Form 3CD is the statement of particulars annexed to the tax audit report under Section 44AB of the Income-tax Act, 1961. For Financial Year 2025-26 (Assessment Year 2026-27), the form must be prepared in the revised format notified by the Central Board of Direct Taxes (CBDT) through Notification No. 23/2025 dated 28 March 2025, being the Income-tax (Eighth Amendment) Rules, 2025, which came into force on 1 April 2025.

The amendments largely align the form with the changes made by the Finance (No. 2) Act, 2024, introduce a few fresh disclosures, and omit certain provisions that are no longer relevant. Incomplete or inaccurate reporting may invite notices from the Department, adverse inferences at the assessment stage and, where the matter is material, a qualification in the audit report. The auditor and the taxpayer should therefore work through the clauses listed below before the report is finalised.

Clause-wise Disclosures Requiring Attention

Clause 12 (Presumptive Income). The reference to Section 44BBC, which provides for presumptive taxation of non-resident cruise ship operators, has been inserted alongside Sections 44AD, 44ADA, 44AE, 44B, 44BB, 44BBA and 44BBB. Income offered under any other presumptive provision not specifically listed in the clause, such as Section 44BBD relating to electronics manufacturing services, should be reported under the residual item. In every case, the income so reported must be reconciled with the profit and loss account.

Clause 19 (Amounts Admissible under Specified Sections). The rows relating to Sections 32AC, 32AD, 35AC and 35CCB have been omitted, and no claim under these provisions should be reported. Reporting continues for the remaining provisions in the clause, including scientific research expenditure under Section 35 and preliminary expenses under Section 35D.

Clause 21 (Expenditure Not Admissible). Any expenditure incurred to settle proceedings initiated for contravention of a law notified by the Central Government must now be disclosed. This is a new requirement and calls for specific enquiry of the management, since such payments are often recorded under general heads such as legal, professional or miscellaneous expenses.

Clauses 22 and 26 (MSME Payments and Section 43B). These two clauses call for particular care. Clause 22 requires the interest inadmissible under Section 23 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 to be reported, together with the amounts payable to micro and small enterprises, bifurcated between amounts paid within the time limit prescribed under Section 15 of that Act and amounts paid beyond it. Clause 26 separately captures the sums disallowable under Section 43B, including amounts payable to micro and small enterprises beyond the Section 15 time limit under clause (h). It should be borne in mind that the benefit of payment up to the due date of filing the return does not extend to clause (h) of Section 43B. Such sums are allowable only in the year of actual payment. The payment timeline under the MSMED Act, being a maximum of 45 days where a written agreement exists and 15 days otherwise, is therefore the governing test.

Clause 31 (Loans, Deposits and Specified Sums). Loans, deposits and specified sums accepted or repaid under Sections 269SS, 269T and 269ST must be reported with the prescribed code for the mode of transaction. Non-cash settlements and book adjustments, including journal entries, must also be captured. The monetary limits are ₹20,000 for Sections 269SS and 269T and ₹2 lakh for Section 269ST, and cash transactions at or above these levels merit close examination.

Clauses 28 and 29 (Omitted). These clauses relating to Sections 56(2)(viia) and 56(2)(viib) have been omitted from the form. However, the valuation records maintained under Rule 11UA should continue to be retained on file.

Clause 36B (Buyback of Shares). A new clause requires the taxpayer to state whether any amount has been received on buyback of shares falling under Section 2(22)(f). Where the answer is in the affirmative, the amount received and the cost of acquisition of the shares should be furnished, so that the buyback proceeds are properly traced.

Clause 44 (GST Expenditure Breakup). The break-up of total expenditure by reference to the GST registration status of the supplier (registered, composition, exempt and unregistered) continues to be required. The total should be reconciled with the profit and loss account after excluding non-expense items such as depreciation.

High-Risk Reconciliations Before Signing the Report

The following reconciliations should be completed before the audit report is signed:

Turnover: turnover as per books against GSTR-1 and GSTR-3B.

Revenue: revenue as per books against the Annual Information Statement (AIS), Taxpayer Information Summary (TIS) and Form 26AS.

TDS: tax deductible as per books against the TDS returns actually filed.

MSME creditors: balances of micro and small enterprise creditors against the disclosures made in Clause 22.

Loans and deposits: balances against bank statements and confirmations from the parties.

Closing stock: stock as per books against physical inventory records.

Clause 44: expenditure as reported against the GST purchase register.

Every material difference should be investigated, explained and supported by appropriate working papers before the report is finalised. Generic explanations are no substitute for proper verification, and the auditor should be in a position to demonstrate the basis of each conclusion if the matter is later examined.

Concluding Remarks

The revised Form 3CD places greater emphasis on specific, verifiable disclosures, particularly in respect of MSME payments, loans and deposits, and expenditure by reference to GST status. Early planning, a structured checklist and timely reconciliation of the books with external data sources will help the auditor complete the report with confidence and reduce the likelihood of queries at a later stage.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

Impact of GST on Real Estate Compliance

Real estate is one of India’s largest economic sectors, involving significant transactions between developers, contractors, businesses and homebuyers. Goods and Services Tax (GST) plays an important role in the taxation of construction-related supplies and services.

The GST framework for real estate has evolved over time. The GST rate rationalisation introduced in 2025, often referred to as GST 2.0, changed the rates applicable to several construction inputs and certain services. However, the special GST rates applicable to under-construction residential apartments remain relevant.

For developers and buyers, understanding the applicable rate, Input Tax Credit (ITC) rules, reverse charge provisions and e-invoicing requirements is essential for proper compliance.

