Union Budget 2026-27 - Finance Bill, 2026

Section 295 of the Act, provides, inter-alia, that where Assessing officer is satisfied that any undisclosed income belongs to or pertains to or relates to any person (herein after referred to as the ‘other person’), other than the person (herein after referred to as the ‘specified person’) with respect to whom search was initiated under section 247 or requisition was made under section 248, then –

(a) any money, bullion, jewellery, virtual digital asset or other valuable article or thing or any books of account or other documents seized or requisitioned or any other material or information relating to the aforesaid undisclosed income will be handed over to the Assessing Officer having jurisdiction over such other person; and

(b) Assessing Officer of the other person shall proceed under section 294 against such other person and the provisions of this section will apply accordingly.

2. Furthermore, in the existing provisions of Block assessment, the block period is same for the specified person or other person.

3. In this regard, it has been considered that where undisclosed income pertaining to a third person relates only to a single tax year, the third person is nonetheless required to undergo the full block assessment procedure, resulting in an increased compliance burden on a person against whom no search or requisition was initiated.

4. Accordingly, it is proposed to amend the section 295(2) of the Act so as to limit the period of block in case of third party

5. This amendment will take effect from the 1st day of April, 2026, for search or requisition is initiated or made as the case maybe, on or after 1st day of April, 2026.

[Clause 64]

 

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Full Text:

Union Budget 2026-27 - Finance Bill, 2026

Union Budget change limits block assessment period for third parties when undisclosed income pertains to a single tax year. Section 295 currently requires that seized material relating to undisclosed income of a person other than the specified person be handed to that person's AO and that the other person undergo block assessment with the same block period; the Finance Bill proposes amending Section 295(2) to limit the period of block for such third parties, particularly where the undisclosed income pertains to a single tax year, with effect for searches or requisitions initiated on or after 1 April 2026.