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Most income tax notices sent to individuals now begin the same way: a figure in a departmental statement does not match a figure in the return. No allegation, no investigation — just an arithmetic difference between what a bank, registrar, depository or employer reported and what the taxpayer declared.

A large proportion of those differences are not errors by the taxpayer at all. They are reporting artefacts. And nearly all of them can be dealt with before a return is even filed, using a facility that most taxpayers never open.

Three statements, three different jobs

The three documents are routinely treated as versions of the same thing. They are not.

Form 26AS is a tax credit statement. Its core function is to record tax deducted at source, tax collected at source, advance tax and self-assessment tax paid, and refunds issued. It answers the question: how much tax has already been paid or credited against my PAN?

The Annual Information Statement (AIS) is far broader. It is a consolidated record of financial information reported to the department about a taxpayer from many sources — interest paid by banks, dividends, securities and mutual fund transactions, foreign remittances, property purchases and sales, business receipts, GST turnover, and other specified financial transactions. It answers a different question: what does the department know about my financial year?

The Taxpayer Information Summary (TIS) is a category-wise summary derived from the AIS. For each category it shows a processed value and a derived value. The derived value is what feeds the return pre-fill, and it is the figure that shifts when feedback is accepted.

Three consequences follow. A transaction can appear in the AIS without appearing in Form 26AS, because no tax was deducted on it. Two statements can show different numbers for what looks like the same thing without either being wrong. And correcting the AIS is what changes the TIS, which is what changes the pre-filled return — not the other way round.

Together they form the department’s view of a taxpayer’s year, and reading all three is now a basic step in income tax compliance in India.

Why the numbers disagree

The AIS aggregates data supplied by third parties under statutory reporting obligations. Those parties report on their own systems, on their own timelines, and to their own conventions. The taxpayer’s books follow accounting rules and the taxpayer’s own facts. The two were never designed to reconcile exactly.

Some divergence is therefore expected and entirely proper. The task is not to make every figure match, but to identify the differences that would look like under-reporting to a reviewer and to explain them on record before anyone asks.

The most common causes of a mismatch

Gross against net. Banks report interest credited gross. The taxpayer may have offered it net of something, or offered only the amount actually received. Similarly, sale consideration on securities is reported gross of brokerage and charges.

Accrual against receipt. Interest on a cumulative deposit accrues each year but is received at maturity. A taxpayer offering interest on receipt will show nothing for the intervening years while the AIS shows accrual for each. Both approaches can be defensible; the mismatch is the predictable consequence of the choice.

Joint holders. A fixed deposit, a property or a demat account in joint names is frequently reported in full against the first holder’s PAN. The second holder’s share, and the beneficial ownership between them, is not visible to the reporting entity.

Duplicate reporting. The same transaction reported by more than one entity — a mutual fund transaction reported by both the fund and the registrar, or a property transaction reported by both the registrar and the bank financing it.

Sale consideration against stamp duty value. Property transactions are reported by reference to the value recorded by the registering authority, which may exceed the actual consideration.

Wrong PAN. A reporting entity attributes a transaction to the wrong PAN. This is the mismatch that most alarms taxpayers, because the transaction is genuinely not theirs.

Timing at the year boundary. A payment credited on 31 March and received on 2 April sits in different years for the two parties.

Turnover figures. GST turnover reported in the AIS is derived from GST returns and is computed on GST principles. It will not equal turnover as reported in the financial statements or as offered under the income tax provisions, and it is not meant to.

Property and securities entries are the ones most often misread, and our note on capital gains and exemptions covers how the gain itself is computed.

The feedback mechanism and the seven options

The AIS carries a feedback facility that lets a taxpayer respond to each item of information. This is the part of the system that is under-used, and it is the whole point of the design.

Against any reported item, the taxpayer may record that the information is:

1. Correct — accepted as reported.
2. Not fully correct — partly right; the correct particulars are supplied.
3. Relates to other PAN or year — the transaction belongs to someone else or to a different period, and the correct PAN or year is given.
4. Not applicable / duplicate — the same transaction has been reported more than once.
5. Denied — the transaction did not occur.
6. Income is not taxable — the receipt is real but does not form part of taxable income.
7. Customised feedback — for categories where the specific facts require a tailored response.

The exact labelling varies a little by information category, and the portal displays the options available for the item in question. The substance is consistent: the taxpayer can put the correct position on record item by item, with an explanation.

Feedback can be submitted online item by item, or through the downloadable utility where the volume is large — which it often is for a taxpayer with an active trading account.

What happens after you submit feedback

Two things happen, and the distinction matters.

First, the AIS immediately displays a modified value alongside the reported value, showing both what was reported and what the taxpayer says. Nothing is deleted; the record shows the disagreement.

Second, the TIS derived value is recomputed to reflect the feedback, and that derived value is what flows into the pre-filled return.

Where the feedback denies or materially alters what a reporting entity has said, the information may be referred back to that entity for confirmation. The reporting entity may accept the correction and file a revised statement, in which case the AIS updates at source, or it may stand by what it reported, in which case the disagreement remains visible on both sides.

The important point is that the taxpayer’s position is timestamped and on record before the return is filed. When a query comes later, the answer is not being constructed after the event.

The e-campaign, and why silence is costly

Where the department’s analytics flag a significant difference between reported information and the return — or where a return has not been filed at all despite significant reported transactions — a message is issued under the e-campaign facility on the compliance portal. This is not a notice. It is an invitation to respond, and it is the cheapest stage at which a difference can be resolved.

A taxpayer who responds with an explanation and supporting particulars usually ends the matter there. A taxpayer who ignores it moves the same difference into a stage where it is dealt with by formal notice, with the consequences that follow. Our note on what to do on receiving an income tax notice covers that later stage.

When feedback is not enough

Feedback corrects the department’s information record. It does not correct a return.

If the return has not been filed, resolve the AIS position first and then file, so that the return and the statement tell the same story.

If the return has been filed and understated income, feedback alone will not cure it. Depending on the timing, a revised return or an updated return under the facility for that purpose may be available. An updated return carries additional tax, and the additional amount increases the longer it is left.

If an intimation proposing an adjustment has already been issued, the response is made in that proceeding, within the time allowed. Feedback on the AIS may support the response but does not replace it.

If the transaction is genuinely not yours — a wrong PAN attribution — record the denial in the feedback, retain evidence of the position, and expect that the item may persist while the reporting entity is asked to confirm. Keep the correspondence.

Beyond that point the matter moves from correspondence into tax litigation, which is a slower and more expensive way to resolve the same difference.

A pre-filing sequence that works

For most individual taxpayers, twenty minutes before filing prevents months of correspondence afterwards:

1. Download Form 26AS, the AIS and the TIS for the year.
2. Reconcile tax credits from Form 26AS against the deductions claimed in the return, deductor by deductor.
3. Read the AIS category by category, not as a total. Interest, dividend, securities, property and remittances are where differences cluster.
4. For every difference, decide whether it is a reporting artefact or a genuine omission on your side.
5. Submit feedback on the artefacts, with the correct particulars.
6. Fix the omissions in the return.
7. Save the AIS, the TIS and the feedback acknowledgement for the year alongside the return, so the file is complete.

The sequence applies whatever the taxpayer category, though the categories that generate the most AIS entries are set out in our note on return filing across taxpayer categories.

