FINANCE BILL 2026 – RESETTING THE RETURN CALENDAR UNDER THE INCOME-TAX ACT, 2025

Filing the return of income is not merely a statutory obligation; it is the primary interface between taxpayers and the tax administration. Through this process, taxpayers disclose financial information, compute tax liabilities, and confirm their compliance responsibilities. Over time, tax administration has recognised that sustainable compliance cannot be achieved through enforcement alone. It requires a framework that is practical, predictable, and aligned with business realities.

The Finance Bill, 2026, reflects this evolving philosophy by proposing significant changes to the return-filing system under the Income-tax Act, 2025. The amendments seek to rationalise the due dates for filing the return of income and extend the time limit for filing revised returns of income. These reforms aim to give taxpayers adequate time to prepare accurate financial information, strengthen voluntary compliance, and reduce avoidable errors.

Another important issue addressed by the proposed amendments concerns the time available to revise returns. Under the earlier framework, the filing deadlines for belated and revised returns were nearly identical. This created a practical difficulty because taxpayers who filed belated returns near the deadline did not get any meaningful opportunity to correct errors later. The Finance Bill, 2026, seeks to address this issue by extending the filing deadline for revised returns. This change encourages the voluntary correction of errors and promotes accurate income reporting. At the same time, the proposal to introduce a reasonable fee for revised returns filed after a specified period helps ensure taxpayers remain disciplined in their compliance behaviour.

In this context, it is important to carefully examine the amendments proposed in Section 263 of the Income-tax Act, 2025, regarding return-filing due dates and the extended timeline for filing revised returns. Since the revised return timeline is linked to the levy of a fee under Section 428(b), a brief reference to this provision is also relevant to understanding the overall compliance framework. The following discussion analyses the proposed amendments and explains how the Finance Bill, 2026, aims to reshape the return-filing system.

Rationalising the Due Date for Filing of the Return of Income (With Effect from April 1, 2026)

(Clause 57 read with Clause 5 of the Finance Bill, 2026)

 Having understood the broader objective of strengthening return-filing compliance under the Income-tax Act, 2025, it is necessary to examine the specific amendments proposed to rationalise the due dates for filing return of income. The due date prescribed under the Act is not merely a procedural timeline; it underpins the entire tax compliance cycle. Several statutory benefits, such as carry-forward of losses, eligibility for revised returns, and avoidance of penalties, are directly linked to the timely filing of returns.

Over the years, tax administration has recognised that uniform due dates for different categories of taxpayers do not always reflect practical business realities. Taxpayers engaged in business or a profession, even when audit is not mandatory, are required to complete multiple financial-closure activities before filing their returns. Given these practical challenges, the Finance Bill, 2026, proposes restructuring the return filing calendar to better align compliance timelines with operational realities. The proposed amendments seek to create a balanced system that facilitates accurate return filing while maintaining administrative discipline.

Statutory Framework Governing Filing of Return – Section 263

Section 263 of the Income-tax Act, 2025, provides the comprehensive legal framework governing the filing of the return of income by taxpayers. The section specifies the persons required to file returns, prescribes the due dates applicable to different classes of taxpayers, and provides flexibility through provisions relating to belated, revised, and updated returns.

One of the most important components of Section 263 is clause (c) of sub-section (1), which defines the “due date” for filing a return of income for different categories of taxpayers. Determining the due date is of significant legal importance because several compliance rights and obligations arise from it. For example, filing the return by the due date is a prerequisite for carry forward of certain losses and determines the availability of corrective compliance options, such as revised returns.

Therefore, any amendment to the due date under Section 263 has wide practical and legal implications for taxpayers, tax professionals, and overall compliance administration.

