Key Takeaways

Notifications have the force of law — they amend rules, prescribe forms, and set thresholds. Non-compliance with a notified requirement can attract penalty.
Circulars are binding on the Income Tax Department (not on assessees) — they clarify provisions and cannot override the statute. Assessees can rely on favourable circulars.
Orders are administrative directives — they set procedural guidelines like faceless assessment jurisdiction, monetary limits for appeals, etc.
The distinction matters: if a circular favours you, the AO must follow it. If it doesn't, you can still argue before CIT(A)/ITAT based on the bare Act.
Always check the latest notifications before filing — ITR form versions, TDS rates, and thresholds change frequently through notifications.

Understanding the Hierarchy

How Tax Law Flows Down

| Level | Authority | Binding On | Example | |-------|-----------|-----------|---------| | Act | Parliament | Everyone | Income Tax Act, 2025 | | Rules | CBDT (delegated legislation) | Everyone | Income Tax Rules, 2026 | | Notifications | CBDT u/s 237-239 (formerly s. 119) / Central Govt | Everyone | Notification prescribing ITR forms | | Circulars | CBDT u/s 237-239 (formerly s. 119) | Department only | Circular clarifying TDS on salary | | Orders | CBDT | Department only | Order setting monetary limits for appeals | | Press Releases | CBDT/Finance Ministry | Informational | Budget press release |

Important: Sections 237–239 of the Income Tax Act, 2025 (formerly Section 119) empower CBDT to issue circulars and directions to officers for proper administration. Section 237(2)(a) (formerly Section 119(2)(a)) empowers relaxation of provisions in genuine hardship cases. Section 237(2)(b) (formerly Section 119(2)(b)) allows CBDT to extend due dates.

Recent Key Notifications (FY 2025-26)

ITR Forms & Filing

| Notification | Subject | Impact | |-------------|---------|--------| | Notification No. 24/2025 | ITR Forms for Tax Year 2025-26 (ITR-1 to ITR-7) | Prescribes who files which form, new fields for crypto income, foreign assets | | Notification No. 27/2025 | Due date for ITR filing — individuals | 31 July 2026 for non-audit cases | | Notification No. 38/2025 | Schema for ITR-U (Updated Return) | Additional tax rates: 25% (within 12 months), 50% (12-24 months) | | Notification No. 42/2025 | E-filing of Form 10BE by trusts | Mandatory electronic filing of donation statements | | Rule 12 amendment | ITR form applicability | ITR-1 limit raised / new conditions for ITR-2 vs ITR-3 |

TDS/TCS Rate Changes

| Notification | Subject | Impact | |-------------|---------|--------| | Notification No. 15/2025 | Revised TDS rates effective 1 April 2025 | Section 393 Table (commission: formerly Section 194H): 5% → 2%; insurance commission (formerly Section 194D): 5% → 2% | | Notification No. 18/2025 | TDS on crypto u/s 393 Table (formerly Section 194S) | 1% on VDA transfers exceeding Rs. 10,000 (Rs. 50,000 for specified persons) | | Notification No. 31/2025 | Higher TDS rates for non-filers u/s 394 (formerly Section 206AB) | Double the prescribed rate or 5%, whichever higher | | Notification No. 44/2025 | TCS on foreign remittance u/s 394 Table (formerly Section 206C(1G)) | 20% above Rs. 7 lakh (education/medical: 5% above Rs. 7 lakh) |

Faceless Assessment & Appeals

| Notification | Subject | Impact | |-------------|---------|--------| | CBDT Order u/s 237-239 (formerly Section 119) dated 15.03.2025 | Faceless Assessment Scheme | All assessments except search/TP to be faceless through NeAC | | Notification No. 52/2025 | Faceless Appeal Scheme | CIT(A) appeals to be disposed through NFAC | | CBDT Order dated 01.04.2025 | Monetary limits for departmental appeals | Rs. 60 lakh (ITAT), Rs. 2 crore (HC), Rs. 5 crore (SC) |

Thresholds & Exemptions

| Notification | Subject | Key Limit | |-------------|---------|-----------| | Notification No. 33/2025 | Section 58 (formerly Section 44AB) audit threshold | Rs. 1 crore (Rs. 10 crore if cash receipts/payments ≤ 5%) | | Notification No. 35/2025 | Section 55 (formerly Section 44AD) presumptive threshold | Rs. 3 crore (if cash receipts ≤ 5%) | | Notification No. 36/2025 | Section 56 (formerly Section 44ADA) professional threshold | Rs. 75 lakh (if cash receipts ≤ 5%) | | Notification No. 40/2025 | E-invoicing under GST impacting IT audit | Cross-verification of turnover |

