FINANCE BILL 2026: RELIEF FOR BUILDERS, CLARITY FOR HOMEOWNERS AND EXPANSION OF PAN REPORTING FRAMEWORK

When Law Evolves, Continuity Becomes the Foundation of Trust

Tax legislation is more than a simple compilation of statutory provisions; it is a dynamic, evolving instrument that reflects a nation's economic priorities, administrative maturity, and policy philosophy. The enactment of the Income-tax Act, 2025, marked a significant milestone in India’s direct taxation journey, representing a concerted effort to simplify legislative drafting, eliminate redundancy, and establish a more transparent and accessible compliance environment. However, when a long-established statute, informed by decades of judicial interpretation and administrative experience, is replaced by a newly codified framework,interpretive gaps and drafting misalignments inevitably emerge as the law begins to interact with real-world business practices and taxpayer behaviour.

The Finance Bill, 2026, is a crucial legislative bridge in this transition. Rather than introducing sweeping structural changes, it focuses on carefully calibrated refinements to preserve continuity with established tax principles while enhancing clarity and administrative efficiency under the new statutory framework. Among the various rationalisation measures proposed in the Bill, Clauses 29, 30, and 56 are particularly significant, as they address the taxation of unsold real estate inventory, the rationalisation of interest deduction limits for self-occupied residential property, and the expansion of Permanent Account Number reporting obligations. Although these amendments appear technical, they carry far-reaching economic, compliance, and policy implications for developers, individual taxpayers, and the evolving data-driven compliance ecosystem.

“???????????????????????????,
??????????????????????????”

When law changes, its intention remains constant;
Every new path carries the wisdom of the past.

Having briefly outlined the proposed amendments, it is now appropriate to examine them individually. The discussion begins with the amendment relating to the determination of the annual value of unsold real estate inventory under section 21(5) of the Income-tax Act, 2025.

Relief for Unsold Real Estate Inventory — Proposed Amendment to Section 21(5)

(Applicable from 1 April 2026)

 The amendment to Section 21(5) is proposed through Clause 29 of the Finance Bill, 2026. Clause 29 reads as follows: -

“29. In section 21 of the Income-tax Act, in sub-section (5), for the words ‘nil for’, the word ‘nil up to’ shall be substituted.”

The amendment introduced through Clause 29 constitutes a subtle yet highly significant legislative clarification regarding the determination of the annual value of property held as stock-in-trade by real estate developers. The substitution of the phrase “nil for” with “nil up to” eliminates interpretational ambiguity concerning the duration of relief available to developers holding completed but unsold units as part of their trading inventory. The Memorandum to the Finance Bill, 2026, clarifies that the annual value of such property shall be deemed nil for up to two years from the end of the financial year in which the completion certificate is obtained from the competent authority. This proposed refinement harmonises the statutory provisions of the Income-tax Act, 2025, with the well-established policy approach that existed under the previous Income-tax Act, 1961.

The real estate sector operates within a complex commercial environment characterised by lengthy project development cycles, regulatory approval processes, financing difficulties, and fluctuating market demand. Completed housing developments often necessitate a reasonable absorption period before achieving full sale realisation. Imposing tax liabilities based on notional rental income during the immediate post-completion phase results in an artificial income calculation that is disconnected from the business's actual profitability.

The proposed legislative refinement further enhances administrative clarity by establishing a standardised method for calculating the relief period. By aligning the start of the relief period with the end of the financial year in which the completion certificate is issued, the proposed amendment effectively eliminates potential disputes over the calculation of the relief period. This proposed level of clarity substantially reduces litigation risk and fosters greater predictability in compliance.

Illustration 1 — Unsold Inventory Relief

Aayra Ltd., a real estate developer, completes a residential project and receives the completion certificate on 26.12.2026. Since this date falls within the 2026-27 financial year, the statutory relief period extends up to March 31, 2029 (i.e., two years from the end of FY 2026-27). During this period, any unsold residential units remaining in the developer’s inventory shall be exempt from taxation on the basis of notional rental income. However, if these units remain unsold after the relief period ends, the annual value provisions will apply. This relief structure offers liquidity support to developers during the crucial post-completion period while maintaining long-term tax compliance.

 For conceptual clarity and quick reference, the comparative statutory position on the taxation of unsold real estate inventory is summarised in the following table:

While the earlier amendment primarily addresses concerns of real estate developers, the next amendment shifts focus to tax benefits available to individual homeowners, bringing into discussion the following proposed refinement in section 22 relating to interest deduction on housing loans:

Rationalisation of Housing Loan Interest Deduction — Proposed Amendment to Section 22(2)

(Applicable from 1 April 2026)

The amendment to Section 22(2) is proposed through Clause 30 of the Finance Bill, 2026. Clause 30 reads as follows:

“30. In section 22 of the Income-tax Act, in sub-section (2), for the word, brackets, figure and letter ‘sub-section (1)(b)’, the words, brackets, figure and letters ‘sub-section (1)(b) and (c)’ shall be substituted.”

Clause 30 pertains to the deduction of interest on borrowed capital concerning self-occupied residential property. By broadening the statutory cross-reference to encompass clause (c) of sub-section (1), the amendment ensures that interest payable for prior periods or pre-construction, related to the acquisition or construction of the property, is included within the overall deduction limit of Rs.2 lakh.

