections. The core Hindu-law concepts are renumbered, not removed Based on the sections mapped so far between the two Acts, the substantive protections that matter most to an HUF continue — just under new numbers: What it covers 1961 Act 2025 Act Independent
How Is the ITR Due Date Decided?
Understanding Audit Applicability Under the Income Tax Act, Companies Act, LLP Act and Trust Laws August 2026 Every year, taxpayers in India notice that not everyone files their Income Tax Return (ITR) by the same date. A salaried individual may have to file by 31st July, while a company, a large partnership firm, or an entity claiming exemption as a charitable trust often gets time until 31st October — or even 30th November. This difference is not arbitrary. It flows from a single, well-defined statutory mechanism in the Income Tax Act, which in turn borrows from audit requirements laid down in completely different laws — the Companies Act, 2013, the Limited Liability Partnership Act, 2008, and various trust laws. This blog explains, section by section, how the ITR due date is actually decided, why “audit applicability” is the real trigger behind the 31st October deadline, and how audits required under other statutes feed into the income tax timeline. It also flags the transition currently underway from the Income-tax Act, 1961 to the new Income Tax Act, 2025, which came into force from 1st April 2026. A quick note on timing: returns for Assessment Year (AY) 2026-27 relate to income earned in Financial Year 2025-26 (before 1 April 2026), so they continue to be governed by the provisions of the Income-tax Act, 1961, even though the new Income Tax Act, 2025 is now in force. From Tax Year 2026-27 onward (income earned on or after 1 April 2026), the new Act’s renumbered sections will apply. Both frameworks are covered below, with the corresponding new-law section numbers noted alongside the familiar old ones. Part 1: The Provision That Decides Everything — Section 139(1) The starting point is Section 139(1) of the Income-tax Act, 1961 (the corresponding provision under the new law is Section 263 of the Income Tax Act, 2025). This section casts the basic obligation to file a return of income on every company and firm, and on every other person whose total income exceeds the basic exemption limit. Sub-section (1) itself does not fix a single date. Instead, it leaves the actual date to be worked out through “Explanation 2” to Section 139(1), which classifies every assessee into one of a few buckets and assigns a due date to each bucket. It is this Explanation — not the main provision — that is the real engine deciding whether a taxpayer gets until July, August, October or November to file. Part 2: The Due Date Buckets for AY 2026-27 (FY 2025-26) Based on Explanation 2 to Section 139(1) as it currently stands, the due dates work out as follows: 31st July of the assessment year — Individuals, HUFs and other non-corporate, non-firm taxpayers who are not required to get their accounts audited under any law (typically those filing ITR-1 or ITR-2). 31st August of the assessment year — Non-audit business and professional taxpayers filing ITR-3 or ITR-4 who are not liable to tax audit. This extended window (as opposed to the earlier 31st July date) reflects a change applicable for AY 2026-27, and taxpayers should always check for the latest CBDT notification or circular before relying on it, since these dates are occasionally extended further. 31st October of the assessment year — This is the big one, and the heart of this blog (see Parts 3-7 below). 30th November of the assessment year — Assessees required to furnish a transfer pricing report under Section 92E (successor Section 172 under the Income Tax Act, 2025). The 31st October date is what taxpayers, companies, LLPs and trusts most often ask about, and it is directly and explicitly tied to audit applicability — not just tax audit under the Income Tax Act, but audit under *any* other law as well. That phrase is the crux of the entire question, so it is worth unpacking carefully. Part 3: The Exact Statutory Language That Creates the Link Explanation 2 to Section 139(1) of the Income-tax Act, 1961 defines “due date” for this category of assessee as 31st October where the assessee is: “a company; or a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or a partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force, or the spouse of such partner…” Notice the phrase “under this Act or under any other law for the time being in force.” This is the statutory hook that pulls audits required under the Companies Act, the LLP Act, and various trust-related laws into the income tax timeline. A taxpayer does not need to independently cross the tax-audit turnover threshold under the Income Tax Act to land in the 31st October bucket — if any other applicable law