The Central Board of Direct Taxes (CBDT) has introduced amendments to Form 161 as part of the Income-tax (Sixth Amendment) Rules, 2026.
As part of the changes under Section 533 read with Section 440 of the Income-tax Act, 2025, “or waiver” has been added after “imposition” in Rule 231.
The amendment provides taxpayers with the option to seek a waiver of the penalty imposed due to misreporting of income and in other cases.
The notification issued in the e-Gazette of India announces that the revised Form 161 would be applicable from October 8, 2026.
The previous Form 161 did not provide immunity to taxpayers against penalties incurred due to misreporting of income. Thus, the revision has the potential to reduce liabilities and facilitate resolution at an initial stage.
What is Form 161?
Prescribed under Section 440(2) of the Income-tax Act, 2025, Form 161 provides relief from penalties under Section 439 and the initiation of prosecution under Sections 478 or 479 arising from the under-reporting or misreporting of income, after the receipt of an assessment or reassessment order, subject to the fulfilment of prescribed conditions.
The conditions accompanying immunity from prosecution, however, include not filing any appeal against the order. This means that if the taxpayer submits Form 161, the option to contest the assessment or reassessment order is no longer available.
An individual taxpayer, an LLP, a company, a trust, etc., receives an assessment order when the tax officer flags an issue, such as income missing from the tax return. It may happen that an already assessed ITR does not mention certain income, or that income has been under-reported or misreported. In that case, the tax officer orders the taxpayer to undergo reassessment.
In such cases, taxpayers may choose to contest the order. However, submitting Form 161 requires them not to file any appeal. Thus, taxpayers who believe the assessment to be incorrect and have a strong case should choose carefully before submitting the form.
Before submitting the form, the taxpayer must pay the amount of tax and interest payable as per the notice of demand.
Associated rules and laws
Section 533: This section gives the CBDT the power to decide the entire procedure that must be followed to implement the Income-tax Act, 2025. The CBDT makes rules and prepares forms required to carry out the proceedings under the Act.
Section 440: Titled “Waiver of penalty and immunity from prosecution”, this section contains the core provisions related to the waiver of penalties arising from the misreporting and under-reporting of income, as well as immunity from prosecution when taxpayers attempt to evade tax and fail to furnish returns.
Rule 231: This rule lays out the application procedure to avail the provisions under Section 440. It provides for an application to the Assessing Officer by taxpayers seeking to waive the penalty and gain immunity from prosecution. The amended form also includes the criteria for calculating the income tax payable in lieu of the penalty.
Note that the deadline to submit the form is one month from the end of the month in which the assessment/reassessment order is received.