 

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Every business that pays money out of India eventually meets section 195. It applies to software licences, professional fees, group recharges, royalties, interest, commission, dividends and a long list of other payments. It is also one of the provisions where a mistake is expensive in two directions at once: the payer loses the deduction for the expenditure, and separately becomes liable for the tax it should have withheld.

The difficulty is rarely the rate. It is the analysis that precedes the rate.

The question that comes first

Section 195 requires deduction from any sum paid to a non-resident which is chargeable to tax in India. Those five words carry the whole provision. If the sum is not chargeable to tax in India, there is nothing to deduct.

Chargeability is determined by reading the domestic law and the applicable tax treaty together. A payment for the purchase of goods from an overseas supplier is ordinarily not chargeable to tax in India in the supplier’s hands, and no deduction arises. A payment characterised as royalty or fees for technical services may be chargeable even though the recipient has no presence in India at all. A payment that would be business profits under a treaty is generally taxable in India only if the recipient has a permanent establishment here.

So the sequence is:

1. Characterise the payment. What is actually being paid for — goods, services, the use of a right, the use of equipment, interest, a reimbursement?
2. Test chargeability under domestic law. Does it accrue or arise in India, or is it deemed to?
3. Test chargeability under the treaty, if one applies and is beneficial. The taxpayer may adopt whichever of the domestic law and the treaty is more favourable.
4. Only then, determine the rate and whether surcharge and cess apply.

Skipping to step four is the most common error we see in this area. Our note on how a DTAA operates sets out the treaty framework in more detail.

What section 195 actually requires

Deduction is required at the time of credit of the sum to the account of the payee or at the time of payment, whichever is earlier. Credit to a suspense account or any other account is treated as credit to the payee’s account, which means an accrual entry at year end can trigger the obligation even though no money has moved.

The person responsible for paying is the deductor. There is no turnover threshold and no minimum amount; an individual remitting a taxable sum abroad is within the section just as a company is.

The rate is the rate in force for the relevant category of income, as modified by the treaty where the treaty is beneficial and the conditions for claiming it are satisfied. Where the recipient has not furnished a PAN, the provision dealing with failure to furnish PAN can apply, subject to the relief available where the prescribed alternative details and documents are furnished.

Unlike most other withholding provisions in Indian income tax compliance, section 195 has no threshold and no minimum amount.

Form 15CA and Form 15CB

These two forms are the reporting mechanism that sits around section 195. They are frequently described as though they impose the tax. They do not — they report a remittance and record the basis on which withholding was or was not applied.

Form 15CA is furnished by the remitter on the e-filing portal. It has four parts, and the part that applies depends on the amount and on whether an order or certificate has been obtained:

Form 15CB is a certificate from a chartered accountant recording the nature of the remittance, the provision under which it is taxable, the treaty article relied on if any, the rate applied and the basis for it. It is required where Part C applies.

The authorised dealer bank will ordinarily not process the remittance without the relevant acknowledgement. That commercial gatekeeping is why these forms attract so much attention, but it is worth keeping the hierarchy straight: the withholding obligation arises from section 195; the forms record how it was discharged.

When no form is required

Rule 37BB prescribes a list of remittances for which Form 15CA and Form 15CB are not required. The list runs to a number of specified purposes and includes categories such as indemnity payments, imports in specified circumstances, remittances by individuals under the Liberalised Remittance Scheme for certain purposes, payments for travel and education in specified cases, and remittances by the Government.

Two cautions apply. First, the list is by purpose code, and the purpose code has to genuinely describe the payment. Second, exemption from the reporting requirement is not exemption from section 195. A remittance may fall outside the form requirement and still be a sum chargeable to tax from which deduction was required.

The treaty documents that decide the rate

Where a beneficial treaty rate is claimed, the documents matter as much as the analysis. The department’s position, and the position taken in assessments, is that the conditions for treaty entitlement must be established at the time of the remittance rather than reconstructed later.

The usual set is:

• Tax Residency Certificate issued by the tax authority of the other country, for the relevant period.
• Form 10F, which supplies the particulars not contained in the TRC. This is now filed electronically on the e-filing portal, and a non-resident without a PAN follows the prescribed route for registration and filing.
• A no permanent establishment declaration, where the treaty article relied on requires the absence of a PE — typically for business profits, and often for fees for technical services under treaties with a make-available or PE-linked condition.
• Beneficial ownership confirmation, where the treaty article for interest, royalties or dividends conditions the reduced rate on beneficial ownership.

A file that contains the analysis but not the documents tends to fail at assessment. A file that contains the documents but no analysis tends to fail on characterisation. Both are needed.

Characterisation and treaty entitlement are among the most frequently contested issues in cross-border tax litigation.

The certificate route under sections 195(2), 195(3) and 197

Where the whole of a payment is not income, or where the appropriate rate is lower than the rate that would otherwise apply, waiting for a refund is a poor outcome. Three routes exist:

Section 195(2) allows the payer to apply to the Assessing Officer for a determination of the appropriate proportion of the sum chargeable to tax. This is the route where, for example, a composite payment includes a substantial non-taxable element.

Section 195(3) allows the recipient, in prescribed circumstances, to apply for receipt without deduction.

Section 197 allows the recipient to apply for a certificate authorising deduction at a lower rate or nil rate. The application is made electronically and is supported by computations, the return history and the basis on which the lower rate is justified.

These applications take time and are best initiated well before the payment is due. A certificate obtained after the remittance does not cure a failure to deduct at the time of the remittance.

Grossing up

Where a contract provides that the non-resident is to receive a sum free of Indian tax, the tax borne by the payer is itself treated as income, and the amount is grossed up so that the net receipt equals the contracted figure. The effect is that the cost to the payer is higher than the headline rate suggests.

This is a contracting point as much as a tax point. A withholding clause that says “all payments shall be made free and clear of any deduction” transfers the entire Indian tax cost to the payer, often without either party having priced it. Where a treaty rate is available but the documents are not produced, the payer bears the difference. Contracts are better drafted to make the treaty documents a condition of the beneficial rate, with the recipient bearing the consequence of not producing them.

The drafting point belongs as much to corporate law compliance as to tax, because it is settled in the contract rather than in the return.

What goes wrong

Disallowance of the expenditure. Failure to deduct, or to pay over what was deducted, on a payment to a non-resident results in the expenditure being disallowed in computing business income. For a substantial payment this is often a larger number than the tax itself.

Assessee-in-default proceedings. The payer becomes liable for the tax not deducted, along with interest running from the date deduction was due.

Characterisation disputes. The recurring battlegrounds are software payments, group cost allocations described as reimbursements, and payments for services said not to make technology available. These turn on the contract, the invoices and what was actually supplied.

Reimbursements assumed to be outside the section. A payment described as a reimbursement is not automatically outside section 195. The question is whether it carries an income element, and that depends on the underlying arrangement and on evidence of the actual cost incurred.

Year-end accruals. Provisions created at year end for services received from a group entity attract the section on credit, even though the invoice and the remittance follow months later.

Each of these is a routine part of business taxation services work, and each is avoidable with a file built at the time of the payment rather than afterwards.

 

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For four years, businesses buying and selling goods in India ran two nearly identical compliance obligations side by side. One sat on the buyer, one on the seller, both at 0.1 per cent, both with a fifty lakh rupee threshold, and both triggered by a ten crore rupee turnover test. Deciding which applied to a given transaction consumed a great deal of accounting time and produced a great many mismatches.