compels an audit of that person’s accounts, the income tax due date automatically shifts to 31st October as well. This is precisely why a small private limited company with modest turnover, or a small LLP that has just crossed a contribution threshold, ends up with the same October deadline as a large, tax-audit-liable business — even if neither of them would independently trigger a tax audit under the Income Tax Act. Part 4: Tax Audit Under the Income Tax Act Itself — Section 44AB (New Section 63) Before looking at the other laws, it helps to understand the “home-grown” audit requirement under the Income Tax Act, since it is the most commonly encountered trigger for the October deadline. Section 44AB of the Income-tax Act, 1961 (renumbered as Section 63 under the Income Tax Act, 2025) makes audit of accounts compulsory in the following situations: For a business — where total sales, turnover or gross receipts exceed ₹1 crore in the year. This threshold is relaxed to ₹10 crore where cash receipts do not exceed 5% of total receipts and cash payments do not exceed 5% of total
Book Profit, Interest on Capital and Partners’ Remuneration under Section 40(b)
A clause-by-clause technical analysis under the Income Tax Act, 1961 Section 40(b) of the Income Tax Act, 1961 governs the deductibility of interest and remuneration paid by a partnership firm to its partners. It operates alongside Section 184 (which lays down the conditions a firm must satisfy to be assessed as a firm), Section 28(v) (which taxes these receipts in the hands of the partner), and, from Assessment Year 2025-26, Section 194T (which mandates TDS on such payments). This article sets out the statutory scheme clause by clause, explains how “book profit” is computed under Explanation 3, and works through a complete numerical example. Threshold condition: assessment as a firm under Section 184 Section 40(b) applies only where the entity is “assessed as a firm.” Section 184 requires that the partnership be evidenced by an instrument of partnership, that the instrument specify the individual shares of the partners, and that a certified copy of the instrument accompany the firm’s return of income for the relevant assessment year (and again whenever the terms of the partnership, or the profit-sharing shares, change during the year). Where these conditions are not satisfied, the firm can lose the benefit of the Section 40(b) deduction scheme entirely, so the partnership deed and its filing are the starting point of the analysis, not a formality to be handled afterward. The structure of Section 40(b): clauses (i) to (v) Section 40(b) is drafted as a list of disallowances — it identifies what a firm cannot deduct, rather than affirmatively granting a deduction. In substance, the five clauses operate as follows. Clause What it disallows (i) Any remuneration paid to a partner who is not a working partner — disallowed in full, regardless of amount or deed authorisation (ii) Any remuneration or interest that is not authorised by, or not in accordance with, the partnership deed (iii) Any remuneration or interest that is authorised by the deed but relates to a period before the date of that deed (i.e., no retrospective effect) (iv) Interest to a partner in excess of 12% simple interest per annum, even where the deed authorises a higher rate (v) Remuneration to a working partner in excess of the aggregate limit computed on book profit under Explanation 3 Clauses (i) to (iii) are essentially gatekeeping conditions — a payment either qualifies for consideration under the section or it doesn’t. Clauses (iv) and (v) are the quantitative caps: a 12% ceiling on interest, and a slab-based ceiling on remuneration. The four Explanations Four Explanations to Section 40(b) fill in definitions and edge cases that the clauses themselves don’t spell out. Explanation 1 addresses a partner who both receives interest from the firm and pays interest to the firm — for instance, where a partner has a debit balance in one account and a credit balance in another, or borrows back from the firm. In such a case, only the net interest paid by the firm to that partner is taken into account for testing against the 12% ceiling, rather than the gross interest paid. Explanation 2 deals with a partner who holds their interest in the firm in a representative capacity — for example, an individual who is a partner “on behalf of,” or “for the benefit of,” another person (a common structure where an HUF’s interest is represented by its karta, or a trust’s interest is represented by a trustee). Interest paid to that individual in their personal capacity, as distinct from their representative capacity as partner, falls outside Section 40(b) altogether; interest paid to them qua partner, and interest paid to the person they represent, is what the section actually tests. Explanation 