Background
On 27 July 2026, India’s Central Board of Direct Taxes (CBDT) notified the Income-tax (Third Amendment) Rules, 2026 (Notification 97/2026 [F. No. 370142/11/2026-TPL]) which become effective from 1 April 2026. These amendments introduce Form ITR-BN and amend Rule 332 by adding Appendix IV specifically for returns related to search and requisition cases.(incometax.gov.in)
Together with that, under the earlier Second Amendment Rules, 2026 (Notification No. 45/2026), Rule 12 has been changed: taxpayers can now claim deductions for up to two house properties instead of one under certain sections; and changes to dates in sub-rules to align for AY 2026-27.(incometax.gov.in)
Key Changes & Implications
| Feature | What’s New | Who It Impacts Most |
|---|---|---|
| Reporting in ITR-BN & Appendix IV | Special format for taxpayers subject to search or requisition operations. | High-wealth individuals, those under investigation, or large corporate entities. |
| Two House Properties | Eligible residents can now claim income or loss from two house properties instead of being restricted to one. | Owners of multiple properties—rental income, home loans, etc. |
| Change of dates in Rule 12 | Certain thresholds and dates updated. | Impacts planning around the timing of deductions, declarations and election between old/new tax regimes. |
Practical Tax-Planning Recommendations
- If you own two residential properties, evaluate whether reporting both helps reduce taxable income via property losses or interest payments—especially under old/new regime options.
- Taxpayers facing a search or requisition notice should prepare to use Form ITR-BN and walk through Appendix IV requirements carefully—missing information here can delay processing or trigger notices.
- Individuals who switch between old and new tax regimes should track deadlines to file Form 10-IEA timely in AY 2026-27 if they opt out of default regime. Old regime retains certain allowances and deductions, but once switched away, reversal options are restricted. (Based on ITR-4 rules.)(incometax.gov.in)
Example
Priya has:
- Salary income: ₹ 14,00,000
- Interest and dividends: ₹ 50,000
- Income from house property: • House A (rental income minus expenses): loss of ₹ 1,50,000 • House B (similar setup): income of ₹ 1,00,000
Under the new option allowing two house properties, she can net these to report a net loss of ₹ 50,000 which can offset other income—something not possible under old single property restriction.
Action Steps Before Year End
- Review all property ownership—if you have more than one house with income or loss, ensure records are ready.
- If you’re under search or inquiry, consult a tax professional with experience navigating ITR-BN & Appendix IV inputs.
- Understand whether new or old tax regime gives better post-deduction effective tax rate; simulate both for FY 2025-26 / AY 2026-27.
These amendments don’t necessarily change tax rates significantly—but they widen options, especially around deductions and reporting. Smart planning and documentation will make the difference.