That position has changed. TCS on the sale of goods under section 206C(1H) was omitted with effect from 1 April 2025. The overlap no longer arises prospectively.

But the provision has not disappeared from a business’s file. It governed four financial years that remain open to assessment, reassessment and processing, and mismatches from those years continue to surface. This article sets out where the position now stands, and what still needs attention for the years in which both provisions were live.

The overlap that existed until 2025

Section 206C(1H) was introduced with effect from 1 October 2020. It required a seller whose total sales, turnover or gross receipts in the immediately preceding financial year exceeded ten crore rupees to collect tax at 0.1 per cent on consideration received from a buyer, to the extent that consideration exceeded fifty lakh rupees in the financial year.

Section 194Q followed with effect from 1 July 2021. It required a buyer whose total sales, turnover or gross receipts in the immediately preceding financial year exceeded ten crore rupees to deduct tax at 0.1 per cent on the purchase of goods from a resident seller, on the value exceeding fifty lakh rupees in the financial year.

The two provisions could apply to the same transaction. Where both a large buyer and a large seller were involved in a sale above the threshold, the buyer’s deduction obligation and the seller’s collection obligation were both triggered.

The statute resolved this by giving the buyer’s obligation precedence: where tax was deductible under section 194Q and had been deducted, the seller was not required to collect under section 206C(1H). In practice this meant that the seller had to know whether the buyer had deducted, which is information a seller does not naturally possess. Declarations were exchanged, systems were configured to suppress one or the other, and reconciliation between purchase ledgers and Form 26AS became a routine year-end exercise.

There was also a timing difference that caused persistent confusion. Section 194Q operated on payment or credit, whichever was earlier. Section 206C(1H) operated on receipt of consideration. The same sale therefore attracted the two provisions at different moments, and in a year straddling those moments the amounts did not line up.

What was withdrawn and from when

The Finance Act, 2025 omitted section 206C(1H) with effect from 1 April 2025. The stated rationale was that the provision had become largely redundant once section 194Q covered the same transactions from the buyer’s side, and that maintaining both imposed a compliance and reconciliation cost without a corresponding revenue benefit.

Two points on scope are worth being precise about, because they are frequently confused:

Only sub-section (1H) went. Section 206C itself remains on the statute book. Collection of tax at source continues for the other categories the section covers — scrap, timber and forest produce, alcoholic liquor, tendu leaves, minerals, motor vehicles above the specified value, and remittances under the Liberalised Remittance Scheme and overseas tour packages. A business that reads “TCS on sale of goods withdrawn” as “TCS abolished” will under-collect.

Section 194Q was not withdrawn. The buyer’s deduction obligation on the purchase of goods continues unchanged. If anything it becomes more prominent, because it is now the only provision operating on ordinary sales of goods.

Neither change affects the wider income tax obligations attaching to the same transactions.

Where the position stands now

For a sale of goods between residents in the current year, the analysis is simpler than it has been since 2020:

• The seller has no collection obligation under section 206C(1H), because the provision no longer exists.
• The buyer deducts under section 194Q if the buyer’s turnover in the immediately preceding financial year exceeded ten crore rupees and purchases from that seller exceed fifty lakh rupees in the financial year.
• The precedence rule that once governed the interaction has no work left to do on ordinary goods.

Systems configured before April 2025 to test for the overlap should have had the 206C(1H) branch disabled. Where that configuration was left in place, the result is over-collection from customers — an amount collected without statutory authority, which then has to be refunded or adjusted, and which will not match the customer’s Form 26AS.

For most businesses this simplifies business taxation compliance on ordinary sales considerably.

Why 206C(1H) still matters for open years

The provision governed transactions from 1 October 2020 to 31 March 2025. Those years remain live for several purposes, and a repealed provision is fully enforceable for the period during which it applied.

Processing intimations. Statements of tax collected at source continue to be processed, and intimations raising short-collection or late-payment demands for those quarters continue to be issued. A demand for financial year 2023-24 is not answered by pointing out that the section was later omitted.

Assessee-in-default proceedings. A seller who failed to collect where collection was required remains exposed for those years, subject to the relief available where the buyer has itself paid the tax and furnished the prescribed certification.

Interest. Interest for failure to collect or to pay over what was collected runs on the old obligation and is not affected by the omission.

Credit mismatches. Buyers claiming credit for tax collected in those years depend on the seller having correctly reported the collection against the buyer’s PAN. Where a seller suppressed 206C(1H) on the assumption that the buyer had deducted under 194Q, but the buyer had not, neither obligation was discharged and both parties have an exposure.

Tax audit reporting. Audit reports for those years carry clause-level reporting on TDS and TCS compliance. Errors identified now feed back into that reporting.

For the same reason, a business closing its books or responding to a notice for those years should read the provision as it stood in the relevant year, not as the position stands today. Our note on discrepancies found in tax audits deals with the wider point.

Where a demand has already been raised for one of those years, it is contested as ordinary tax litigation rather than answered by the current position.

The 194Q conditions that still catch businesses out

With 194Q now standing alone, the conditions that generate disputes deserve restating.

The turnover test looks backwards. It is the buyer’s total sales, turnover or gross receipts from business in the financial year immediately preceding the year of purchase. A business that crosses ten crore rupees in the current year does not become liable in that year.

The threshold is per seller, per financial year. Fifty lakh rupees is tested seller by seller and is cumulative across the year, not per invoice and not per order. Deduction applies to the value exceeding fifty lakh rupees, not to the whole amount.

The trigger is payment or credit, whichever is earlier. Credit to the seller’s account — including credit to a suspense or any other account — triggers the obligation even if payment follows much later.

Goods only. Section 194Q applies to the purchase of goods. Services attract the provisions applicable to them. Composite arrangements need to be examined rather than assumed.

Resident sellers only. A purchase from a non-resident seller falls outside section 194Q and is examined under the provisions governing payments to non-residents.

No PAN means a higher rate. Where the seller has not furnished a PAN, the elevated rate under the section dealing with failure to furnish PAN applies. Vendor master hygiene therefore has a direct rate consequence.

Purchase returns and credit notes. Where tax has already been deducted on a purchase that is subsequently returned or the price renegotiated, the adjustment has to be traced through both the deduction record and the seller’s credit. Leaving it untraced is the most common source of a year-end mismatch.

Reconciliation points for older years

Where financial years 2020-21 to 2024-25 are being closed out, checked for a notice, or reviewed before an assessment, four reconciliations are worth running:

1. Purchase ledger against tax deducted under 194Q — seller by seller, against the fifty lakh threshold, for each year in which the buyer met the turnover test.
2. Sales ledger against tax collected under 206C(1H) — buyer by buyer, on a receipts basis, for each year the provision was in force and the seller met the turnover test.
3. Both against Form 26AS — confirming that what was deducted or collected was reported against the correct PAN and appears in the counterparty’s statement.
4. Declarations on file — the buyer declarations relied on to suppress collection. Where a seller suppressed collection on the strength of a declaration, the declaration is the defence, and it needs to exist.

Findings from these reconciliations feed directly into the tax audit process for the years concerned.