The proposed amendment substitutes clause (c) of sub-section (1) by introducing a revised classification-based due date structure as reproduced below:

In section 263 of the Income-tax Act, ––

1. in sub-section (1), for clause (c), the following clause shall be substituted, namely: ––

 ‘(c) for the purposes of this section, “due date” in respect of the persons mentioned in column B of the Table below, subject to conditions as mentioned in column C of the said Table, shall be the due date of the financial year succeeding the relevant tax year as mentioned in column D thereof:

TABLE

1. for sub-section (5), the following sub-section shall be substituted, namely: ––

 “(5) If any person, having furnished a return under sub-section (1) or (4), discovers any omission or any wrong statement therein, he may, subject to the provisions of section 428(b), furnish a revised return at any time within twelve months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier.”;

1. in sub-section (6), ––

1. for clause (b), the following clause shall be substituted, namely: ––

 “(b) (i) the provisions of clause (a) shall continue to apply for a tax year if any person has sustained a loss in the said tax year and has furnished a return of loss within the due date specified under sub section (1) and the updated return is a return of income or such updated return has the effect of reducing the loss;

1. the provisions of clause (a) shall also apply where an updated return is furnished by a person for the relevant tax year in pursuance of a notice issued under section 280 within such period as specified in the said notice and in such a case, the assessee shall be precluded from filing return in pursuance of the said notice in any other manner;”;
    
2. in clause (c), ––

(A) in sub-clause (i), after the words “tax year”, the words, brackets, figures and letter “except in a case referred to in sub-section (6) (b) (i)” shall be inserted;

 (B) in sub-clause (v), after the words “tax year” the words, brackets, figures and letter “except in a case referred to in sub-section (6) (b) (ii)” shall be inserted;

 (iii) in clause (e), for the figures, brackets, letters and words “206(1)(m) to (p) and 206(2)(e) to (h)”, the figures, brackets, letters and words “206(2)(e) to (h) and 206(3) and (4)” shall be substituted.

The above amendments broadly reflect the following practical changes:

1. Amendment in Section 263(1) – Rationalisation of Due Dates for Filing Return of Income

The proposed amendment to Section 263(1)(c) introduces a new system for determining the due date for filing return of income. Instead of applying a single common due date to most taxpayers, the law now classifies taxpayers into categories and sets separate due dates based on their compliance requirements. This amendment primarily aims to provide additional time to taxpayers who require more time to prepare their accounts, particularly business taxpayers.

Category 1 – Due Date: 30th November

This category covers cases in which the provisions of Section 172 apply. These cases usually involve special reporting or certification requirements that require additional verification and documentation. Under the proposed amendment, taxpayers in this category will be required to file their return of income by 30th November of the financial year following the relevant tax year. The purpose of granting the longest timeline to this category is to ensure that taxpayers with specialised compliance requirements can complete their reporting properly.

Category 2 – Due Date: 31st October

This category covers the following taxpayers:

1. Companies
2. Taxpayers whose accounts are required to be audited
3.  Partners of firms where audit is mandatory
4.  Spouses of such partners in specified situations

For these taxpayers, the due date for filing the return of income will remain 31st October. The reason for retaining this date is that taxpayers subject to audit cannot finalise their taxable income until the audit is completed. The audit process includes verifying the books of account, preparing audit reports, and ensuring compliance with accounting standards. Therefore, a later due date is necessary for proper compliance.

Category 3 – Due Date: 31st August

This category is the most important relief provided by the amendment. It covers:

1. Taxpayers having income from a business or profession whose accounts are not required to be audited
2.  Partners of such firms
3. Spouses of such partners in specified cases

This extension recognises that, even when an audit is not mandatory, business taxpayers still need time to finalise accounts and complete reconciliation procedures.

Category 4 – Due Date: 31st July

This category covers all other taxpayers, such as salaried individuals and persons having relatively simple income structures. For these taxpayers, the due date remains 31st July because preparing the return in such cases generally does not involve complex accounting procedures.

Practical Illustrations

Illustration 1: Small Business Taxpayer

Anish Kapoor operates a retail trading business, and his accounts are not subject to audit. Under the earlier framework for the 2026-27 tax year, he was required to file his return by 31st July 2027. Due to pending confirmation of creditor balances and reconciliation of GST turnover with books of account, he often filed his return based on provisional figures. Under the proposed amendment, Anish Kapoor will be able to file his return by 31st August 2027, allowing him to finalise his accounts accurately and reduce the risk of subsequent revision or rectification.

