1. ITR Forms for FY 2025-26 (AY 2026-27) Notified — Last Return Under the Old Act
The Central Board of Direct Taxes (CBDT) has notified the Income Tax Return forms for FY 2025-26 (Assessment Year 2026-27). This marks a significant milestone — FY 2025-26 is the final year for which returns will be filed under the Income Tax Act, 1961. From Tax Year 2026-27 onwards, all returns will be governed by the Income Tax Act, 2025, with new section references, new forms, and a new compliance framework.
Taxpayers, employers, and practitioners must therefore approach AY 2026-27 filings with particular care — using old section numbers, old form references, and the old assessment year framework throughout.
Applicable ITR Forms & ITR Filing Requirements for AY 2026-27
| Form | Applicable To |
| ITR-1 (Sahaj) | Resident individuals with salary, one house property, other sources — income up to ₹50 lakhs |
| ITR-2 | Individuals/HUFs not having business or professional income; capital gains cases |
| ITR-3 | Individuals/HUFs having income from business or profession |
| ITR-4 (Sugam) | Individuals, HUFs, firms (other than LLP) opting for presumptive taxation under Sections 44AD, 44ADA, 44AE |
| ITR-5 | Firms, LLPs, AOPs, BOIs, and other entities |
| ITR-6 | Companies other than those claiming exemption under Section 11 |
| ITR-7 | Trusts, political parties, research institutions, and entities under Sections 139(4A) to 139(4F) |
Key Due Dates
| Category | Due Date |
| Individuals / HUFs (non-audit) | 31 July 2026 |
| Non-audit business & professional cases, trusts | 31 August 2026 |
| Audit cases (business/profession) | 31 October 2026 |
| Transfer pricing cases | 30 November 2026 |
Critical Reminder — Do Not Use New Act References
Do not use new Act section references (e.g., Section 393 for TDS) in ITR for FY 2025-26. Old section references — 194C, 194J, 192, etc. — continue to apply for this return cycle. Using new section numbers in AY 2026-27 returns will cause portal validation errors.
The first return under ITA 2025 (for Tax Year 2026-27) will be filed from July 2027.
2. CBDT Clarifies TDS on Salary Under New Act — Section 392 of ITA 2025
Following transition to the Income Tax Act, 2025 from 1 April 2026, CBDT has issued a clarification on salary TDS computation for Tax Year 2026-27. Employers are required to compute tax on salary under Section 392 of ITA 2025 (replacing old Section 192). The default regime is now the new tax regime — employees must specifically opt out in writing to switch to the old regime.
Key practical points:
- The new regime slab rates under ITA 2025 apply by default to all salaried employees for Tax Year 2026-27.
- Employers must collect declarations from employees at the beginning of the tax year. Declarations received mid-year can be given effect prospectively only.
- Where an employee does not submit any declaration, the employer must deduct TDS under the new regime default slabs.
- Form 12BAA (employee’s declaration of other income and deductions) continues for the new act as Form 132.
- Salary TDS certificates will now be issued in Form 130 (replacing old Form 16), applicable from Tax Year 2026-27.
Employers are advised to update payroll software to reflect new section references and form numbers before processing May 2026 salaries to avoid mismatches in Form 168 (new Form 26AS equivalent).
Respond Now, Challenge Later? Not Anymore : HC
Vijender Pal Jain v. ACIT | Delhi High Court | May 8, 2026
What happened?
Mr. Rishi Raman Jain passed away in 2018 during his income tax assessment for AY 2016-17. The department was informed of his death but still initiated reassessment proceedings in his name. The notice was addressed to the deceased “through Legal Heir Mr. Vijender Pal Jain” — his father. The father filed a detailed reply describing himself as the “legal representative,” and then later filed a writ petition arguing the notice was invalid because, as a Class II heir under the Hindu Succession Act, he was not technically a “legal heir.”
What did the Court say?
The Court rejected the challenge on the notice, holding that since the father had himself participated in the proceedings as legal representative, he could not later turn around and say the notice was invalid. “Legal heir” and “legal representative” are different — Section 159 of the Income Tax Act uses only “legal representative,” which is defined broadly under the CPC to include anyone who represents or intermeddles with the estate of the deceased.
However, the notice was ultimately quashed on a different ground — the Revenue had obtained approval from the PCIT, whereas since the extended period of limitation was invoked, approval from the PCCIT was mandatory under Section 151(ii).
Key Takeaways
- If you respond to a reassessment notice as “legal representative,” you may lose the right to later challenge whether you were properly served.
- Revenue must obtain sanction from the correct authority — PCCIT (not PCIT) when invoking extended limitation under Section 148.
Settlement Amount for Withdrawing Litigation — Capital Receipt, Not Taxable : ITAT
Belani Housing Development Ltd v. DCIT ITAT Kolkata | IT(SS)A 107/KOL/2025 | AY 2018-19 | Decided: 27 February 2026
Background
Belani Housing Development Ltd, a real estate company, along with three other companies, entered into an agreement in 2004 to purchase factory land from Saregama India Ltd (SIL) for a real estate project. The deal fell through — two successive arbitrators held that SIL itself had no valid title to the land, and Belani had no enforceable rights under the Agreement for Sale.
During the pendency of Belani’s suit in Barasat Court, SIL agreed to pay a total of Rs. 18 crores to Belani and the three other companies together to settle all disputes. Out of this, Rs. 6.58 crores was Belani’s share; the remaining Rs. 11.42 crores belonged to and was received by the three other companies.
What the Authorities Did ?
The AO taxed the entire Rs. 18 crores in Belani’s hands as capital gains, treating it as payment for extinguishment of rights. The CIT(A) restricted the capital gains addition to Belani’s actual share of Rs. 6.58 crores but retained the Rs. 11.42 crores in Belani’s hands on a protective basis pending assessment of the other three companies.
What the Tribunal Held — Appeal Fully Allowed
On Rs. 6.58 crores: The Tribunal held that since both arbitrators had already ruled that Belani had no enforceable rights under the Agreement, what Belani actually possessed at the time of settlement was only the “right to sue” — a personal legal privilege. The “right to sue” is not a capital asset under Section 2(14) of the Act and therefore compensation received for giving it up cannot be charged to capital gains. The receipt was also towards loss of source of income, making it a capital receipt following the Supreme Court in Oberoi Hotels (P) Ltd v. CIT (236 ITR 903).
On Rs. 11.42 crores: Since this amount was received by and belonged to the three other companies, it could not be taxed in Belani’s hands. Further, a protective addition can only be made after a substantive assessment is first raised in the hands of the actual recipient — which had not been done here.