What changes again from 1 April 2026

From 1 April 2026 the Income-tax Act, 2025 governs sums paid or credited on or after that date. The withholding obligations that were spread across the 194 series have been consolidated, with section 393 read together with the relevant schedule carrying the deduction provisions.

The substance of the buyer’s obligation on the purchase of goods is carried forward, but the reference by which it is cited changes. Deduction masters, vendor communications and challan narrations that quote “194Q” by number will need to be revisited, and any reply or certificate relating to a payment made on or after 1 April 2026 should cite the new provision. Sums paid or credited on or before 31 March 2026 continue to be governed by the 1961 Act and are correctly cited as 194Q.

 

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Of everything the Income-tax Act, 2025 does, the change most people will notice first is the smallest one to describe. Two familiar terms have gone. In their place there is one.

For sixty years Indian tax law asked taxpayers to hold two years in their head at the same time: the year in which income was earned, and the year in which it was taxed. From 1 April 2026 there is a single reference point — the tax year.

The change is not merely linguistic. It touches the way returns are labelled, the way notices are described, the way TDS periods are stated, and, for one filing season, the way a taxpayer selects the correct year on the e-filing portal.

The problem the change solves

Under the Income-tax Act, 1961, income earned between 1 April 2024 and 31 March 2025 belonged to the previous year 2024-25. It was assessed in the assessment year 2025-26. Both years appeared in the same conversation, and they were always one apart.

This produced a steady stream of avoidable errors. Taxpayers selected assessment year 2024-25 on the portal when they meant to report income of the financial year 2024-25. Challans were deposited against the wrong year. Advance tax was credited to a year the taxpayer had not intended. Replies to notices cited the year of earning where the notice referred to the year of assessment. Every practitioner has spent time unwinding a payment sitting against the wrong assessment year.

The distinction had a historical rationale. It had ceased to have a practical one.

For anyone handling income tax compliance in India, the cost of the distinction was measured in corrected challans rather than in tax.

What section 3 provides

Section 3 of the Income-tax Act, 2025 defines the tax year. It is the twelve-month period of the financial year, beginning on 1 April. For a business or profession newly set up, or a source of income newly coming into existence, the tax year begins on the date of setting up or coming into existence and ends with that financial year.

The consequence is that the year in which income arises and the year by reference to which it is taxed are now the same year, described by the same name. Income arising between 1 April 2026 and 31 March 2027 is income of the tax year 2026-27, and it is returned and assessed as income of the tax year 2026-27.

There is no separate assessment year in the 2025 Act. The concept has not been renamed; it has been removed.

The change sits within the wider set of reforms effective 1 April 2026, though it is the one taxpayers will notice first.

The same facts, stated both ways

The following comparison makes the shift concrete:

The arithmetic of the tax has not moved. The label has.

Income of the financial year 2025-26 continues to be taxed at the slab rates for FY 2025-26, whatever the year is called.

The one year in which both vocabularies are live

The transition creates a single period in which a taxpayer will legitimately encounter both sets of terms, and it is worth being clear about it.

Income earned in the financial year 2025-26 — that is, up to 31 March 2026 — is governed by the Income-tax Act, 1961, which was still in force when that income arose. It is returned for assessment year 2026-27, using the forms notified for that assessment year. This return is filed during 2026, after the 2025 Act has already commenced. The new statute does not change the label on it.

Income earned in the financial year 2026-27 is governed by the Income-tax Act, 2025. It is income of tax year 2026-27 and is returned after that year ends, in the new forms, during 2027.

So in 2026 a taxpayer files under the old vocabulary for old income. In 2027 the new vocabulary takes over. There is no double filing and no overlap of substance — only an overlap of terminology.

Departmental guidance on the transition makes the point that the e-filing portal will offer both year designations, and that selecting the correct one matters. A payment or a return recorded against the wrong designation is recorded under the wrong statutory framework, and correcting it later is the same tedious exercise that the reform was meant to eliminate.

The practical effect differs by taxpayer, and our note on return filing for different categories of taxpayers sets out where each category stands.

Where “assessment year” is still correct

It would be a mistake to scrub the phrase from every document. Assessment year remains the correct description for anything arising under the repealed Act, and the repealed Act continues to govern a great deal for some years yet.

The saving provision in the 2025 Act preserves the 1961 Act for proceedings pending when the new Act commenced and for rights and liabilities already accrued. That means:

• A scrutiny assessment for assessment year 2024-25 remains an assessment for assessment year 2024-25.
• An appeal before the Commissioner (Appeals) or the Tribunal relating to an earlier year continues to be described by its assessment year.
• A reassessment notice issued before 1 April 2026 keeps its original character, and the proceeding is completed under the old law.
• A refund claim, a demand, or a recovery proceeding relating to an earlier year carries its assessment year with it.

In short: use “tax year” for the 2025 Act; use “assessment year” for anything that arose or was pending under the 1961 Act. Mixing the two in a single document is a common drafting error and an easy one to avoid.

Our note on responding when an income tax notice is received deals with the wider question of how the year cited in a notice frames the reply.

What to change in practice

The vocabulary change is felt across a surprising number of routine documents. A practical review would include:

Return and filing workflows. Internal checklists and calendars that describe deadlines by assessment year need a second column, or a note, for periods governed by the new Act.

Payroll and salary documentation. Employee declarations, regime elections, investment proof formats and the covering communication that accompanies Form 16 all typically recite an assessment year.

Accounting and ERP configuration. Tax year masters, deferred tax working papers and the labels used in trial-balance mapping. Software that stores a tax period by assessment year will need to accommodate a single-year designation.

Advance tax and challan records. The year selected when depositing tax is the single most common place where the old confusion caused loss. The reform reduces the risk, but only if the person making the payment knows which framework the payment belongs to.

Correspondence templates. Standard covering letters, engagement documentation and reply formats that open by reciting the year under consideration.

Board and audit committee papers. Tax provisioning notes, contingent liability disclosures and litigation schedules that identify matters by assessment year. For pending matters the assessment year label stays; for current-period provisioning the tax year label applies.

The same review is worth extending to the rest of a company’s business taxation documentation, where the year label is embedded in more places than expected.

A note for those drafting documents

Contracts and internal policies that fix a reference to a statutory year age badly. A withholding clause that says “for the assessment year in which the payment falls” now needs interpretation. A clause that says “for the relevant tax period under the applicable income tax legislation in force” does not.

Where a document must name a year, the safer formulation names the period by dates — “the twelve months commencing 1 April 2026” — rather than by a statutory label that a subsequent enactment may abolish. This is a small drafting discipline that would have saved a good deal of work in the present transition, and will save it in the next one.

 

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From 1 April 2026, the Income-tax Act, 1961 stands repealed and the Income-tax Act, 2025 governs income tax law in India. For most businesses the arithmetic of tax has not moved. What has moved is almost every section number they have been citing for decades.

That sounds like a cosmetic problem. In practice it is not. Section numbers sit inside tax audit reports, TDS software configurations, board resolutions, loan agreements, transfer pricing documentation, engagement letters, employment contracts and standard-form replies to departmental notices. A reference that was correct in March 2026 may point to an entirely different provision in April 2026.

This article sets out how the renumbering works, which correspondences are officially confirmed, and why the mapping tables circulating online should be treated with caution.