GST’s Impact on Real Estate

GST generally applies to the construction of a property when the supply takes place before completion or first occupation, subject to the applicable provisions. A sale of a completed property, where the entire consideration is received after the completion certificate is issued or after first occupation, whichever is earlier, is generally outside the scope of GST.

For residential apartments, the applicable GST rate depends on whether the property qualifies as affordable housing.

Under the prevailing framework:

• Affordable residential apartments: 1% GST without ITC, subject to the applicable conditions.
• Other qualifying under-construction residential apartments: 5% GST without ITC.
• Ready-to-move-in properties: Generally no GST where the transaction falls within the applicable exemption after completion certificate or first occupation.
• Commercial property: The applicable rate depends on the nature of the supply and the applicable GST notification. Commercial construction and works-contract supplies should not be treated as automatically falling under the residential 1% or 5% scheme.

The 1% and 5% residential rates were introduced with effect from 1 April 2019 and are subject to specific conditions.

What Qualifies as Affordable Housing?

The concessional 1% GST rate is available only when the property satisfies the applicable definition of an affordable residential apartment.

Broadly, the GST framework uses both carpet-area and value criteria. The carpet-area limit is up to 60 square metres in metropolitan cities and up to 90 square metres in non-metropolitan cities, while the value limit is ₹45 lakh, subject to the applicable rules and definitions.

Delhi NCR, including specified areas such as Gurgaon/Gurugram, falls within the metropolitan-city definition for this purpose.

Therefore, a property cannot qualify for the 1% rate merely because its carpet area is within the prescribed limit. The applicable conditions must be considered together.

GST on Under-Construction Residential Property

For qualifying under-construction residential apartments sold by a promoter, the effective GST rates are generally:

Property Type	GST Rate	ITC	Key Condition
Affordable residential apartment	1%	Not available	Must satisfy applicable affordable-housing conditions
Other residential apartment	5%	Not available	Applicable to qualifying residential construction
Ready-to-move property covered by exemption	Nil	—	Completion certificate/first occupation conditions apply

The 1% and 5% rates are effective rates after the prescribed treatment of the land component and are subject to the conditions of the relevant notification.

GST on Ready-to-Move-In Property

A common question among homebuyers is whether GST is payable when purchasing a completed flat.

Generally, where the entire consideration is received after issuance of the completion certificate, where required, or after first occupation, whichever is earlier, the transaction is outside the GST levy applicable to construction services.

However, buyers should distinguish GST from stamp duty and registration charges, which are state-level levies and continue to apply according to the applicable state laws.

The timing of payment and the status of the project can therefore be important when determining GST liability.

GST 2.0 and the Real Estate Sector

The GST rate rationalisation announced in 2025 affected several goods and services used in construction.

For example, the GST rate on cement was reduced to 18%, which can reduce the tax component of an important construction input. The GST Council’s 56th-meeting reforms were aimed at rationalising rates and simplifying the wider GST structure.

However, lower GST on construction inputs does not automatically mean that the GST charged to a homebuyer on an under-construction residential apartment has fallen. The residential 1% and 5% rates operate under a specific no-ITC framework.

The actual impact on project costs and property prices may therefore vary depending on the developer’s procurement structure, project stage and other costs.

Input Tax Credit for Real Estate Developers

Input Tax Credit (ITC) is an important part of GST compliance.

Under the concessional residential construction scheme, developers generally cannot claim ITC on inputs and input services used for the construction of apartments covered by the 1% or 5% scheme.

This is an important difference from certain other taxable construction and commercial supplies where ITC may be available, subject to the conditions of the GST law.

Developers should therefore maintain accurate records and determine ITC eligibility separately for different projects and supplies rather than applying one rule across their entire business.

GST Reverse Charge in Real Estate

Reverse Charge Mechanism (RCM) shifts the responsibility for paying GST from the supplier to the recipient for specified supplies.

Real estate businesses may encounter RCM in situations specifically notified under GST law. For example, the GST framework contains provisions relating to certain purchases from unregistered suppliers and specific construction-related supplies.

The rules should not be simplified to say that all architect fees, small jobs or purchases from unregistered suppliers automatically attract RCM. The exact nature of the supply, supplier status and applicable notification must be examined.

The GST Council has also introduced changes concerning the reverse-charge treatment of certain commercial-property rentals. Taxpayers should check the applicable notification and their registration status before determining who is responsible for GST.

E-Invoicing for Real Estate Businesses

E-invoicing is an important part of GST compliance for eligible businesses.

The e-invoicing mandate has been extended to taxpayers with aggregate annual turnover of ₹5 crore or more, subject to the applicable conditions and exemptions. The requirement applies from 1 August 2023 for the notified category.

Under the e-invoicing system, eligible invoices are reported to the Invoice Registration Portal (IRP), which generates an Invoice Reference Number (IRN) and QR code.

For real estate businesses, proper integration between accounting software and GST systems can help reduce errors in invoice reporting and reconciliation.

GST Compliance Checklist for Builders and Developers

Developers can strengthen their GST compliance by following a systematic process:

• Maintain accurate project-wise accounting records.
• Reconcile purchase invoices and eligible ITC regularly.
• Verify supplier GST details and invoices.
• Determine whether the project falls under the 1%/5% residential scheme or another applicable rate.
• Monitor RCM obligations separately.
• Generate e-invoices where applicable.
• Reconcile GST returns with accounting records.
• Maintain proper documentation for construction-related expenses.
• File GST returns within the applicable deadlines.
• Review changes in GST notifications and circulars regularly.