Illustration 2: Partnership Firm Without Audit Requirement

A partnership firm engaged in consultancy services is not required to get its accounts audited. The firm and its partners were previously required to complete the filing of the income return by 31st July. However, the allocation of partnership income, the verification of expenses, and the preparation of partner capital accounts often required additional time. Under the proposed amendments, both the firm and its partners will benefit from the extended due date of 31st August, enabling better coordination and more accurate tax reporting.

Illustration 3: Impact on Tax Professional Workload

Harpreet Kapoor, a Chartered Accountant handling multiple non-audit clients, often faced significant workload pressure in July due to simultaneous filing deadlines. With the extension of the due date to 31st August for such clients, workload distribution becomes more balanced, enabling better verification of financial data and improving compliance quality.

The legislative intent behind the proposed amendment has been explained in the Memorandum to the Finance Bill, 2026, which states:

'In order to facilitate taxpayers engaged in business or profession and partners of firms whose accounts are not required to be audited and trusts, it is proposed that more time should be made available to them to prepare their books of account and comply with return filing requirements. Accordingly, it is proposed to extend the due date for filing return of income in such cases from 31st July to 31st August.'

Amendment in Section 263(5) – Extension of Time Limit for Filing Revised Return

The proposed amendment to Section 263(5) addresses the time limit for a taxpayer to revise a return after filing it. A revised return allows a taxpayer to correct mistakes or omissions discovered after filing the original or belated return. These mistakes may involve incorrect income reporting, incorrect deduction claims, or incomplete disclosure of financial details. To fully appreciate the impact of this amendment, it is useful to compare the earlier statutory framework with the revised proposal.

Existing Position Before Proposed Amendment

Under the existing provision, a taxpayer could file a revised return within nine months of the end of the relevant tax year, or before completion of the assessment, whichever was earlier.

However, this created a practical difficulty. The last date for filing a belated return was also aligned with the same nine-month period. Therefore, if a taxpayer filed a belated return close to the last permissible date, the taxpayer did not get any opportunity to revise the return even if mistakes were discovered later.

Position After Proposed Amendment

Under the proposed amendment, a taxpayer may file a revised return within 12 months of the end of the relevant tax year, or before the assessment is completed, whichever is earlier. This means taxpayers filing belated returns will now have additional time to correct errors and ensure accurate income reporting.

Fee Linked with Extended Revision Period

The amendment further provides that if a revised return is filed more than nine months after the end of the relevant tax year, the prescribed fee under Section 428(b) must be paid. In simple terms, taxpayers can still correct their mistakes, but filing the revised return later will involve a cost. This approach encourages timely corrections, while still allowing a reasonable extended window to rectify genuine errors.

Illustration 4: Correction After Filing Original Return

Naman Jaggi files his return of income for Tax Year 2026-27 within the due date. Later, while preparing the financial statements, he discovers that he had omitted certain interest income from a fixed deposit.

Under the existing provisions, Naman Jaggicould revise his return only within nine months from the end of the tax year. However, under the proposed amendment, he will be allowed to revise his return within 12 months of the end of the tax year. This additional time provides him with a better opportunity to voluntarily correct mistakes and to avoid future disputes with the tax department.

Illustration 5: – Belated Return Followed by Revision

Mr. Inder Bajaj could not file his return within the due date and therefore filed a belated return near the last permissible date. After filing the belated return, he discovers that certain business expenses were wrongly disallowed in her computation.

Under the earlier framework, Mr. Inder Bajaj would not have been able to revise her return because the timelines for the belated and revised returns expired simultaneously. Under the proposed amendment, he may now revise her return within 12 months of the end of the tax year. However, if he files the revised return after nine months, he will be required to pay the prescribed fee under Section 428.

Illustration 6 – Correction of Loss Computation

Varun Kapoor files a return declaring a business loss. Later, during an internal audit, it was discovered that certain expenses had been improperly claimed, resulting in an overstated loss. Accordingly, Varun Kapoorcan now revise the return within twelve months and correct the loss computation, thereby avoiding future litigation or penalty exposure.

