Sebi offers a way over FPI tax rule hurdle
The Income Tax (I-T) Department has enabled online filing and Excel utility for Income Tax Return-3 (ITR-3) form for the Assessment Year 2026–27 (AY 2026-27) Financial Year 2025-26 (FY 2025-26) on its official e-filing portal. The ITR-3 form is meant for individuals and Hindu Undivided Families (HUFs) with business or professional income. Taxpayers who are not eligible to use simpler forms such as ITR-1, ITR-2 or ITR-4 are required to file ITR-3. Who can use ITR 3? If an individual or a Hindu Undivided Family has income under the heading ‘profits or gains of business or profession’ and is not qualified to submit Form ITR-1 (Sahaj), ITR-2, or ITR-4 (Sugam), they must use the ITR-3 form.
Recently, the Central Board of Direct Taxes (CBDT) issued guidelines for compulsory selection of income tax returns (ITRs) for complete scrutiny and in this regard specified two deadlines, one for internal use and the other for sending tax notices. The two deadlines are: June 15, 2026: (internal deadline) Tax officers have to forward certain selected ITRs which satisfy specific guidelines to the Directorate of Income Tax (Systems) so that further action can be taken. June 30, 2026: This is the deadline for issuance of tax notice under Section 143(2) for ITRs filed in FY 2025-26.
The government will examine demands for rationalising taxes on equity investments, but is not considering any knee-jerk response to stem foreign institutional investor (FII) outflows from Indian equity markets, a senior Finance Ministry official told The New Indian Express. “There is a need for a deeper study of the taxation of capital gains from equity investments,” the official said, acknowledging that there are currently divergent views on the issue. The official was responding to a question from TNIE on why the government chose to provide tax relief on investments in government bonds by foreign investors while leaving unaddressed the long-standing demand for lower capital gains taxes on equities.
A ruling by the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has underscored the importance of understanding tax deduction at source (TDS) obligations when purchasing property. The case involved a Mumbai resident, who had jointly purchased a residential flat in the tony area of Haji Ali, worth Rs 1.9 crore with her husband. She held a 15% share in the property (Rs. 28.50 lakh) and deducted TDS of Rs 28,500 under Section 194-IA on her share of the purchase price. However, the tax department later raised a demand exceeding Rs 5.8 lakh, alleging short deduction of tax on the ground that the seller's PAN was inoperative and therefore higher TDS provisions under Section 206AA should have applied. The ITAT deleted the demand, noting that the seller had subsequently linked Aadhaar with PAN and regularised the PAN within the timeline prescribed by a circular issued by the Central Board of Direct Taxes (CBDT) in July 2025. The ITAT also observed that the seller had disclosed the capital gains in his tax return and paid the applicable taxes, making it inappropriate to treat the buyer as an 'assessee in default'.
Can a taxpayer face a hefty tax demand merely because her name appears on a property purchase agreement, even though the entire payment was made by someone else? In a recent ruling by the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) in the case of Sanjeevani Sanjay Rane vs ACIT (ITA No. 7361/Mum/2025) for Assessment Year 2017-18, the tribunal deleted additions of Rs 54.93 lakh made by the tax department after finding that the entire investment in the property had been made by the taxpayer’s husband and that the source of funds was adequately explained. How the dispute began The case relates to a residential property purchased during FY 2016-17 for Rs 52.81 lakh. According to the taxpayer, her name was included in the registered agreement only as a family member for convenience, while the entire consideration for the property was paid by her husband, Sanjay Rane.
The Central Board of Direct Taxes (CBDT) has notified fresh guidelines for compulsory scrutiny of Income Tax Returns (ITRs) during the financial year 2026-27, identifying six categories of cases that may be selected for detailed examination by the Income Tax Department. The guidelines, issued through a notification dated June 4, 2026, aim to ensure closer scrutiny of high-risk cases involving surveys, search and seizure actions, tax-evasion information, recurring tax disputes, and certain trusts or institutions claiming tax benefits despite cancellation or denial of registrations. Which taxpayers can face mandatory scrutiny? According to the CBDT guidelines, the following categories of cases can be selected for compulsory scrutiny: 1. Taxpayers covered under survey operations Returns of taxpayers on whom a survey under Section 133A of the Income-tax Act was conducted on or after April 1, 2024, will be selected for scrutiny. However, surveys conducted under Section 133A(2A) have been excluded from this category.
Natural diamonds, at least in India, have always earned blanket trust from customers—trust in their value, reliability, and endurance. They are expected to last and to shine light( pun intended) on generations gone by as they are passed down family lines. The diamond industry is evolving, like all industries need to, in order to adapt to modern requirements and younger generations. Consumers nowadays have questions and access to answers from the internet. They want to know, “Is my diamond natural or laboratory-grown? Has it been certified? Is it ethically sourced?”, etc. For this reason, the Bureau of Indian Standards (BIS) has introduced disclosure norms for clarity and consistency.