Digital accounting and GST tools can make reconciliation easier, but businesses remain responsible for ensuring that their returns and supporting records are accurate.

Benefits for Buyers

For homebuyers, understanding GST can help avoid confusion while comparing properties.

Before purchasing an under-construction property, buyers should check:

1. Whether the property is affordable housing under the GST definition.
2. Whether the quoted price includes GST.
3. Whether the property is under construction or has received the required completion/occupation certificate.
4. Whether GST is being charged at the applicable rate.
5. Whether stamp duty and registration charges are included separately.
6. Whether the builder’s invoice clearly identifies the applicable tax.

Buyers should also retain agreements, invoices and payment records as part of their property documentation.

GST and Property Rentals

GST treatment also differs between residential and commercial rentals.

Certain residential renting arrangements can be exempt or subject to specific rules, while renting of commercial or other immovable property to a registered person may attract GST under the applicable provisions, including reverse-charge rules in specified circumstances.

Therefore, landlords and tenants should not assume that every rental transaction has the same GST treatment. The type of property, nature of the tenant and registration status should be examined before determining the applicable tax.

Conclusion

GST has an important role in India’s real estate and construction sector, but the tax treatment depends heavily on the type of property, stage of construction, nature of the supply and applicable GST notifications.

Under the current framework, qualifying under-construction residential apartments generally fall under the 1% or 5% concessional rates without ITC, while completed-property transactions meeting the prescribed conditions are generally outside GST.

GST 2.0 has also changed the tax treatment of several construction inputs, including cement, which can affect project costs. At the same time, developers must continue to comply with requirements relating to invoicing, ITC, reverse charge, reconciliation and e-invoicing.

For buyers and developers alike, understanding the applicable rules before entering into a transaction can help prevent tax errors and unexpected liabilities.

How TaxAcumen Can Help

GST compliance in the real estate sector can become complicated because different rates and conditions may apply to residential projects, commercial properties, construction services, rentals and other transactions.

The professionals at TaxAcumen can help businesses and property stakeholders understand applicable GST provisions, review compliance requirements, assess tax treatment and maintain appropriate documentation.

Contact TaxAcumen for professional assistance with GST, real estate taxation and compliance requirements.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

Receiving a notice from the Income Tax Department can be stressful, but it does not necessarily mean that something is wrong with your tax return. Notices may be issued for routine processing, verification, discrepancies in reported information, or requests for additional details.

However, an income tax notice should never be ignored. Understanding the reason for the notice, gathering the relevant documents and submitting an appropriate response within the prescribed time can help prevent unnecessary complications, additional demands or further proceedings.

Why Notices Are Issued and Common Types

The Income Tax Department may issue a notice even after you have filed your return and paid your taxes. Common reasons include discrepancies in tax-credit information, differences between the income reported in your ITR and information available with the department, errors in the return, high-value transactions, or the need for additional information or verification.

Some commonly encountered notices and communications include:

• Intimation under Section 143(1): This is issued after the department processes your return. It may show adjustments arising from apparent errors, incorrect claims or discrepancies identified during processing. It can result in a refund, a tax demand or no additional tax liability.
• Notice under Section 143(2): This indicates that the return has been selected for scrutiny. The taxpayer may be required to provide information, explanations or supporting documents relating to the return.
• Notice under Section 139(9): This is issued when the Income Tax Department considers a return to be defective. The taxpayer is generally required to rectify the defect within the time specified in the notice. The prescribed response period should therefore be checked carefully rather than assuming a fixed period.
• Notice under Section 142(1): The department may issue this notice to seek additional information, documents or clarification during assessment proceedings. The notice will specify what information is required and the applicable response deadline.
• Notice under Section 156: This is a notice of demand issued when tax, interest, penalty or another amount is payable. The applicable demand should be examined carefully, and payment or an appropriate response should be made within the specified period.
• Notice under Section 148: Under the applicable reassessment provisions, a notice under Section 148 may be issued when the Assessing Officer proposes to reassess income that is believed to have escaped assessment, subject to the conditions and procedures prescribed under the law.
• Notice under Section 245: This provision relates to adjustment of a refund against outstanding tax demands, subject to the applicable procedure. If you receive such a communication, verify the outstanding demand and respond appropriately if you disagree with it.

How to Respond to an Income Tax Notice

The first step is to read the notice carefully and identify the assessment year, section under which it has been issued, issue involved, information requested and response deadline.

Taxpayers should also verify the authenticity of the communication and check the notice or proceeding through the official Income Tax e-filing portal.

For notices requiring an online response, log in to the Income Tax e-filing portal and access the relevant proceedings under the applicable section, such as Pending Actions / e-Proceedings, depending on the type of notice and the portal workflow currently applicable.

Select the relevant proceeding and follow the instructions provided for submitting your response.

Depending on the nature of the notice, you may need to:

• Provide a written explanation addressing the specific issue raised.
• Upload supporting documents such as bank statements, Form 16, tax-payment challans, investment documents or other relevant records.
• Accept or disagree with an observation or proposed adjustment, where the proceeding provides those options.
• For a tax demand, review the demand carefully and select the appropriate response option if you believe the demand is incorrect or only partly correct.
• Provide documentary evidence supporting your explanation wherever required.

Responding to High-Value Transaction Queries

If the department seeks an explanation regarding a high-value transaction, the taxpayer should identify the actual source of the funds and provide appropriate supporting evidence.

For example, if a transaction was funded through accumulated savings, a loan, a gift or another legitimate source, relevant documentation should be maintained and submitted where required.