Amendment in Section 263(6) – Clarification Relating to Updated Return

The proposed amendment to Section 263(6) clarifies the circumstances under which taxpayers may file updated returns. The updated return concept has been introduced to provide taxpayers with an additional opportunity to voluntarily disclose income that may have been omitted or misreported in earlier returns. This facility reflects the Government’s policy of encouraging voluntary compliance by allowing taxpayers to correct their income disclosures even after the normal filing timelines have expired. At the same time, the law also ensures that this facility is not misused for repeated or inconsistent filings. Therefore, the amendment introduces safeguards to maintain compliance discipline and procedural clarity in the return-filing system. The proposed amendment introduces two important statutory clarifications.

Situation 1 – Updated Return, Reducing Loss or Converting Loss into Income

Where a taxpayer has filed a return of loss by the due date and later files an updated return that converts the loss into income or reduces the loss, the earlier compliance conditions relating to timely filing will continue to apply. This means that taxpayers who originally filed a return within the due date will not lose statutory benefits merely because they later correct their income position.

Situation 2 – Updated Return Filed in Response to Notice under Section 280

The amendment also provides that where a taxpayer files an updated return in response to a notice issued under Section 280, the taxpayer will not be allowed to file a return for that tax year in any other manner. This provision prevents multiple filings of return for the same tax year and ensures clarity and discipline in the compliance process.

Illustration 7: Updated Return Converting Loss into Income

Abhishek Arora filed his return on time, declaring a business loss. Later, he discovers that certain income was not reported and therefore files an updated return, converting the loss into taxable income.

Under the proposed amendment, Abhishek Arora will not lose compliance benefits merely because he updated the return. Since the original loss return was filed within the due date, the statutory conditions linked with timely filing will continue to apply.

Illustration 8: Updated Return Reducing Loss

A partnership firm files a return declaring a loss within the due date. Later, after an internal review, it was realised that some expenses had been incorrectly claimed. The firm files an updated return, reducing the loss amount. Under the proposed amendment, the firm will still be deemed to have met the due date requirement because the original loss return was filed on time.

Illustration 9: Updated Return Filed After Notice Under Section 280

Suresh Kumar receives a notice under Section 280 asking him to furnish an updated return. He files the updated return within the time specified in the notice.

Under the proposed amendment, once Suresh Kumar files the updated return in response to the notice, he will not be permitted to file any other return for the same tax year. This prevents multiple or conflicting return filings.

Practical Understanding of the Overall Amendment

The proposed amendments introduced by Clause 57 aim to create a balanced return-filing system. The revised due date structure provides additional time to business taxpayers, the extended revised return timeline allows correction of mistakes, and the clarification regarding updated returns ensures orderly compliance. From a broader compliance perspective, these amendments reflect the Government’s approach of promoting voluntary and accurate tax reporting rather than relying solely on penal enforcement mechanisms. By providing reasonable time to prepare accounts and allowing taxpayers to correct errors through revised and updated return provisions, the law encourages responsible compliance behaviour. These changes are also expected to reduce avoidable litigation arising from inadvertent reporting mistakes and minimise rectification proceedings.

From the perspective of tax professionals, a staggered return filing calendar will help distribute compliance workload more evenly, enabling better verification of financial data and improved advisory support for taxpayers. Overall, the proposed amendment seeks to strike a practical balance between taxpayer convenience and compliance discipline, thereby strengthening the quality of returns filed under the Income-tax Act, 2025.

It may be noted that the amendments proposed in Section 263 of the Income-tax Act, 2025, through Clause 57 of the Finance Bill, 2026, are proposed to come into force with effect from 1st April 2026 and shall accordingly apply from Tax Year 2026-27 and subsequent tax years.

Beyond Compliance — Opportunity for Professional Growth

For tax professionals, amendments such as these are not merely changes to statutory timelines but also opportunities to strengthen professional capabilities. Those who invest time in understanding new provisions and guiding taxpayers with clarity often experience growth not only in practice but also in professional confidence and credibility. In the ever-evolving field of taxation, continuous learning remains the most reliable path to long-term professional success.

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CA.  RAJ JAGGI AND ADVOCATE KIRTI JAGGI