3 defines “book profit” — the base figure to which the clause (v) remuneration slabs are applied. It is not the accounting net profit; it is the net profit as per the profit and loss account, computed in the manner laid down for income under the head “Profits and gains of business or profession,” as increased by the remuneration to partners where that remuneration has already been debited to the profit and loss account. Explanation 4 defines a “working partner” as an individual partner who is actively engaged in conducting the affairs of the business or profession of the firm. This definition does the heavy lifting behind clause (i): a partner who has contributed capital but takes no active part in the business cannot receive deductible remuneration, however the payment is labelled in the deed. Computing book profit under Explanation 3 Because book profit excludes the deduction for remuneration itself (that deduction is what’s being tested against it), and because it is confined to income taxable under the business head, arriving at it requires a short sequence of adjustments starting from the profit and loss account: Begin with the net profit as per the profit and loss account. Add back any remuneration to partners already debited as an expense. Add back interest on partners’ capital disallowed under clause (iv) — i.e., any excess over 12% simple interest per annum. Add back any other expenditure disallowed under the Act, such as amounts caught by Section 40A(3) (cash payments beyond the prescribed limit) or Section 43B (certain statutory dues not paid before the due date for filing the return). Then deduct any income credited to the profit and loss account that is chargeable under a head other than business income — capital gains, house property income, or interest on an income-tax refund, for instance. What remains is the book profit for the purposes of clause (v). Interest on capital: clause (iv) in practice A firm may pay interest to partners on their capital contributions, but the deduction is conditional on two things holding simultaneously: authorisation under the partnership deed (clauses (ii) and (iii)), and a rate not exceeding 12% simple interest per annum (clause (iv)). Partners are free to agree commercially to a higher rate in the deed, but the deduction available to the firm remains capped at 12%; the excess
Missed reporting Foreign Assets in ITR? Here is Foreign Assets of Small Taxpayers Disclosure Scheme, 2026
A Complete Guide for Taxpayers Introduction Many Indian taxpayers hold a foreign bank account, an inherited property abroad, a handful of foreign shares, or income earned overseas — and, often without any intent to evade tax, never got around to reporting it in their Indian income-tax return. Under the existing law, such gaps fall within the reach of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the Black Money Act), which was designed to deal with serious concealment and carries correspondingly severe consequences. Recognising that a large number of these cases involve modest amounts and unintentional lapses rather than deliberate evasion, the government has introduced the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 (FAST-DS) — a one-time voluntary disclosure window under Chapter IV (sections 130 to 144) of the Finance Act, 2026, backed by the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026, notified by the CBDT on 14th August 2026. It lets eligible taxpayers come forward, declare the asset or income, pay a specified amount, and walk away with immunity — without going through the far harsher Black Money Act route. Quick Details Particular Detail Legal basis Sections 130–144, Chapter IV, Finance Act, 2026, read with the FAST-DS Rules, 2026 Date of commencement 16th August 2026 Last date to file declaration 31st December 2026 (no extensions contemplated) Valuation date 31st March 2026 Declaration form Form 1, filed electronically Administering authority Principal Director General / Director General of Income-tax (Systems) Monetary ceiling — undisclosed asset/income ₹1 crore Monetary ceiling — reporting lapse on already-taxed asset ₹5 crore Amount payable — undisclosed asset/income 30% tax + equal additional amount (effectively 60%) Amount payable — reporting lapse Flat ₹1 lakh Who Must Take Benefit of This Scheme FAST-DS is aimed squarely at what its name suggests — small taxpayers, not large-scale concealment cases. You should seriously consider using this Scheme if you fall into any of these situations: You hold a foreign bank account, foreign property, foreign shares or securities, jewellery, or any other asset located outside India, and never reported it in any Indian tax return. You earned income from a source outside India — interest, rent, dividends, capital gains, or otherwise — that was taxable in India but was never offered to