Why every section number changed

The 1961 Act had grown by accretion for six decades. Amendments were inserted as sub-sections, provisos, explanations and lettered sections until a single provision could run for pages. Section 10 alone had accumulated dozens of clauses. Practitioners navigated it by memory rather than by structure.

The 2025 Act is a redrafting exercise rather than a policy exercise. The stated objective was simplification: shorter sentences, tables in place of narrative provisos, formulae in place of descriptive computation language, and the removal of provisions that had become spent. The result is an Act of 536 sections arranged across 23 chapters with 16 schedules, running to roughly half the word count of the statute it replaces.

Because the drafters reorganised subject matter into a cleaner sequence rather than preserving legacy numbering, continuity of section numbers was not an objective. A handful of numbers coincide by accident. Most do not.

What the 2025 Act changed and what it did not

It is worth being precise about the scope of the change, because a good deal of commentary has overstated it.

What did not change. The heads of income remain the same five. Residential status continues to determine the scope of total income. The distinction between business income and capital gains survives. Depreciation, presumptive taxation, set-off and carry-forward of losses, and the deduction architecture all continue in recognisable form. Rates of tax are set by the annual Finance Act, as before, and the 2025 Act did not by itself alter them.

What did change. The vocabulary of “previous year” and “assessment year” has been replaced by a single concept, the tax year, defined in section 3. The withholding provisions that were spread across the 194 series have been consolidated, with section 393 read together with the relevant schedule now carrying the deduction obligations. The presentation of computation provisions has shifted heavily towards tables. And, of course, the numbering.

For a fuller account of the substantive changes taking effect, see our note on the income tax reforms effective 1 April 2026 and the summary of key income tax changes from April 2026.

The structure: 1961 Act against 2025 Act

The safest way to navigate the new Act is by subject matter rather than by remembered section number. At chapter level the correspondence is stable and easy to hold in mind:

Working from subject matter down to section, rather than from an old number across to a new one, avoids most of the errors we see in practice.

Section numbers that are officially confirmed

There is a meaningful difference between correspondences the Income Tax Department has itself published and correspondences a website has inferred. The following are drawn from departmental material:

Section 536 deserves particular attention. It is the provision that keeps the 1961 Act alive for everything that was already under way. A reassessment commenced for assessment year 2024-25 before 1 April 2026 is completed under the 1961 Act. An appeal pending on that date continues to be governed by the old law. A refund a taxpayer had become entitled to under the repealed Act remains payable. Unutilised MAT and AMT credit carried forward under the old sections is treated as eligible credit under the new Act.

The practical consequence is that from April 2026 both statutes operate side by side — the 1961 Act for closed and pending years, the 2025 Act for income arising on and after 1 April 2026.

For anyone with tax litigation already in progress, the governing law is the law that applied when the proceeding began.

Why third-party mapping tables disagree

A large number of concordance tables have been published, and they do not all say the same thing. The withholding provisions are the clearest illustration: some tables assign salary withholding to one section in the 170s, while departmental material treats withholding as consolidated under section 393 with schedule support. Both cannot be right.

The disagreement arises because the 2025 Act does not always map one old section to one new section. A single 1961 provision may be split across several, several may be merged into one, and some content has moved from the body of the Act into a schedule. A table built on the assumption of one-to-one correspondence will misstate exactly those provisions.

For a professional document — an audit report, a reply to a notice, an opinion — an unverified table is not an adequate source. Nor is this article. The correct source is the statute itself, supported by the departmental utility described below.

Using the CBDT comparison utility

The Income Tax Department has published a utility that allows a provision of the 1961 Act to be checked against the corresponding provision of the 2025 Act. It is hosted on incometaxindia.gov.in under the Income-tax Act 2025 heading within Tax Laws and Rules.

A sensible workflow is:

1. Identify the old section you have relied on and the specific sub-section or clause, not merely the section number.
2. Run it through the departmental utility to obtain the corresponding provision.
3. Open the bare text of the new provision and read it. Confirm that the operative language, the thresholds and the exceptions are what you assumed.
4. Record both the old and the new reference in your working papers so the basis of the change is traceable.

Two companion documents are worth keeping alongside the utility: the departmental FAQs on interplay and transition, which deal with which Act applies to which period, and the form mapping guide published on the e-filing portal, which pairs the old return and statement forms with their replacements.

These sit alongside the ordinary stream of CBDT notifications that continues to shape day-to-day compliance.

What to update in your own records

The renumbering reaches further into a business’s documents than most teams expect. A practical sweep would cover:

• TDS and TCS systems. Deduction masters, challan narrations and vendor communications that quote 194C, 194J or 194Q by number.
• Tax audit and certification templates. Clause references, annexures and standard remarks.
• Withholding clauses, gross-up clauses, indemnities and tax representations in vendor, employment, loan and shareholder documents. Contracts drafted with an open reference to “the applicable provisions of the Income-tax Act as in force” age better than those citing a number.
• Employee communications. Regime declaration forms, salary structure notes and Form 16 explanatory material.
• Standard replies. Precedent responses to notices, which frequently open by reciting the section under which the notice was issued.
• Board and committee papers. Resolutions authorising tax positions or approving related-party pricing.

Nothing here is urgent in the sense of a deadline, but a document that cites a repealed section is harder to defend later than one that cites the correct provision from the outset.

Three transition traps

Quoting the wrong statute in a reply. A notice for an earlier year is issued under the 1961 Act and must be answered under it. Replacing the old section reference with the new one in a reply is not a tidy-up; it misstates the legal basis of the proceeding.

Assuming the numbering change alters the position. Because the sections look unfamiliar, there is a temptation to reopen settled positions. In most cases the operative language is materially the same and a settled position survives the renumbering. The question to ask is whether the words changed, not whether the number changed.

Treating the withholding consolidation as a rate change. Consolidating the 194 series into section 393 and its schedule reorganises where the obligation is stated. It is not, in itself, a change in who deducts or at what rate. The rate remains a function of the schedule and the annual Finance Act.

 

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A show cause notice is not a demand. It is an allegation that a demand may be justified, and an invitation to explain why it is not. That distinction matters, because how a taxpayer uses the reply window largely determines what happens over the following two or three years.

This article is published for general information and awareness. It sets out the practical sequence after a notice is received, the deadlines that govern it, and the points at which GST notice reply services in Delhi and elsewhere make a material difference.

Step One: Identify What You Have Actually Received

Not everything issued by the department is a show cause notice, and the correct response differs sharply.

• ASMT-10 is a scrutiny intimation pointing to a discrepancy in returns. The reply is filed in ASMT-11, and a satisfactory explanation closes the matter in ASMT-12.
• DRC-01A is a pre-notice intimation of tax ascertained. It offers the chance to pay or explain before a formal notice issues, and responding well here can end the matter entirely.
• DRC-01 is the show cause notice proper, issued with a demand under Section 73 or 74 for periods up to FY 2023-24, and under Section 74A from FY 2024-25.
• REG-17 proposes cancellation of registration; the reply is due in REG-18 within the stated period.
• A summons under Section 70 requires attendance, not a written reply, and should never be ignored.

Reading the form number first avoids the common error of preparing an elaborate reply to something that needed a two-line clarification, or vice versa.

Step Two: Check Where the Notice Was Served

This has become a live issue in Delhi. Notices are frequently uploaded to the GST portal under the “Additional Notices and Orders” tab rather than the main notices tab, where taxpayers do not think to look. Many first learn of a proceeding when recovery begins.