Under the earlier Income-tax Act, 1961, interest during construction can be claimed in five equal instalments, commencing in the year in which the construction was completed or the property was acquired. These deductions are always subject to the statutory limit for self-occupied residential property. However, the draft of the Income-tax Act, 2025, introduced interpretive ambiguity regarding whether this principle would continue, potentially leading to discrepancies in deduction claims and assessments. Clause 30 clarifies this uncertainty by explicitly including prior-period interest within the statutory deduction rules.

 Illustration 2— Housing Loan Interest Deduction

Harpreet Kapoor, a taxpayer, constructs a self-occupied residential property utilising borrowed funds and incurs a pre-construction interest expense of Rs. 5,00,000. Under Section 24 of the Income-tax Act, 1961, this expense is eligible for claim in five equal instalments of Rs.1,00,000 each, commencing in the year of completion. If the interest payable during the pertinent financial year amounts to Rs.2,30,000, the cumulative interest liability would total Rs.3,30,000. However, under the revised provisions of the Income-tax Act, 2025, the taxpayer is eligible to claim a deduction of up to Rs.2,00,000.

 Having examined the scope and practical implications of the proposed amendments to Section 22(2), it may now be useful to present the changes in a structured comparative format. The table below provides a side-by-side picture of the existing provision and the proposed amended position, enabling readers to quickly recapitulate the legislative shift and its structural refinement:

The Finance Bill, 2026, also proposes specific amendments intended to enhance transparency in transaction reporting. In this context, the proposed amendment to Section 262(10)(c) seeks to render disclosures more precise and dependable. The following discussion elucidates the purpose of this amendment and its potential to improve compliance:

Strengthening Transaction Transparency — Proposed Amendment to Section 262(10)(c)

(Applicable from 1 April 2026)

The proposed amendment in Section 262(10)(c) has been made through the following Clause 56 of Finance Bill, 2026:

56. In section 262 of the Income-tax Act, in sub-section (10), in clause (c), for the words ‘pertaining to business or profession’, the words ‘pertaining to, business or profession, or other transactions,’ shall be substituted.

Clause 56 proposes a substantial broadening of statutory authority regarding the requirements for quoting the Permanent Account Number. By broadening PAN reporting obligations to encompass not only documents related to business or profession but also “other transactions,” the proposed amendment signals the legislature’s recognition of the growing importanc of transaction-level oversight in contemporary tax administration.

 Illustration 3 — Expanded PAN Reporting

Kirti Bajaj engages in high-value personal transactions, such as the acquisition of luxury assets, significant investments in financial instruments, or the purchase of high-value immovable property, in a personal capacity. Pursuant to the expanded statutory authority, the CBDT may  establish requirements for quoting PAN for such transactions subject to rules prescribed by CBDT.

To better understand the nature of the proposed amendment to Section 262(10)(c), it is helpful to examine the statutory language in comparative form. The table below presents the existing provision alongside the proposed amended version, allowing readers to clearly identify the specific changes proposed under the Finance Bill, 2026.

Comparative Statutory Table — Section 262(10)(c)

For ease of reference and quick professional recall, the key amendments discussed above are summarised below.

 Overview of the all three proposed amendments

The Spirit of Reform — Stability Through Thoughtful Legislative Evolution

Tax reform achieves its maximum effectiveness when it fosters clarity, predictability, and taxpayer confidence, while concurrently enhancing administrative efficiency and safeguarding revenue. The proposed amendments introduced via Clauses 29, 30, and 56 of the Finance Bill, 2026, exemplify a legislative approach that values continuity over disruption and refinement over radical change. Each of these proposed modifications specifically addresses interpretational gaps identified during the transition to the Income-tax Act, 2025, thereby strengthening the structural integrity of the new legal framework while maintaining the accumulated wisdom derived from decades of judicial interpretation and administrative expertise.

The relief granted to real estate developers acknowledges the capital-intensive and cyclical nature of property development and ensures that taxation remains aligned with genuine revenue realisation rather than hypothetical income constructs. The clarification regarding the housing loan interest deduction promotes uniformity and fairness by preventing unintended expansion of tax benefits while maintaining the social policy objective of encouraging homeownership. Similarly, the expansion of PAN reporting authority reflects the inevitable evolution of tax administration toward technology-driven compliance ecosystems, in which financial transparency and information integration serve as primary tools of governance.

Taken together, these amendments demonstrate that legislative excellence lies not in frequent structural overhauls but in thoughtful refinements that balance economic practicality with compliance standards. In an era marked by digital financial systems, cross-platform data integration, and predictive tax analytics, such carefully calibrated amendments enhance revenue protection and foster taxpayer trust. Additionally, they reaffirm the principle that stable and credible tax regimes are developed through ongoing improvement rather than sudden legislative changes.

The Finance Bill, 2026, therefore signifies more than a simple exercise in technical correction; it embodies the legislature’s commitment to establishing a tax framework that is developed responsibly, adapts to commercial realities, and sustains interpretive stability. By enhancing clarity, continuity, and transparency, these proposed amendments significantly promote voluntary compliance, reduce litigation, and bolster long-term fiscal stability in India’s direct taxation system.

“????????????????????????????,
??????????????????????????”

(Reform is never born in suddenness;
Every step emerges through thought and balance.)