India | How to Use the New ITR-BN Form & Search-Requisition Return Rules

Background

In July–August 2026, the Indian CBDT issued Notification No. 97/2026 [F. No. 370142/11/2026-TPL], introducing the Income-tax (Third Amendment) Rules, 2026. Key among these is the creation of Form ITR-BN, and amendments to Rule 332 via insertion of Appendix IV, governing returns related to search and requisition cases. These changes became effective 1 April 2026 (Assessment Year 2026-27). (incometax.gov.in)

What Changed: ITR-BN & Rule 332/App. IV

• New Form ITR-BN: Designed for taxpayers who under Sections 131 (search) or 132A (seizure), or Section 158BD/158BE (requisition) of the Income-tax Act, need to file under special rules. The form captures details of seized/requisitioned documents, assets, disclosures.
• Rule 332 & Appendix IV: Adds structure for search or requisition cases — specifying timelines, content required, how to compute income impacted by the search or requisition, penalties.

Who Needs to File ITR-BN

• Individuals, HUFs, firms or any person subject to search/seizure or requisition by tax authorities under the relevant sections.
• Even if no income arises beyond what’s declared, the form must capture assets seized, requisitioned documents, etc.

Practical Steps for Taxpayers

1. Determine applicability: review notices received under search or requisition sections to see if ITR-BN and App. IV apply.
2. Collect documents: seized/requisitioned goods or documents, valuation statements, income records, books of account, inventory, etc.
3. Prepare schedule under App. IV:
   • Disclosures of seized assets or documents.
   • Details of valuation and assessments as per search or requisition.
   • Explanation of differences between declared income and declared under the search/requisition notice.
4. File by due date: The return for AY 2026-27 using ITR-BN must be submitted like other returns; ensure no delays to avoid default penalties.
5. Observe penalties: Non‐compliance (late filing, wrong/incomplete disclosure) may attract penalties under sections of the Income-tax Act, including misreporting or concealment.

Example Case

Rahul, a business owner, receives a notice under Section 132A regarding a requisition of several stored financial records. He must file his AY 2026-27 return using ITR-BN, provide details in Appendix IV of assets/documents requisitioned, explain income differences observed, attach valuations. Even if his basic income remains unchanged, failure to comply correctly may expose him to penalties.

Why It Matters & Planning Tips

• The new form and appendix force greater transparency over what assets/documents were found or seized and how income is reconstructed.
• Taxpayers with cross-border holdings or those using digital/ad‐hoc incomes (e.g. social media, software exports) must be extra careful since discrepancies uncovered in search cases can trigger ITR-BN obligations.

Actionable tips:

• Maintain detailed books and contemporaneous records even for foreign or digital incomes.
• If assets or documents are requisitioned, get valuation reports immediately.
• Engage a tax professional in case of search/requisition notices to avoid misstatements.
• Stay current with foreign asset reporting via the Annual Information Statement (AIS), which is now visible for many taxpayers. (incometax.gov.in)