tax. You did report a foreign asset in your books or elsewhere, or it was acquired while you were a non-resident, but it never made it into the specific foreign-assets schedule of your income-tax return. You are worried about a past lapse being picked up later — for instance through automatic exchange of financial account information between countries — and want to regularise your position on your own terms rather than waiting to be caught. In each of these cases, coming forward voluntarily under FAST-DS is almost always preferable to the alternative of the tax department discovering the gap independently, because the Scheme trades a fixed, known cost today for the open-ended exposure of tax, penalty and possible prosecution later. Applicability Who can declare You qualify as an eligible “assessee” if you are resident in India (under section 6 of the Income-tax Act) for the relevant previous year, or if you are currently a non-resident or resident-but-not-ordinarily-resident (RNOR) but were resident in India either in the year the income relates to or the year the asset was acquired. A change in your residential status since then does not disqualify you. When it applies A declaration is available where you failed to furnish a return altogether, failed to disclose the asset or income in a return you did file before the Scheme commenced, or where the asset or income would otherwise be treated as having escaped assessment under section 147 of the Income-tax Act. Monetary thresholds Applicability splits into two tracks, and you must check the one relevant to you: Track 1: An undisclosed foreign asset or undisclosed foreign income that was never offered to tax — available only where the combined value does not exceed ₹1 crore as on the valuation date. Track 2: A foreign asset already offered to tax, or acquired while you were non-resident, but not declared in the relevant schedule of the return — available only where the aggregate asset value does not exceed ₹5 crore. Cross the applicable ceiling and the Scheme is unavailable for that declaration entirely; there is no scaled-down benefit. Where it does not apply, regardless of value The Scheme is off the table if the income or asset represents proceeds of crime with proceedings already initiated or pending under the Prevention of Money-Laundering Act, 2002, or if assessment proceedings for that year have already been completed under the Black Money Act, 2015. Determination of Tax Liability Track 1 — undisclosed asset/income The amount payable is the aggregate of tax at 30% of the declared value, plus a further amount equal to that tax — effectively a 60% levy on the total. Illustration: Description Value / Income Tax (30%) Additional 100% of tax Total payable Foreign bank account ₹60 lakh ₹18 lakh ₹18 lakh ₹36 lakh Foreign income ₹20 lakh ₹6 lakh ₹6 lakh ₹12 lakh Total ₹24 lakh ₹24 lakh ₹48 lakh Track 2 — reporting lapse The amount payable is a flat ₹1 lakh, irrespective of whether the asset is worth ₹50 lakh or the full ₹5 crore ceiling. Valuing the asset Everything is valued as on 31st March 2026. As a general rule, fair market value is the higher of the original cost of acquisition and the open-market price on the valuation date (ideally backed by a recognised valuer’s report); where no such valuation is done, the indexed cost of acquisition applies instead. Foreign bank accounts follow a distinct rule — value is the sum of all deposits made into the account since it was opened, up to the valuation date, excluding amounts that are really a withdrawal being redeposited, and excluding deposits already covered by an earlier Black Money Act declaration. Paying
Depreciation Under the Income Tax Act: A Complete Guide to the Block of Assets
Understanding block-wise WDV computation, additions, sales, and when a block ceases to exist Depreciation is one of the most useful deductions available to a business, and once you understand how the block of assets system works, calculating it becomes refreshingly straightforward. Unlike the Companies Act, which tracks depreciation asset-by-asset, the Income Tax Act uses a simpler, more efficient block approach. This guide walks through the concept step by step, with worked examples, so you can apply it confidently to any client’s fixed asset schedule. 