The Delhi High Court has repeatedly held that uploading a notice in that tab, without effective service, does not amount to proper service, and has set aside orders passed in those circumstances and remanded matters for fresh hearing. If an order has been passed without your knowledge, the manner of service is worth examining before assuming the demand is final.

The practical safeguard is simple: check both tabs on the portal periodically, and keep the registered email and mobile number current. A notice discovered late still has to be answered, but the options narrow considerably once the reply window has closed.

Step Three: Fix the Deadline and the Scope

Note the date of the notice, the reply deadline — commonly thirty days — and the tax periods covered. Then read the notice for what it actually alleges.

Two statutory points assist here. A demand confirmed in an order cannot exceed the amount specified in the notice, and cannot rest on grounds other than those stated in it. A notice that is vague, that does not disclose the basis of the computation, or that annexes no calculation is defective, and saying so in the reply preserves the point for later.

Limitation should also be checked. Notices and orders under Sections 73, 74 and 74A each carry their own time limits, and a demand raised beyond them is open to challenge.

Step Four: Draft the Reply Properly

The reply is filed in DRC-06. Its quality decides the case, because the adjudicating authority, the appellate authority and eventually the Tribunal will all read the same document.

A reply that works usually does four things. It answers each allegation separately rather than in narrative form. It annexes the evidence for every factual assertion — reconciliations, ledgers, invoices, contracts, bank statements — indexed to the paragraph it supports. It takes legal objections explicitly, including on limitation, jurisdiction and defects in the notice. And it requests a personal hearing in writing.

Where part of the demand is accepted, paying that portion in DRC-03 and saying so in the reply narrows the dispute and can reduce penalty exposure. Where the entire demand is contested, that should be stated without ambiguity.

Grounds not raised at this stage are considerably harder to introduce later. That is the main reason GST notice reply services in Delhi are usually engaged at the start of the reply window rather than in its final two days.

Step Five: Attend the Personal Hearing

The Act requires an opportunity of hearing where it is requested in writing or where an adverse decision is contemplated. Attend, and file written submissions at the hearing so that the record reflects what was argued.

Where an order is passed without granting a hearing that was requested, that failure is itself a ground of challenge — and Delhi’s High Court has interfered on precisely that basis in a number of matters.

Step Six: If the Order Still Goes Against You

An appeal under Section 107 lies to the Appellate Authority within three months of communication of the order, with one further month condonable on sufficient cause. It requires a pre-deposit of 10% of the disputed tax, subject to the prescribed ceiling.

Beyond that, the GST Appellate Tribunal is now functioning, with its Principal Bench in New Delhi. For orders communicated before 1 April 2026, appeals to the Tribunal must be filed by 30 June 2026; later orders carry the ordinary three-month period.

Provisions and dates are stated as understood at the time of writing and are amended periodically.

Where a Taxation Legal Advisor Fits

Compiling reconciliations is accounting work. Deciding whether the notice discloses a valid ground, whether invocation of the extended period is sustainable, whether the demand is time-barred, and how to frame objections so they survive to appeal is legal work. That distinction is what separates GST notice reply services in Delhi from routine return filing, and it is the layer at which a taxation legal advisor is generally engaged.

The recurring lesson from Delhi adjudications is unremarkable but consistent: cases are won on the record built at the reply stage, not on argument added afterwards.

 

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Every company begins with an understanding between the people starting it. Often that understanding is never written down, or is recorded in a template signed without much thought. It works while the business is small and relations are good. It is tested when a founder leaves, an investor comes in, or the company is sold.

Shareholders’ agreements and founders’ agreements are the documents that decide those moments. This article is published for general information and awareness, and sets out what each is meant to do, and the drafting issues specific to Indian law that legal documentation services in India routinely encounter.

Two Documents, Two Purposes

A founders’ agreement governs the relationship between the people building the business. It is signed early, often before or around incorporation, and deals with contribution, commitment and departure.

A shareholders’ agreement governs the relationship between everyone who holds equity, including investors who join later. It deals with control, protection of minority positions, transfer of shares and exit.

They overlap, and in a young company one may substantially replace the other. The distinction matters because they are triggered by different events.

What a Founders’ Agreement Should Settle

The equity split is only the starting point. The clauses that prevent disputes are the ones dealing with what happens afterwards.

Vesting. Equity vesting over time, commonly four years with a one-year cliff, protects the founders who stay from one who leaves early holding a large block. Without it, a departure in month eight can leave those shares outside the business permanently. Vesting is a matter of contract, not statute, so it exists only if drafted.

Intellectual property assignment. Code, designs, brand names and content created by founders — including work done before incorporation — must be assigned to the company in writing. This is the most common gap found in investor diligence, and far harder to fix after a departure or dispute.

Roles, time commitment and remuneration. Who is full-time, who is not, and what each is paid.

Leaver provisions. What happens to unvested and vested shares when a founder exits, and whether the circumstances of departure change the treatment.

Deadlock and dispute resolution. With two equal founders, the absence of a tie-breaking mechanism can paralyse the company.

What a Shareholders’ Agreement Governs

Once outside capital arrives, the document expands to cover governance and exit: board composition and observer rights; reserved matters requiring investor consent; information rights; transfer restrictions such as rights of first refusal or first offer; tag-along rights protecting minority holders; drag-along rights enabling a majority to compel a full exit; anti-dilution protection; liquidation preference; and the agreed exit route, whether a strategic sale or a listing.

Each is negotiated, and each has a cost. A widely drawn list of reserved matters can leave founders unable to run the business without consent for routine decisions — a trade-off that legal documentation services in India are usually asked to calibrate rather than eliminate.

The Indian Law Issues That Change the Drafting

This is where generic templates fail, and where careful legal documentation services in India earn their place.

Alignment with the articles of association. A private company restricts the transfer of its shares through its articles. While the Companies Act recognises that a contract between persons in respect of transfer of securities is enforceable as a contract, and courts have upheld pre-emption arrangements between shareholders, the safer and settled practice is to mirror the operative provisions of the agreement in the articles. A term that sits only in the agreement may bind the signatories without binding the company, which is precisely the gap that matters when a transfer is being registered.

Restraint of trade. Section 27 of the Indian Contract Act renders agreements in restraint of a lawful profession or trade void. Restrictions operating during the term of engagement are generally valid; a post-exit non-compete usually is not, the recognised exception being a restraint attached to the sale of goodwill. Well-drafted founders’ documents therefore rely on confidentiality, non-solicitation and IP assignment, which are treated far more favourably, rather than on a non-compete that may not survive challenge.

Foreign investment. Where a non-resident holds shares, exchange control rules shape what can be promised. Assured-return exits are not permitted, and optionality clauses must be structured to provide exit at a price determined in the prescribed manner. A clause valid between two residents can be unworkable once a foreign investor is on the cap table.

Stamping. These agreements attract stamp duty at rates that vary by state. Inadequate stamping is treated as a curable defect rather than a fatal one, but curing it during a dispute costs time at the worst possible moment.

The statute prevails. Nothing in either document can override the Companies Act. Provisions that conflict with the statute fail regardless of what the parties intended.

The Failures That Recur

Four patterns account for most of the difficulty. Agreements are signed but never reflected in the articles. IP is never formally assigned. Vesting is omitted because the founders trust each other at the time of drafting. And exit terms are left vague because the parties are focused on starting rather than on ending.