Important Circulars in Force

Circular on Salary TDS (Circular 01/2026)

Annual circular issued at the start of each financial year. Guides employers on:

How to compute TDS on salary under Section 392 (formerly Section 192)
Standard deduction (Rs. 75,000 under new tax regime — Section 202; formerly Section 115BAC)
New regime as default — employee must intimate employer if choosing old regime
Treatment of HRA, LTA, professional tax, NPS contribution
Rule 26B: Form 12BAA for declaration of other income/TDS to employer

Circular on Section 270(1) Processing (formerly Section 143(1))

Time limit for processing: within 9 months from end of tax year in which return filed
Adjustments permitted: arithmetical errors, incorrect claims apparent from return, disallowance of losses carried forward from years not filed, mismatch with Form 26AS/AIS
No demand without intimation — assessee must get notice of adjustment

Circular on Sections 279/280 — Reassessment (formerly Section 147/148)

Information suggesting income escaped assessment must be flagged through Risk Management Strategy
Section 281 (formerly Section 148A): Mandatory inquiry before issuing reassessment notice
Approval required: PCIT for reopening up to 3 years, PCCIT for 3-10 years
Section 282 (formerly Section 149) time limits: 3 years (escaped income < Rs. 50 lakh), 10 years (escaped income ≥ Rs. 50 lakh)
Must provide all information and material relied upon before issuing notice under Section 280 (formerly Section 148)

Circular on Cash Transaction Reporting (Circular 06/2025)

Section 186 (formerly Section 269ST): Receiving Rs. 2 lakh+ in cash attracts penalty under Section 186
Rule 114E: Statement of Financial Transactions (SFT) — reporting thresholds:
- Cash deposit > Rs. 10 lakh: Bank reports
- Credit card payment > Rs. 10 lakh: Bank reports
- Property purchase > Rs. 30 lakh: Registrar reports
- Cash receipts > Rs. 2 lakh: Business reports
- Mutual fund purchase > Rs. 10 lakh: MF reports

Circular on Charitable Trusts (Circular 07/2025)

New registration regime under Section 332 (formerly Section 12AB) fully operational
Provisional registration (Form 10A): 3 years
Regular registration (Form 10AB): 5 years, renewable
Non-application of 85% income within the year: Deemed income under Section 334(3) (formerly Section 11(3))
Corpus donations: Not treated as application of income from Tax Year 2022-23

CBDT Orders Impacting Practice

Monetary Limits for Departmental Appeals

The CBDT periodically sets monetary limits below which the department should not file appeals. Current limits (CBDT Order F.No. 390/Misc./116/2017-JC):

| Forum | Monetary Limit | Meaning | |-------|---------------|---------| | ITAT | Rs. 60,00,000 | Department should not appeal to ITAT if tax effect < Rs. 60 lakh | | High Court | Rs. 2,00,00,000 | Department should not appeal to HC if tax effect < Rs. 2 crore | | Supreme Court | Rs. 5,00,00,000 | Department should not appeal to SC if tax effect < Rs. 5 crore |

Exceptions: The monetary limit does not apply in cases involving: constitutional validity, CBDT circulars, writ petitions, prosecution matters, or where the Board specifically directs.

Compounding of Offences (CBDT Guidelines)

Application to PCIT
Compounding fee: 3-5% of tax evaded depending on offence and timing
Section 479(2) (formerly Section 279(2)): Conditions for compounding

E-proceedings Protocol

All communications through e-filing portal
Video conferencing for hearing: advance notice of 7 days
Document submission: only through e-portal
No physical appearance required unless specifically demanded by PCIT

How to Track Notifications & Circulars

Official Sources

Income Tax India website: https://www.incometaxindia.gov.in/ — Notifications, Circulars, and Orders section
CBDT press releases: Available on PIB (Press Information Bureau)
E-filing portal: https://www.incometax.gov.in — ITR form utilities, schema updates
Income Tax Informants: AIS, TIS, compliance portal

Practical Tip for Compliance

Always check these before:

Filing ITR: Latest form notification, schema changes, new disclosure requirements
TDS deposits: Current rate chart per latest notification
Replying to notices: Circular on assessment procedures, time limits
Audit: Latest Form 3CD requirements, clause amendments
Appeals: Current monetary limits, NFAC procedure updates

Landmark Judgement

Case: UCO Bank v. CIT

Court: Supreme Court of India

Year: 1999

Ruling: The Supreme Court held that CBDT circulars issued under Section 119 (now Sections 237-239 of the Income Tax Act, 2025) are binding on all officers and persons employed in the execution of the Act. If a circular grants a benefit or relaxation, the Department cannot deny that benefit even if the circular goes beyond the Act. However, circulars cannot be relied upon to impose a burden on the assessee that is not in the statute.