The explanation should be consistent with the taxpayer’s bank records, income disclosures and other financial information. Avoid providing unsupported explanations simply to close the proceeding.

Keep Records of Your Response

After submitting the response, retain the acknowledgement, reference number, submitted explanation and copies of all documents uploaded.

Where the particular proceeding requires verification or authentication, complete the applicable verification process using the method available on the e-filing portal.

Maintaining a complete record can be valuable if the department raises a further query or if you need to refer to the response in future proceedings.

What to Do If You Disagree With the Notice

You do not necessarily have to accept every observation or demand made by the Income Tax Department.

If you believe the notice is based on incorrect information, a tax-credit mismatch or an error in the department’s records, review the relevant documents and provide a clear explanation with supporting evidence.

For example, compare your ITR with your Form 26AS, AIS, TIS, Form 16, bank statements and tax-payment records, as applicable.

If the matter involves a substantial tax demand, scrutiny proceedings, reassessment or a complex legal issue, obtaining professional tax advice before responding can help ensure that your position is presented accurately.

Conclusion

Receiving an income tax notice is not necessarily a cause for panic, but it does require careful and timely action. Start by identifying the type of notice, understanding the issue raised and checking the prescribed response deadline.

Gather the relevant documents, prepare a clear response and submit it through the appropriate channel specified in the notice. Keeping complete records of the communication and your response can also help with any future proceedings.

Most importantly, do not assume that every notice has the same response period or procedure. Always follow the specific instructions and deadline stated in the notice.

How TaxAcumen Can Help

Dealing with an income tax notice can be complicated, particularly when it involves discrepancies, scrutiny, reassessment or a significant tax demand.

The professionals at TaxAcumen can assist you in reviewing the notice, understanding the issue, gathering relevant supporting documents and preparing an appropriate response through the Income Tax e-filing portal.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

SIP vs Fixed Deposit: Which Should You Choose

Fixed Deposits (FDs) and Systematic Investment Plans (SIPs) are two popular ways of investing in India, but they serve very different financial needs. While FDs focus on stability and predictable returns, SIPs provide a disciplined way to invest in mutual funds and participate in market-linked growth.

The right choice depends on your financial goals, risk tolerance, investment horizon and liquidity requirements. In many cases, investors may benefit from using both options for different purposes.

Understanding FDs and SIPs

A Fixed Deposit (FD) is a traditional savings and investment product in which you deposit a lump sum with a bank for a predetermined tenure. The bank pays interest at a specified rate according to the terms of the deposit.

FDs are generally preferred by conservative investors who value predictable returns and want to avoid direct exposure to market volatility. However, an FD is not completely risk-free. Deposit insurance through the Deposit Insurance and Credit Guarantee Corporation (DICGC) is available subject to the applicable conditions and limits, including the ₹5 lakh insurance limit per depositor per bank.

FD interest rates vary across banks, tenures and customer categories, so investors should check the prevailing rate before investing rather than relying on a fixed market-wide range.

A Systematic Investment Plan (SIP) is a method of investing a fixed amount at regular intervals, usually monthly, into a mutual fund scheme. SIP itself is not a separate investment product; the risk and return depend on the mutual fund selected.

Equity-oriented mutual fund SIPs can provide significant long-term growth potential, but their returns are market-linked and not guaranteed. Short-term market fluctuations can result in losses, particularly during periods of market volatility.

Key Differences to Consider

Returns

FDs: The interest rate is generally predetermined, allowing investors to estimate their returns over the selected tenure.

SIPs: Returns depend on the performance of the underlying mutual fund. Equity-oriented funds may offer higher growth potential over long periods, but there is no guaranteed return.

Therefore, comparing an FD’s interest rate directly with an SIP’s return can be misleading because the two investments have different risk profiles.

Risk

FDs generally involve lower market risk than equity mutual funds. However, investors should still consider factors such as the financial institution, deposit terms and applicable deposit-insurance limits.

SIPs carry the risk associated with the underlying mutual fund. Equity funds can experience substantial short-term fluctuations, while debt-oriented funds generally have different levels and types of risk.

Liquidity

FDs can generally be withdrawn before maturity, subject to the bank’s terms. Premature withdrawal may result in a reduced interest rate or penalty.

Mutual fund units can generally be redeemed when required, subject to the scheme’s terms. Certain funds may have an exit load, while some investment products may have a lock-in period.

Investment Approach

FDs generally require a lump-sum deposit.

SIPs allow investors to invest smaller amounts at regular intervals. This can encourage financial discipline and reduce the need to invest a large amount at a single point in time.

Regular investing also means that investors purchase mutual fund units at different market levels. However, SIPs do not guarantee profits or eliminate investment risk.

Taxation

FDs: Interest earned on an FD is generally taxable and is added to the investor’s taxable income according to the applicable tax rules.

Equity mutual funds: Tax treatment depends on the type of fund, holding period and applicable tax laws. For equity-oriented mutual funds, long-term capital gains are currently taxed at 12.5% on aggregate eligible gains exceeding ₹1.25 lakh in a financial year, subject to the applicable conditions. Short-term capital gains on specified equity-oriented investments are currently taxed at 20%, subject to applicable rules.

Investors should consider post-tax returns, rather than comparing only the headline FD interest rate with mutual fund returns.

Which One Should You Pick?

There is no single answer that works for every investor.

An FD may be suitable if you:

• Prioritise capital stability and predictable returns.
• Have a short- or medium-term financial goal.
• Need greater certainty about the maturity amount.
• Are uncomfortable with market fluctuations.
• Want to keep a portion of your portfolio in relatively stable investments.