None of these is visible while the business is going well. All of them surface in diligence, which is why legal documentation services in India are most useful at formation rather than at fundraising.

Where a Taxation Legal Advisor Fits

Drafting these documents is not a form-filling exercise. It requires deciding what should sit in the agreement, what must be carried into the articles, what is enforceable under Indian law, and what tax consequence attaches to a chosen structure — share transfers, buybacks and option grants each have their own treatment.

A taxation legal advisor is generally engaged for that combination of corporate and tax analysis. The value lies less in producing a document than in ensuring the document does what the parties believe it does.

 

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Construction and infrastructure contracts generate disputes for structural reasons rather than bad faith. Work is priced years before it is executed, site conditions differ from what was assumed, scope changes mid-project, and payment depends on certification by a party with its own commercial interest. When those pressures accumulate, the dispute resolution clause decides everything that follows.

Arbitration remains the default mechanism in this sector. This article is published for general information and awareness, and outlines how arbitration services in India operate in practice, what the current timelines require, and which recent developments have changed the landscape.

Why These Disputes Go to Arbitration

Three features push these claims towards arbitration. The subject matter is technical, and a tribunal can include members who understand delay analysis and measurement. The disputes turn on site records, correspondence and progress certificates rather than oral testimony. And the parties usually need to keep working together while the dispute runs, which a confidential process accommodates better than public litigation.

The recurring claim types are familiar: extension of time and prolongation costs, variations and change orders, withheld payments, defective work allegations, price escalation, and disputes over termination or encashment of bank guarantees.

The Statutory Framework

The Arbitration and Conciliation Act, 1996, as amended in 2015, 2019 and 2021, governs the process. A few provisions do most of the work in practice:

• Section 8 requires a court to refer parties to arbitration where a valid agreement exists.
• Section 9 allows a court to grant interim measures before or during arbitration; Section 17 gives the tribunal comparable powers once constituted.
• Section 11 provides for court appointment of an arbitrator where the agreed mechanism fails.
• Section 34 sets out the narrow grounds for setting aside an award.
• Section 36 makes an award enforceable as a decree of court, with a stay requiring a separate application rather than following automatically.

Interim relief matters disproportionately here, because the practical dispute is often about whether a bank guarantee may be invoked or a site handed over while the merits are decided.

The Timelines That Now Apply

The 2015 and 2019 amendments imposed a structure that changed how these matters are run.

Statements of claim and defence must be completed within six months of the arbitrators receiving notice of their appointment. The award must then be made within twelve months of the completion of pleadings. Parties may extend that by consent for a further six months, and any extension beyond that requires the court. For international commercial arbitration, the twelve-month period operates as an endeavour rather than a hard limit.

For a large construction claim with volumes of records and expert evidence, these periods are demanding. Meeting them depends on preparation done before the notice of arbitration is issued — which is where the difference between well-organised and reactive arbitration services in India becomes visible.

Recent Developments Worth Noting

Unilateral appointment has been curtailed. A five-judge bench of the Supreme Court held in late 2024 that clauses requiring one party to select an arbitrator from a panel curated by the other are inconsistent with equal treatment. This affects a very large number of public sector construction contracts, where panel-based appointment was standard practice.

Courts cannot rewrite awards. A five-judge bench confirmed in 2025 that the power under Sections 34 and 37 does not extend to modifying an award beyond the correction of limited or clerical errors. A challenge therefore succeeds or fails as a whole; it is not an opportunity to have the quantum revisited.

Government contracting policy has shifted. Guidelines issued by the Ministry of Finance in June 2024 for domestic public procurement advise against routinely including arbitration clauses, and provide that arbitration in disputes above ₹10 crore requires approval at a senior level. Mediation under the Mediation Act, 2023, or recourse to the courts, is encouraged instead. For contractors dealing with government entities and public sector undertakings, the dispute clause can no longer be assumed.

The position continues to develop, and the current law should be confirmed before acting on any of the above.

What Makes Construction Arbitration Different

The outcome is usually decided by records rather than argument. Daily progress reports, hindrance registers, minutes of site meetings, notices issued under the contract within the stipulated period, measurement books and correspondence on variations carry more weight than any later reconstruction of events.

Two failures recur. The first is a failure to serve contractual notices within the time the contract prescribes, which can bar an otherwise sound claim. The second is quantum presented as a lump sum without a demonstrable link between the delay event, the period claimed and the cost incurred. Tribunals routinely reduce claims not because liability is absent but because causation is not established.

Challenge and Enforcement

An application to set aside must be made within three months of receipt of the award, with a further thirty days available at the court’s discretion and no power to condone beyond that. The grounds are limited — they do not include an error of fact or a different view of the evidence.

An award that survives challenge is enforced as a decree. Because a stay is no longer automatic, an award-holder is in a considerably stronger position than under the pre-2015 regime — the single biggest practical improvement in arbitration services in India over the last decade.

Where Professional Advice Fits

Most of the value in arbitration services in India is delivered before the tribunal is constituted: drafting a workable dispute clause, preserving contemporaneous records, serving notices on time, and assessing honestly whether a claim is worth pursuing against its cost and timeline. A taxation legal advisor practice handling commercial disputes is generally engaged at those points as much as at the hearing.

The clause signed at the start of a project determines the seat, the governing rules, the number of arbitrators and the method of appointment. It is drafted in an hour and governs a dispute that may run for years.

 

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Corporate compliance is usually discussed in terms of the Registrar of Companies — annual returns, board meetings, statutory registers. Employment obligations sit in the same category and carry sharper consequences, because they involve money held on behalf of employees rather than filings made on behalf of the company.

Provident fund and state insurance dues are deducted from wages and remitted in trust. Delay attracts interest and damages automatically, and in serious cases prosecution. Any assessment of company compliances services in India that stops at the MCA calendar leaves the more exposed half of the obligation unexamined.

This article is published for general information and awareness.

Employees’ Provident Fund: Coverage and Contributions

The provident fund obligation generally arises once an establishment employs 20 or more persons. The wage ceiling for mandatory coverage was notified at ₹15,000 per month under the Code on Social Security, 2020 in May 2026, and it performs two functions — it determines who must be enrolled, and it caps the wages on which contributions are computed.

The standard structure is 12% from the employee and 12% from the employer. The employer’s share is split, with 8.33% directed to the pension scheme subject to the ceiling and 3.67% to the provident fund. Contributions towards deposit-linked insurance and administrative charges are payable in addition.

The electronic challan-cum-return is filed and dues remitted by the 15th of the following month. Employees earning above the ceiling may be covered with mutual consent, which is common practice but should be documented rather than assumed.

Employees’ State Insurance: Coverage and Contributions

ESI applies at a lower headcount — generally 10 or more employees, though a few states have historically applied 20 for certain establishments. The wage ceiling is ₹21,000 per month, raised to ₹25,000 for employees with disability.

Contributions are 0.75% from the employee and 3.25% from the employer, computed on gross wages including overtime. Payment is due by the 15th of the following month, with returns filed half-yearly.

A frequent error is treating an employee as outside ESI mid-year because a salary revision took them past the ceiling. Coverage continues to the end of the contribution period in which the change occurred.

What the Labour Codes Changed

The four labour codes took effect on 21 November 2025 and altered the base on which most of these calculations rest.