1. The Block of Assets Concept Section 2(11) of the Income Tax Act defines a ‘block of assets’ as a group of assets falling within the same class — tangible assets such as buildings, machinery, plant, or furniture, or intangible assets such as patents, copyrights, trademarks, licences, and franchises — for which the same rate of depreciation is prescribed. In practice, this means you do not depreciate each machine or vehicle individually. Instead, every asset eligible for the same rate is pooled into one block, and depreciation under Section 32 is computed on the written down value (WDV) of the block as a whole, not on individual assets. This has a few important consequences: Once an asset enters a block, it loses its individual identity for depreciation purposes. You do not need to track the WDV of each individual asset year after year — only the block’s combined WDV. Gain or loss on sale of an individual asset is generally not computed separately; it flows through the block (see Section 4). Good practice: maintain a fixed asset register with individual asset detail for internal control and audit purposes, even though the tax computation itself only needs block-level figures. 2. Rates and Classification of Blocks The Income Tax Rules (Appendix I) prescribe the rate applicable to each class of asset. A few commonly used rates are illustrated below — always verify the current rate against the latest Rules before filing, as rates and classifications are occasionally revised. Block Illustrative Assets Rate of Depreciation Building (residential) Staff quarters, residential buildings 5% Building (non-residential) Factory, office premises 10% Furniture and fittings Furniture, fixtures 10% Plant and machinery (general) General plant and machinery 15% Motor vehicles (general use) Cars, vans not used in a hiring business 15% Computers, including software Computers, laptops, software 40% Intangible assets Patents, trademarks, licences, franchises 25% 3. Computing Depreciation: The Basic WDV Formula Depreciation for the year is computed on the WDV of the block as at the beginning of the year, adjusted for additions and deletions during the year: Depreciation = Rate × [Opening WDV of block + Cost of assets acquired during the year − Sale consideration/moneys receivable for assets sold, discarded, or destroyed during the year] This adjusted figure — opening WDV plus additions minus deletions — is what the Act calls the WDV of the block as on the last day of the previous year, and it is this figure to which the rate is applied. 4. Additions During the Year — the 180-Day Rule When a new asset is added to a block during the year, the depreciation allowed depends on how long it was used in that year: Asset put to use for 180 days or more in the year of acquisition: full year’s depreciation at the normal rate. Asset put to use for less than 180 days in the year of acquisition: depreciation restricted to 50% of the normal rate, for that year only. The 180-day test looks only at the date the asset is put to use, not the date of purchase or invoicing. From the following year onward, the asset merges fully into the block and the 180-day restriction no longer applies — the full rate is charged on the entire block WDV, addition included. 5. Sale, Discarding, or Destruction of an Asset — Effect on the Block When an asset within a block is sold, discarded, demolished, or destroyed during the year, the moneys payable in respect of it (sale price, insurance/scrap value, compensation, etc.) are simply deducted from the block’s WDV before applying the rate — there is no separate gain or loss computed on that individual asset, so long as the block continues to exist and has a positive balance after the deduction. This is one of the most useful features of the block system for a growing business: selling an old machine at a profit or loss over its individual book value does not, by itself, trigger a taxable event. The sale proceeds simply reduce the pool on which future depreciation is calculated. 6. Illustrative Example — Additions and Deletions in the Same Block Consider a Plant and Machinery block (rate 15%) for a manufacturing client for FY 2025-26: Particulars Amount (₹) Opening WDV as on 1 April 2025 50,00,000 Add: New machine purchased and used from 10 June 2025 (used > 180 days) 12,00,000 Add: New machine purchased and used from 5 January 2026 (used < 180 days) 6,00,000 Less: Sale proceeds of an old machine sold in August 2025 (4,00,000) WDV before depreciation 64,00,000 Because the 180-day rule applies asset-by-asset only in the year of addition (not to the block as a whole), depreciation is split into two components for the current year: Component Base (₹) Rate Applied Depreciation (₹) Opening WDV + additions used ≥ 180 days, less deletions 50,00,000 + 12,00,000 − 4,00,000 = 58,00,000 15% 8,70,000 Addition used < 180 days 6,00,000 7.5% (half rate) 45,000 Total depreciation for FY 2025-26 9,15,000 Closing WDV carried forward to FY 2026-27 = ₹64,00,000 − ₹9,15,000 = ₹54,85,000. From next year, this entire figure is treated as a single opening WDV, and the half-rate addition loses its special treatment entirely. 7. When the Block Ceases to Exist — the ‘Block Deleted’ Concept A block can come to an end in two distinct situations, and it is important to tell them apart correctly: (a) All assets in the block are sold, but sale proceeds are less than or equal to