An equity SIP may be suitable if you:

• Have a long-term investment horizon.
• Are comfortable with market volatility.
• Want to build wealth over the long term.
• Prefer investing regularly rather than making a large lump-sum investment.
• Can remain invested through periods of market fluctuations.

For example, someone saving for a financial requirement within a few years may prefer an FD for the relevant portion of their savings, while someone building a retirement corpus over several decades may consider equity mutual fund SIPs for long-term growth potential.

Why Some Investors Use Both

Choosing between an FD and an SIP does not always have to be an either-or decision.

An investor may use FDs for short-term requirements, planned expenses or stability, while using SIPs in suitable mutual funds for long-term wealth creation.

For example, an emergency fund or money required for a near-term financial goal may be kept in relatively stable and accessible instruments, while investments intended for long-term goals can have greater exposure to growth-oriented assets depending on the investor’s risk profile.

The right allocation depends on individual circumstances rather than a fixed formula.

Don’t Choose Based Only on Returns

One of the biggest mistakes investors make is choosing an investment solely because it has delivered higher returns historically.

FDs offer greater predictability, whereas mutual funds involve market risk. A mutual fund may outperform an FD over a particular period, but it can also decline in value.

Your decision should therefore consider:

• Investment horizon
• Risk tolerance
• Financial goals
• Liquidity requirements
• Tax implications
• Existing investments
• Need for capital stability

Conclusion

Both SIPs and Fixed Deposits can play an important role in a well-structured financial plan.

FDs are generally better suited to investors who prioritise stability and predictable returns, while SIPs—particularly equity mutual fund SIPs—can be suitable for investors seeking long-term growth and who are comfortable accepting market risk.

Rather than choosing one option solely because of its potential return, evaluate how each investment fits your overall financial goals and risk profile. In many cases, combining appropriate investments can provide a better balance between stability, liquidity and long-term growth.

Contact TaxAcumen today to discuss your investment and tax-planning requirements and build a more efficient financial strategy.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

India’s Goods and Services Tax (GST) system, which went into effect on July 1, 2017, simplifies compliance and enforcement by combining several indirect taxes under one framework. Sections 129 and 130 of the Central Goods and Services Tax (CGST) Act, 2017, which deal with detention, seizure, and confiscation during the transfer of goods, are among its essential provisions. These two provisions have different objectives, even though they deal with violations of goods transportation. Commencing on January 1, 2022, and strengthened by changes in 2024 and 2025, these sections work independently to ensure compliance and penalise noncompliance.

Understanding Section 129: Detention, Seizure, and Release of Goods in Transit

Goods carried or held in violation of GST regulations, such as when an accurate e-invoice or e-way bill is missing, are governed by Section 129. Until the fine is paid, it permits officials to temporarily hold or seize the goods and the vehicle.

The current system of penalties is:

• 200% of the tax due on taxable goods if the owner comes forward.
• In the event that the owner remains silent: 200% of the tax due or 50% of the good’s value (less any taxes paid).
• For exempt goods: 2% of the value or ₹25,000, whichever is lower, if the owner shows up; 5% of the value or ₹25,000, whichever is lower, if the owner does not.

A detention notice (FORM GST MOV-06) and a show cause notice (MOV-07) for the penalty must be issued by the appropriate official within seven days. The officer has an additional seven days to issue an order (MOV-09) after granting representation. After the order, payment must be made within 15 days. These fines are documented in the Unified AIS (Form 168) under the Income Tax Act of 2025 and are not deductible from business expenses. By paying a maximum penalty of ₹100,000 or the good’s penalty, whichever is smaller, a carrier can obtain the vehicle’s release.

Understanding Section 130: Confiscation of Goods and Conveyance

Cases involving intentional tax evasion are covered by Section 130. This includes providing goods without registering, intentionally utilising a vehicle to transport goods in contravention of the law with the intention of evading taxes, and intentional tax noncompliance. The goods and carriage are subject to confiscation in certain situations. Instead of confiscating something, the officer may issue a fine. This fine must be at least equivalent to the penalty specified in Section 129 and cannot be greater than the market value of the items (after deducting tax). Furthermore, a Section 122 penalty is frequently imposed. To ensure procedural justice prior to the commodities becoming government property, confiscation necessitates a separate show cause notice (MOV-10) and a chance to be heard.

Key Differences Between Sections 129 and 130

Aspect	Section 129 (Detention & Seizure)	Section 130 (Confiscation)
Nature	Procedural: Ensures compliance during transit	Penal: Punishes intentional tax evasion
Causes	Document violations like missing E-Way Bill	Clear intent or motive to evade tax
Objective	Detain goods until the penalty is paid	Confiscate goods as they are “tainted”
Outcome	Release after penalty or security	Transfer of ownership to the Government
Appeal Deposit	25% of the penalty amount	Generally 10% of the disputed tax
IT Act 2025	Non-deductible penalty in Form 168	Non-deductible fine in Form 168

Conclusion

The CGST Act’s Sections 129 and 130 deal with multiple levels of GST violations. Section 129 addresses document-related concerns during transportation and is focused on procedural compliance. Section 130 permits the complete confiscation of goods in order to deal with outright tax evasion. These provisions have been further divided under the current 2025–2026 tax framework so that failure to pay a Section 129 penalty does not immediately result in Section 130 confiscation. The only approach for businesses to avoid the significant financial impact of these provisions is to maintain a clean digital record in the Invoice Management System (IMS).