A Pune bench of the Income Tax Appellate Tribunal (ITAT) has come to the rescue of a scrap dealer who was saddled with a tax demand of nearly Rs 44 lakh after the Income Tax Department treated cash deposits in his bank account as unexplained money. The case involved Wajeed Khan, a scrap trader who had been in business for over a decade. The dispute centred on cash deposits of Rs 1.28 crore made in his cooperative bank account during FY 2015-16. Why did the tax department reopen the case? Wajeed had filed his income tax return declaring an income of Rs 3,00,340. However, the department’s Insight portal flagged cash deposits of Rs 1,28,26,078 in his bank account, prompting the reopening of the assessment under Section 147.
Income-tax (Amendment) Ordinance, 2026 Notified: Govt Gives Tax Relief on G-Sec Investments for FIIs- So the Centre has officially issued and promulgated the Income-tax (Amendment) Ordinance, 2026, which I guess is meant to be a rather big tax relief for Foreign Institutional Investors (FIIs). It basically waives capital gains and also interest income earned from investments in government securities, the so-called G-Secs. It was published in the Gazette of India on Friday and the Ordinance is amending the Income-tax Act, 2025, and, importantly, it has been applied retrospectively starting from April 1, 2026. In plain terms, India is making its sovereign debt market more appealing for overseas investors, because the tax friction on G-Sec returns is being removed. This step is being read as a strategic nudge to lift foreign participation, especially when global capital flows are still very sensitive to uncertainty and changing risk appetite. Extension Of Benefit To Bank For International Settlements The Income-tax (Amendment) Ordinance, 2026 sort of also extends a similar tax exemption to the Bank for International Settlements (BIS), widening the relief beyond Foreign Institutional Investors. Under that provision, any interest that BIS earns on government securities, and also any capital gains that arise from the sale, exchange, or transfer of such securities by BIS, will be completely exempt from taxation. This step seems to fit the larger aim of encouraging broader involvement in India’s sovereign debt market and making it more appealing to some major global financial institutions, in a way.
India is preparing to roll out new measures aimed at attracting more foreign money into the country, with key decisions likely to be taken as early as this week. According to Bloomberg, citing people familiar with the matter, the Union Cabinet is expected to discuss a major reduction in the taxes that foreign funds pay when investing in Indian bonds. Interest tax on bonds also under review The Cabinet is also expected to examine the future of the 20% tax currently imposed on interest earned from bonds. According to Bloomberg, officials are weighing two options: either scrapping the levy altogether or reducing it to a very low level. The proposal is still under consideration, and a final decision could be taken after Cabinet discussions.
The Central Board of Direct Taxes (CBDT) has instructed assessing officers to exercise greater diligence and consistency in invoking anti-evasion provisions relating to unexplained income and assets after a draft audit report by the Comptroller and Auditor General of India flagged inconsistencies in their application that led to revenue losses for the government. These provisions-Sections 68, 69A, 69B, 69C and 69D-are used when taxpayers are unable to explain the source of money, assets, investments or expenses found during scrutiny, allowing authorities to treat unexplained cash, investments, jewellery, or spending as income if the taxpayer cannot justify where it came from. Section 68 typically covers unexplained credits in books of account, 69A deals with unexplained money or valuables found in possession, 69B relates to under-reported investments, 69C covers unexplained expenditure, and 69D deals with unexplained borrowing or repayment transactions.
The income tax appellate tribunal's (ITAT) Mumbai bench has held that the absence of a formal gift deed cannot, by itself, justify treating a property purchase as an 'unexplained investment' when the source of funds is clearly identifiable. Under I-T laws, if income or an asset is treated as unexplained, it is subjected to a steep punitive tax rate. The ITAT held in its May 27 order that a man purchasing a property in his daughter's name out of natural love and affection cannot be treated as a suspicious transaction merely because no formal gift deed was executed. The daughter, a Mumbai-based homemaker with no independent source of income, came under the tax department's scanner after information surfaced that she had purchased an immovable property valued at Rs 1.1 crore in 2015-16.
A Mumbai taxpayer who declared annual income of just Rs 6.30 lakh found himself facing a tax addition after the Income Tax Department noticed that he had paid credit card bills worth Rs 27.65 lakh in a year, including nearly Rs 14 lakh in cash. The tax department treated the cash payments as unexplained money and added the amount to his income under Section 69A of the Income Tax Act. However, after examining income tax returns, bank statements and other evidence submitted by the taxpayer and his family members, the Income Tax Appellate Tribunal (ITAT) granted substantial relief and deleted a large part of the addition.
The Income Tax Department has begun the phased rollout of online filing and Excel utilities for ITR-1, ITR-2 and ITR-4 on the e-filing portal for Assessment Year (AY) 2026-27. With the utilities now available, taxpayers can start filing income tax returns for Financial Year (FY) 2025-26. While the annual tax filing process may appear routine, several important changes in ITR forms and disclosure requirements could impact how individuals, salaried employees, landlords, and small business owners file their returns this year. Here's a point-by-point look at the key changes for AY 2026-27: 1. Unrealised rent A significant change has been introduced for taxpayers earning rental income. For AY 2026-27, ITR-1 and ITR-4 forms now include a dedicated field titled "The amount of rent which cannot be realized."
