India’s Central Board of Direct Taxes (CBDT) has amended the Income Tax Rules 2026 to revise the procedure for applying for an income tax penalty waiver under the Income Tax Act 2025. These changes were notified on 8 October 2026, through the Income Tax (Sixth Amendment) Rules 2026.
CBDT notification amends Rule 231 and replaces Form No. 161 with a revised application form for seeking a penalty waiver under Section 440(2) of the Income Tax Act 2025. The amended rules came into force on the date of publication (9 October) in the official gazette.
The revised form specifies the information taxpayers must provide about their assessment or reassessment orders, under-reported income, tax liabilities and payments when applying for a penalty waiver.
Review Form 161
Contact our India tax experts to know your eligibility for a penalty waiver under the Income Tax Rules 2026.Who is affected by the revised tax Form No. 161?
CBDT’s 8 October 2026 notification is relevant to taxpayers who have received an assessment or reassessment order. This involves underreported income or intending to seek a penalty waiver under Section 440(2), subject to the applicable statutory conditions.
The potentially affected groups include the following:
- Individuals: Taxpayers facing a relevant penalty in connection with an assessment or reassessment order may use the revised form if they qualify under Section 440.
- Companies and other businesses: Entities facing penalties relating to under-reported income may be eligible to apply, subject to the relevant provisions.
- Taxpayers with outstanding tax demands: Applicants must review the assessed income, tax and interest payable, additional income tax calculations and applicable payment requirements.
- Tax professionals and consultants: Professionals assisting eligible taxpayers will need to use the revised form and verify the supporting assessment and payment information.
It must be noted that the notification does not introduce an automatic penalty waiver for all taxpayers. Eligibility depends on the applicable provisions of the Income Tax Act 2025.
What has changed under the Income Tax (Sixth Amendment) Rules, 2026?
The notification makes two principal amendments to the Income Tax Rules 2026.
Amendment to Rule 231
Rule 231 has been amended by inserting the words “or waiver” after the word “imposition”. This expressly extends the wording of the rule to include the waiver of penalties.
Replacement of Form No. 161
The existing Form No. 161 has been replaced with a revised application form titled Application for seeking waiver of penalty under Section 440(2) of the Income Tax Act 2025.
This revised tax form sets out the information applicants must furnish to support their waiver applications. This includes providing details of the relevant assessment order and the amounts payable.
Information required in the revised Form No. 161
The revised form is divided into personal information, assessment and payment details, and verification.
- Applicants must provide the following information:
- Full name
- Permanent Account Number (PAN)
- Address
- Mobile number
- Email address
Form 161 specifies address particulars, including the country or region, building or flat, street, postal code, locality, district and state.
- Applicants must provide information relating to the order for which the penalty waiver is being sought, including:
- Tax year
- Section under which the order was passed
- Document Identification Number (DIN)
- Date of the order and date it was served
- Due date for payment under the notice of demand
- Income assessed and under-reported income
- Tax and interest payable on the assessed income
The form distinguishes between under-reported income attributable to the specific categories of misreporting listed under Section 439(11) and under-reported income that does not result from misreporting.
- Additional income tax and payment details: The form requires applicants to calculate the additional income tax payable in lieu of the penalty and the total amount payable for the waiver application.
It also requires details of payments made, including the bank branch code (BSR Code), deposit date, challan serial number and amount paid.
Some information may be pre-filled to the extent possible, according to the notes accompanying the form.
How is the amount payable for a penalty waiver calculated?
The revised Form No. 161 distinguishes between the tax and interest payable on assessed income and the additional income tax payable in lieu of the penalty.
|
Component |
Details |
|
Tax and interest |
Amount payable on assessed income, as indicated in the computation sheet accompanying the notice of demand |
|
Tax on under-reported income |
Amount calculated under Section 439(12), with separate entries for the categories identified in the form |
|
Additional Income Tax |
100 per cent of the amount under Section 439(11)(a)–(f) and 120 per cent of the amount under Section 439(11)(g), as reflected in the form |
|
Total amount payable |
Tax and interest payable on assessed income plus the total additional income tax specified for the waiver application |
Form 161 identifies the total amount payable for the penalty waiver by reference to Section 440(1) of the Income Tax Act 2025.
The penalty-waiver procedure should not be interpreted as a waiver of the underlying tax and interest liabilities. The form accounts for these amounts separately. Taxpayers should verify the applicable statutory conditions and calculations before submitting an application.
Declaration and verification requirements
The revised form requires applicants to declare that the information furnished is true to the best of their knowledge and belief.
Applicants must also declare that no appeal has been filed against the specified assessment or reassessment order and undertake not to file an appeal before the expiry of the period specified in Section 440(5).
The form must be signed by the applicant or the authorised person, as applicable.
These declarations make it important for taxpayers to review the implications of seeking a penalty waiver before submitting the application.
What should taxpayers do?
Taxpayers considering an application under Section 440(2) should take the following steps:
- Review the assessment or reassessment order: Identify the relevant tax year, statutory provision, assessed income and demand.
- Verify the amounts payable: Reconcile the tax and interest liabilities with the computation sheet and notice of demand.
- Calculate the additional income tax: Apply the relevant statutory provisions to determine the amount specified for the waiver application.
- Compile payment records: Verify challan details and retain evidence of amounts deposited.
- Review the eligibility conditions: Examine Section 440 and the applicable provisions, including the restrictions concerning appeals.
- Complete the revised Form No. 161: Ensure that the application contains accurate assessment, payment and verification details.
The notification prescribes the revised form and related amendments; the eligibility requirements and legal consequences must be determined from the Act and other applicable provisions.
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Conclusion
CBDT’s 8 October 2026 notification revises the procedural framework for applying for an income tax penalty waiver by amending Rule 231 and replacing Form No. 161 under the Income Tax Rules 2026.
These changes are relevant to taxpayers seeking a waiver under Section 440(2) of the Income Tax Act 2025 and to tax professionals assisting them.
Taxpayers in India should distinguish this procedural amendment from a general waiver of penalties. Whether an application qualifies, what amount must be paid and which restrictions apply will depend on the relevant statutory provisions and the taxpayer’s circumstances.