Taxpayers are mostly responsible for calculating, paying, and reporting their own taxes under India’s GST system. Although this self-assessment approach is intended to make things easier and faster, there must be security measures in place for everything to function properly. GST audits serve as that protection. The government uses them to ensure that companies maintain integrity and compliance.

Turnover-Based (Annual Reconciliation)

In the current 2025-26 framework, businesses with sales above ₹2 crore must file an annual return in GSTR-9. If your business crosses the ₹5 crore turnover mark, you must also file a reconciliation statement in GSTR-9C.

The process has become more integrated with the Invoice Management System (IMS). This system tracks which invoices you accepted throughout the year to ensure your Input Tax Credit (ITC) matches your supplier’s records. While self-certification is common, businesses crossing high thresholds often now seek professional certification to align with the new Form No. 26 requirements under the Income Tax Act 2025.

Key Points:

• Applies to businesses with turnover above ₹2 crore for GSTR-9.
• GSTR-9C is mandatory for turnover above ₹5 crore.
• Uses IMS data to auto-populate and verify ITC claims.
• Focuses on matching GST returns with the audited financial books.

Departmental Audit (Section 65)

This audit is conducted by tax officers, usually at the direction of the GST Commissioner. The business gets at least 15 working days’ written notice before the audit begins through Form GST ADT-01.

The audit can happen at your office or at the GST department. Usually, it is over within three months, but in complex cases, the Commissioner may extend it by an additional six months. After the process, the findings are sent to you in Form GST ADT-04. This report highlights any mistakes, missing tax payments, or wrongly claimed credits.

Why It Matters:

• Ensures taxes and ITC claims match actual business activity.
• Flags bad bookkeeping or attempts to dodge taxes.
• Allows officers to initiate recovery under Section 73, 74, or the newer Section 74A.

Special Audit (Section 66)

This audit is only ordered when there is a strong reason to suspect the value of tax has not been correctly declared or the credit availed is out of normal limits. The GST Commissioner will order the audit, and a CA or CMA chosen by the authorities carries it out.

The nominated auditor reports back within 90 days, though this can be extended to 180 days. You will have a chance to respond to any irregularities before any penalties begin. If the audit proves there is fraud or hidden sales, the department can begin steps to recover lost revenue or even prosecute.

Why This Audit Happens:

• Used for serious cases like suspected tax fraud or highly complex transactions.
• An independent expert reviews the situation for the tax department.
• The cost of this audit is paid for by the government, not the taxpayer.

Audit Type	Conducted By	When	Duration	Main Focus
Annual Reconciliation	Taxpayer / Professional	Sales > ₹2cr (GSTR-9) / ₹5cr (GSTR-9C)	Annual	Books vs. Returns
Departmental Audit	GST Department	Selected based on risk	3-9 Months	General Compliance
Special Audit	Govt. Appointed CA/CMA	Suspicious or complex cases	90-180 Days	Fraud Investigation

Conclusion

GST audits are important for maintaining the fairness of India’s tax system. The approach saves time for honest taxpayers by emphasising self-assessment and IMS-based data for the majority of enterprises. However, department-led and special audits continue to be efficient methods for identifying significant errors. In the present digital era of the 2025–2026 tax regime, being aware of these audits allows you to operate your business clearly and gain the assurance of tax authorities.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

The Income Tax Act of 2025 contains special procedures to calculate income after search or seizure operations. A specific block assessment framework governs the process for searches carried out on or after April 1, 2026. The earlier 1961 Act provisions have been superseded by Sections 294 and 295 as the main sections governing these evaluations.

Meaning and Purpose

Section 294 of the 2025 Act addresses the evaluation of an individual whose assets are requisitioned under Section 248 or who has been searched under Section 247. On the other hand, if assets or papers that belong to someone other than the individual being searched are discovered during that operation, Section 295 is applicable.

To put it simply:

• The individual who was the subject of the search is covered by Section 294.
• A related or third party whose materials were found during that target’s search is covered under Section 295.

When Each Section Applies

Section 294 is triggered immediately upon a search. The Assessing Officer (AO) will issue a notice requiring the searched person to file a special return for the Block Period.

Section 295 is invoked only when the AO of the searched person is satisfied that seized money, jewelry, or documents belong to another person. Under the 2025 Act, this satisfaction must be recorded digitally. The materials are then handed over to the AO of the other person, who starts the proceedings.

The Block Period Covered

Both provisions cover a specific timeframe known as the Block Period. This includes:

• The six tax years immediately preceding the tax year in which the search was conducted.
• The period from April 1 of the search year to the actual date the search was initiated.

A key procedural detail in the 2025 Act is that for Section 295 (the other person), the Block Period is determined by the date of the original search, aligning it more closely with the timeline of the searched person.

Requirement of Satisfaction Note

A major procedural safeguard lies in the requirement of a satisfaction note for third parties:

• Under Section 294: No separate satisfaction note is needed to start the process since the search warrant itself provides the legal ground.
• Under Section 295: The AO must record a clear satisfaction note stating that the seized material belongs to the third party. This is a jurisdictional requirement. If the AO fails to record this properly, the assessment can be challenged and declared invalid.

Abatement of Pending Assessments

According to the 2025 Act, any outstanding assessment for any tax year that falls within the Block Period will decrease upon the start of a search. This results in the regular assessment ceasing and the income for that year being included in the Block Period’s total undeclared income. This ensures a single, unified tax order and avoids concurrent litigation.