The central change is a uniform definition of wages applied across statutes. Because that definition limits how much of total remuneration can sit outside “wages”, salary structures built around a low basic component and large allowances generally require restructuring. Where basic pay rises, provident fund and gratuity computations rise with it — a cost effect that reaches the accounts rather than merely the HR file.

Other significant changes include gratuity eligibility for fixed-term employees after one year of continuous service, mandatory appointment letters for all employees, permitted maintenance of registers in digital form, and the extension of social security coverage towards gig and platform workers. Rules and digital infrastructure under the codes continue to be finalised, so the transition remains a live compliance area rather than a settled one.

What Non-Compliance Costs

Default under both statutes is expensive in a way that is often underestimated, because the exposure accrues rather than being levied once.

Late deposit attracts interest at 12% per annum, together with damages that rise with the length of the delay — graded broadly from 5% to 25%. Failure to deposit employee contributions that have already been deducted is treated seriously and can attract prosecution. Beyond the statutory consequence, unpaid dues surface in diligence, block tender eligibility and delay clearances.

Two points are frequently missed. First, liability can extend to persons in charge of the establishment, not only to the entity. Second, contractor employees may attract principal-employer responsibility where the contractor defaults, which makes verification of a contractor’s remittances part of the company’s own compliance rather than someone else’s problem.

The Wider Set Within Company Compliances Services in India

EPF and ESI are the two most visible obligations, but they sit within a broader set that well-organised company compliances services in India track together:

• Professional tax, shops and establishment registration, and labour welfare fund contributions, each governed by state law
• An Internal Committee under the POSH Act, required at ten or more employees, together with the annual report
• Quarterly TDS statements on salary and issue of Form 16
• Maternity benefit entitlements and related record-keeping
• Statutory registers and returns under the codes, in the formats now prescribed

Grouping these with the ROC calendar matters because the same payroll data feeds all of them. A wage figure that differs between the provident fund return, the TDS statement and the financial statements is the kind of discrepancy that invites questions from more than one authority.

Where a Taxation Legal Advisor Fits

Computing contributions and filing returns is a payroll function. Determining whether a particular allowance falls within the revised definition of wages, whether a category of worker is covered, what liability arises for a contractor’s default, or how to respond to an inspection or a damages notice under Section 14B involves statutory interpretation.

A taxation legal advisor is generally engaged at that level. As the codes settle, the questions arising are less about arithmetic than about characterisation — which is where advice is worth taking early rather than after an assessment order.

 

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Incorporating a company in India is now a single online transaction. The SPICe+ form on the MCA V3 portal handles name reservation, incorporation, DIN allotment, PAN, TAN, and — through the linked AGILE-PRO-S form — GST registration, EPFO, ESIC, professional tax and a bank account. Nothing in the process requires a professional intermediary.

That raises a fair question for a founder watching costs: is a company registration consultant in India worth paying for when the portal will accept a self-filed application?

This article is published for general information and awareness. It sets out what each route actually costs, and where the difference between them tends to appear.

What the Government Charges

The statutory cost of incorporation is lower than most founders expect.

Item	Typical Position
MCA filing fee on SPICe+	Nil where authorised capital is up to ₹15 lakh; rises in slabs above that
Stamp duty on MOA and AOA	State-specific — a few hundred rupees in some states, several thousand in others
Digital Signature Certificate	Roughly ₹1,500–2,500 per director, from a licensed certifying authority
DIN	Allotted through SPICe+ for up to three directors at no separate fee
PAN and TAN	Issued through the integrated process; no separate application
Name reservation (RUN)	₹1,000 per application, payable again if the name is rejected

For a two-director private limited company with modest authorised capital, the unavoidable government and certificate cost commonly lands in the region of ₹5,000 to ₹10,000, with stamp duty the largest variable. Professional fees sit on top of that and vary widely across the market.

The honest conclusion from the table is that DIY registration is genuinely cheaper in cash terms. The relevant comparison is therefore not fee against fee, but fee against the cost of what goes wrong.

Where the Real Difference Shows Up

Name rejection

Names are refused for resemblance to existing companies or trademarks, for restricted words, and for objects that do not match the proposed name. Each fresh application carries its own fee and, more importantly, delays a bank account, a lease or an investor timeline.

The objects clause

The main objects in the memorandum define what the company may lawfully do. Drafting them too narrowly forces an amendment later; drafting them loosely can create difficulty with banks, regulators or licensing authorities. Amendment after incorporation requires a shareholder resolution and a filing — a cost that dwarfs any saving at registration.

Capital and shareholding structure

Authorised versus paid-up capital, share classes, and the split between founders are decided at incorporation and are awkward to unwind. Where an outside investor is expected, the structure set on day one affects the terms available later.

Post-incorporation obligations

This is where self-filed companies most often come unstuck, because the portal issues a certificate of incorporation and says nothing further. The obligations begin immediately:

• The board must appoint the first auditor within 30 days of incorporation.
• Form INC-20A, the declaration of commencement of business, must be filed within 180 days. Default attracts ₹50,000 on the company and ₹1,000 per day on officers, subject to a cap.
• DIR-3 KYC is due annually for every director by 30 September. A missed filing deactivates the DIN and attracts a fee, and a deactivated DIN cannot sign any MCA form.
• AOC-4 and MGT-7 follow the annual general meeting, with a late fee of ₹100 per day and no upper limit.

A company that fails to commence business or file returns can also be struck off the register. Against those figures, the fee saved by not engaging a company registration consultant in India is quickly overtaken by a single missed deadline.

When DIY Registration Is Reasonable

It would be inaccurate to suggest self-filing is always unwise. It works reasonably well where the facts are simple: one or two resident individual directors and shareholders, standard objects in a common trade or service, a straightforward equal or majority shareholding, no foreign investment, an unregulated sector, and a founder with the time and patience to read the instruction kit carefully.

Many companies are incorporated this way each year without difficulty. The requirement is attention, not expertise.

When It Usually Is Not

The calculus changes where any of the following is present: a non-resident director or foreign shareholding, which brings FEMA reporting obligations after incorporation; more than one class of shares or an agreed cap table; a regulated activity requiring a licence or specific object language; a conversion from a proprietorship, partnership or LLP; intellectual property being assigned into the company; or a fixed deadline tied to funding or a tender.

In these situations, the value of engaging a company registration consultant in India is not the form-filling. It is the decisions taken before the form is filed.

The Cost Comparison, Fairly Stated

DIY registration costs less at the point of incorporation and carries the founder’s own time, the risk of resubmission, and full responsibility for the compliance calendar that follows. Engaging a company registration consultant in India costs more upfront and typically bundles the structural decisions, the drafting and the first year’s statutory filings into that fee.

Which is cheaper depends entirely on how the first year unfolds — which is precisely what makes the comparison difficult to run in advance.

Where a Taxation Legal Advisor Fits

Filing SPICe+ is an administrative task. Choosing between a private limited company, an LLP and a one-person company; drafting the articles to reflect an actual founder arrangement; structuring shareholding where investment is expected; and confirming the tax consequences of each option are legal and advisory questions.

A taxation legal advisor is generally engaged for that layer rather than for the filing itself. Where a business is straightforward, the honest position is that the incorporation can be self-filed and advice reserved for the points that genuinely require it.

 

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