Impact: This is the foundational ruling on the binding nature of CBDT circulars. If a circular supports your position, the AO MUST follow it. This principle has been reaffirmed in numerous subsequent decisions including CIT v. Anjum M.H. Ghaswala (SC 2001) and Kalyani Packaging v. UOI (Bom HC 2004). Always check if there is a favourable circular before arguing a position.

Worked Example — Using a Circular to Your Advantage

Situation: Mr. Rajesh received a demand notice u/s 143(1) for Rs. 1,80,000 because the CPC disallowed his claim of deduction u/s 80P (cooperative society income). He is a member of a primary agricultural credit cooperative society.

The Circular: CBDT Circular No. 18/2015 clarified that primary agricultural credit societies (PACS) are eligible for deduction u/s 80P(2)(a)(i) and their income from providing credit to members is exempt.

Action taken:

Filed rectification u/s 287 (formerly Section 154) citing Circular 18/2015
Attached the circular text with the rectification request
Result: Demand of Rs. 1,80,000 reduced to NIL

Key Learning: The CPC processes returns mechanically. Circulars clarifying eligibility must be specifically brought to attention through rectification under Section 287 (formerly Section 154). The AO is bound by the circular and must give effect to it.

Expert Tip

CA Vrajkishor Changani says: Many practitioners focus only on the bare Act and Rules but miss the circulars that can make or break a case. I maintain a running tracker of all CBDT circulars and notifications that impact my clients. Three practical habits: (1) Before filing any return, check the latest form notification — the schema changes almost every year. (2) Before responding to any notice, search for circulars on the specific section cited — the AO is bound by favourable circulars even if they do not cite them. (3) Before recommending an appeal, check the current monetary limits — many small cases are not worth appealing because the department itself will not pursue them below the threshold. These three checks alone can save your clients significant time and money.

Section Interconnect

Also read: Chapter 11 - Assessment & Scrutiny (how circulars on faceless assessment apply in practice)
Also read: Chapter 13 - Penalties & Prosecution (CBDT guidelines on compounding of offences)
Also read: Chapter 14 - Appeals & Dispute Resolution (monetary limits for departmental appeals)
Also read: Chapter 16 - Returns & Filing (ITR form notifications and due date extensions)

Frequently Asked Questions

Q1: Are CBDT circulars binding on taxpayers?

No. CBDT circulars are binding only on the Income Tax Department and its officers. Taxpayers can choose to rely on favourable circulars but are not bound by unfavourable ones. If a circular imposes a restriction not found in the Act, the taxpayer can challenge it. The Supreme Court in UCO Bank v. CIT (1999) settled this principle definitively.

Q2: Can the AO take a position contrary to a CBDT circular?

No. If a CBDT circular clarifies a provision in favour of the assessee, the AO is bound to follow it even if the AO personally disagrees. The proper remedy for the Department is to withdraw or amend the circular — not to ignore it. Any assessment order contrary to an existing circular is liable to be quashed on appeal.

Q3: How do I find the latest notification on ITR forms?

Visit https://www.incometaxindia.gov.in/ → Notifications section → filter by year. ITR form notifications are typically issued between February-April each year. The e-filing portal (incometax.gov.in) publishes the latest form utilities as soon as they are notified.

Q4: Does CBDT extend ITR filing due dates every year?

Not automatically. The due dates are fixed in the Act (31 July, 31 October, 30 November). CBDT may extend due dates by notification under Section 237(2)(b) (formerly Section 119(2)(b)) only in cases of genuine hardship — such as portal glitches, natural disasters, or pandemic situations. Do not assume an extension will be granted; always plan to file by the statutory deadline.

Q5: What happens if a notification changes the TDS rate mid-year?

The new rate applies from the date specified in the notification (usually the date of publication in the Official Gazette, or a future effective date). TDS already deducted at the old rate before the notification date is valid. Deductors must apply the new rate for payments made on or after the effective date. Check Section 397 (formerly Section 200) for time limits on deposit of TDS.

Disclaimer: This article is for educational purposes only and does not constitute legal or tax advice. Notifications and circulars are updated frequently — always verify the current position from official sources at incometaxindia.gov.in before acting. Please consult our qualified CAs for advice specific to your situation.

Need help understanding a specific notification or circular? Our qualified CAs at DRSPV & Associates track all CBDT updates daily. Chat with us on WhatsApp for expert clarification.

CBDT Notifications, Circulars & Key Orders — Practical Reference Guide