Conclusion

Sections 294 and 295 provide the legal foundation for post-search tax calculations for searches conducted under the current 2025 Act. While Section 295 protects the revenue’s interest about third parties, Section 294 covers the person who was the primary target. Compared to the generic reassessment procedures employed in recent years, the return to a specialised Block Assessment regime guarantees that search cases are resolved more quickly and clearly. To ensure correct compliance and protect taxpayer rights during a search, it is important to comprehend these particular areas.

Quarterly TDS returns have carried the familiar names for years: Form 24Q, 26Q, 27Q, and 27EQ. That changed from 1st April 2026, when the Income Tax Act, 2025, came into force and renumbered every one of these forms. Those still using the old names in payroll templates or filing checklists need to update them, since returns submitted under old numbers for this period get rejected on validation.

What the New Forms Cover

Each old form now has a direct replacement, and the underlying purpose hasn’t changed:

• Form 24Q is now Form 138, used for TDS on salary payments.
• Form 26Q is now Form 140, used for TDS on non-salary payments to residents.
• Form 27Q is now Form 144, used for TDS on payments to non-residents.
• Form 27EQ is now Form 143, used for Tax Collected at Source.

For Q1 of FY 2026-27, covering April to June, all four returns share the same due date, 31st July 2026. This is a genuine change for TCS filers, who used to submit Form 27EQ two weeks earlier than the TDS returns. Under Form 143, that gap has closed, and TCS collectors now follow the same schedule as everyone else.

Filing the Return Correctly

Before you build the return, reconcile every TDS deposit made during the quarter against your bank challans, and confirm each one was tagged under Tax Year 2026-27 rather than the older Assessment Year format. A mismatch here can misallocate a payment to the wrong year’s records and create reconciliation trouble later.

It helps to work through the filing in order:

1. Confirm the correct form for each deduction category, Form 138 for salary, Form 140 for resident non-salary, Form 144 for non-resident payments, and Form 143 for TCS.
2. Verify the updated section code for every payment type against the current CBDT mapping, rather than relying on last year’s codes from memory.
3. Match deductee PAN details carefully, since PAN errors are a common reason for correction filings later on.
4. Generate the return file using an RPU or FVU utility version that supports the new form numbers.
5. Submit the return on the portal and save the acknowledgement once accepted.
6. Issue TDS certificates to deductees soon after filing. The salary certificate, earlier called Form 16, now goes by the name Form 130, though its content and purpose haven’t changed.

Penalties and a More Stringent Correction Window

Missing the due date still carries the same consequences as before. A late fee of Rs 200 per day applies under Section 234E, capped at the total TDS or TCS amount for that quarter, with no discretion to waive it once a return is filed late. Persistent or inaccurate filing can also draw a penalty ranging from Rs 10,000 to Rs 100,000 under Section 271H.

One more change worth noting, corrections to a filed statement, such as fixing a wrong PAN or an incorrect section code, must generally be made within two years from the end of the relevant financial year. Older statements with uncorrected errors may fall outside this window soon, so it’s worth clearing them up alongside your current filing.

Conclusion

Filing Q1 FY 2026-27 correctly is less about learning something new and more about updating labels, codes, and templates that stayed unchanged for years. Confirm the right form for each payment category, verify section codes against the current mapping, and reconcile your challans before the 31st July deadline. Getting this first quarter right makes every filing after it considerably smoother.

It can be challenging for operational staff to ensure a smooth transfer of goods for your business while maintaining complete regulatory compliance. The uncertainty around transportation laws and the requirement to wait for documentation are two major causes of inefficiency for finance executives. The Electronic Way Bill (E-Way Bill) system, which was incorporated into India’s Goods and Services Tax (GST) system, is the main digital tool designed to expedite this process. By guaranteeing that every significant goods transfer is documented and tracked, it reduces the chance of tax evasion and makes the entire transportation process transparent.

What is an E-Way Bill?

Before starting the movement of goods, a registered individual must create an electronic document called an E-Way Bill on the official portal. When a single invoice, bill, or delivery challan covers a cargo for more than ₹50,000, this bill is required. A distinct E-Way Bill Number (EBN) is assigned and made available to the transporter, the supplier, and the recipient after it has been generated.

The bill is constructed from two primary components:

Part A: This captures details of the goods and the transaction, including the recipient’s GSTIN, place of delivery PIN code, invoice details, value of goods, and the reason for transportation. This section also requires accurate HSN codes: 4 digits for turnover up to ₹5 crores and 6 digits for turnover exceeding ₹5 crores.

Part B: This focuses solely on transportation logistics, requiring the vehicle number and transporter details.

Applicability and Mandatory Requirements

E-Way Bills must be generated whenever goods are moved in a conveyance of value more than ₹50,000, whether the movement is:

• In relation to a formal supply such as a sale or transfer.
• For reasons other than a supply, such as a goods return.
• Due to an inward supply from an unregistered person.

Importantly, for certain specific goods, the E-Way Bill must be generated regardless of the consignment value:

• Inter-state movement of goods by the principal to a job worker.
• Inter-state transport of handicraft goods by an exempted dealer.
• Intra-state movement of gold and precious stones if the state has notified a threshold (typically ₹2 lakhs) under Rule 138F.

Who is Responsible for Generation?

The responsibility for generating the E-Way Bill typically falls on the registered consignor or consignee.

Registered Person: They must generate the bill for movements over ₹50,000 and can also choose to generate it for lower-value movements. If the person is required to issue e-invoices, the E-Way Bill should ideally be generated via the Invoice Reference Number (IRN) on the E-Invoice portal.

Unregistered Persons: If an unregistered person makes a supply to a registered person, the receiver is responsible for ensuring all compliance is met, acting as if they were the supplier.

Transporter: The transporter must generate the bill if the supplier or recipient has not done so. For multiple consignments in a single vehicle, a transporter can generate a consolidated E-Way Bill using Form GST EWB-02.

E-Way Bill Validity and Time Limits

The validity of an E-Way Bill is calculated from the date and time of its generation, based on the distance the goods must travel:

Type of Cargo	Distance (or part thereof)	Validity Period
Other than Over Dimensional Cargo (ODC)	Every 200 Kms	1 Day
Over Dimensional Cargo (ODC)	Every 20 Kms	1 Day

The validity can be extended by the generator eight hours prior to or within eight hours following expiration. The entire extension is only available in extraordinary circumstances and is limited to 360 days from the initial generation date. Furthermore, only documents dated within the last 180 days are eligible for creating E-Way Bills.

Situations in Which an E-Way Bill Is Not Necessary

1. In several situations, the e-way bill is exempt, including:
2. movement of a non-motor vehicle.
3. goods that are carried under seal or customs supervision.
4. Transport goods to or from Bhutan or Nepal.
5. Movements caused by defence formations.
6. Transportation within 20 km between a company location and a weighbridge, as long as a delivery challan is present.
7. Certain commodities are free from state regulations; for example, in states like Tamil Nadu and Delhi, certain intrastate movements are subject to higher limitations of ₹1 lakh.

Conclusion

A significant step toward digital and transparent logistics management under GST is the E-Way Bill system. Making sure logistics data corresponds with the digital footprint in the Unified Annual Information Statement (Form 168) is important in the current Income Tax Act 2025 framework. Any firm must correctly calculate validity periods and comply with required Multi-Factor Authentication (MFA). Following these guidelines not only guarantees smooth logistical operations but also protects your business from severe fines under Section 129 of the CGST Act.

Residencial status of a person is the primary criteria that decides how foreign assets and income are taxed in India. Residents, resident but not ordinarily resident (RNOR), and non-residents (NRIs) are defined by the Income Tax Act, 2025. Each category specifies what information is required and how much of your overseas income is taxable.

Residential Status

A person is considered a Resident and Ordinarily Resident (ROR) if they stay in India for 182 days or more during the year or for 365 days or more during the previous four years along with at least 60 days in the current year. Additionally, Indian citizens with Indian income over 15 lakh rupees not taxed elsewhere are “deemed residents”.

• ROR: Taxable on total global income, including all foreign earnings.
• RNOR: Taxed only on income received or accrued in India or from a business controlled from India.
• NRI: Taxed only on income that arises or is received in India.

Taxation of Foreign Income

1. For RORs: Global income such as salary, dividends, capital gains, and business profits earned abroad is taxable in India as if earned domestically. However, they can claim foreign tax credit (FTC) for taxes paid abroad under India’s Double Taxation Avoidance Agreements (DTAAs).
2. For RNORs: Foreign income not received in India is generally not taxable. Only income sourced from India or a business set up in India is taxed. This status is vital for returning NRIs.
3. For NRIs: Only income that accrues, arises, or is received in India is taxable. Foreign salaries, rents, or investments held outside India are exempt from Indian taxation.

Taxation of Foreign Assets

Owning a foreign asset does not automatically create tax liability unless it generates income. Yet, residents (RORs) must disclose such assets every year in their income tax return under Schedule FA.

• Reportable Assets: These include foreign bank accounts, immovable property abroad, foreign company shares, and cryptocurrency wallets maintained on overseas exchanges.
• Disclosure Rules: Under the 2026 Budget updates, while non-disclosure can invite a penalty of 10 lakh rupees, prosecution is now waived for non-immovable assets valued below 20 lakh rupees if the error was unintentional.

Double Taxation Avoidance Agreement (DTAA)

When the same income is taxed in both India and another country, taxpayers can claim relief under DTAAs. The relief is given in two forms:

• Exemption method: Income taxed abroad is exempt in India.
• Credit method: Tax paid abroad is adjusted against Indian tax payable.

To claim credit, one must submit Form 44 (formerly Form 67) before filing the return and maintain proof of taxes paid abroad. This data is now integrated into the Form 168 (Unified AIS) for easier verification.

The Black Money Act and Penalties

The Black Money (Undisclosed Foreign Income and Assets) Act, 2015, remains the primary tool against hidden offshore wealth. It covers:

• A fixed 30% tax on unreported foreign income or assets.
• A penalty equal to three times the tax amount.
• The FAST-DS 2026 Scheme: A new 6-month window allows taxpayers to declare old undisclosed assets below 1 crore rupees with a specialised tax and fee structure to gain immunity from prosecution.

Under the Income Tax Act 2025

The Income Tax Act 2025, in force since April 1, 2026, continues the concept of global taxation for residents while enhancing digital compliance. It utilises automated verification through the Common Reporting Standard (CRS) to check foreign holdings. The new law has simplified Schedule FA and made digital record-keeping for foreign tax credits more robust. Special provisions also exist for returning NRIs to prevent double taxation during their transition year.

Conclusion

Residency is the basis for India’s tax system. RNORs are partially liable, residents are taxed on their worldwide income, while NRIs are only taxed on income earned in India. Foreign assets must be declared in order to avoid hefty penalties, even if they are not necessarily taxable. The law promotes truthful reporting through Form 44 and DTAA benefits to prevent double taxation. Your foreign assets and income are taken into account when calculating your taxes if you live in India and work overseas. Financial security depends on transparency and accurate filing under the Income Tax Act of 2025.