CBDT drops arrest, detention provisions from tax recovery rules

The notification has been brought in line with the Budget 2026-27 announcement of decriminalisation of technical defaults including non-production of books of account and documents, and payment of TDS (tax deducted at source). (Representational image)

The Central Board of Direct Taxes (CBDT) has removed arrest and detention provisions from the tax recovery rules with retrospective effect from April 1, 2026. It bars tax officers from undertaking arrest in case of tax default.

In a notification dated September 17, the CBDT has brought in Income-tax (Fourth Amendment) Rules, 2026, which also removes “arrest and detention” from the tax recovery rules in case of death of the defaulter.

The notification has been brought in line with the Budget 2026-27 announcement of decriminalisation of technical defaults including non-production of books of account and documents, and payment of TDS (tax deducted at source).

The Budget had stated that minor offences will only attract fines and not prosecution. The CBDT has now amended Rule 225 of the Income-tax Rules, 2026, which relates to recovery of tax arrears, specifically through the attachment and sale of movable and immovable property.

Richa Sawhney, Partner – Tax, Grant Thornton Bharat said in practical terms, tax recovery will continue through attachment and sale of assets and other recovery mechanisms, but personal arrest will no longer form part of the prescribed recovery process under these rules.

“This amendment aligns Rule 225 with the changes introduced by the Finance Act, 2026 and reflects a shift towards property-based recovery measures,” she said.

Also, the CBDT’s notification gives existing valuers and authorised income-tax practitioners additional six months time, until March 31, 2027, to complete their registration under the new Income-tax Act, 2025 framework.

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This extension should help ensure a smoother transition to the new regime, particularly because the registration forms now require detailed disclosures relating to qualifications, experience and eligibility, experts said.

Under the Form 169, which is to be used by individuals seeking registration as valuers under section 514 of the Income-tax Act, 2025, applicants are required to furnish key personal and professional particulars, including PAN, contact details, educational qualifications, professional certifications, relevant valuation experience and the class of assets for which registration is sought.

With this, the registration framework is being streamlined to ensure that valuation assignments for tax purposes are carried out by qualified and independent professionals. Registered valuers are expected to undertake impartial valuations, issue valuation reports in the prescribed form, follow the prescribed fee structure and avoid assignments where they have a direct or indirect interest in the asset being valued.

Under Form 171, individuals will be required to seek registration as authorised income-tax practitioners under Section 515 of the Income-tax Act, 2025. Applicants are also required to provide supporting documents for their qualifications and disclose matters that may affect eligibility, including convictions involving fraud or dishonesty, insolvency proceedings, removal or dismissal from government service, or findings of professional misconduct by a relevant professional body.

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“The revised registration framework reflects a clear policy intent to professionalise tax valuation and representation. By insisting on qualification, disclosure and independence at the entry stage, CBDT is moving towards a more accountable ecosystem for taxpayers and tax professionals alike,” said Riaz Thingna, Partner, Grant Thornton Bharat.

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Aanchal Magazine is a Deputy Associate Editor with The Indian Express, serving as a leading voice on the macroeconomy and fiscal policy. With 15 years of newsroom experience, she is recognized for her ability to decode complex economic data and government policy for a wider audience. Expertise & Focus Areas: Magazine’s reporting is rooted in "fiscal arithmetic" and economic science. Her work provides critical insights into the financial health of the nation, focusing on: Macroeconomic Policy: Detailed tracking of GDP growth, inflation trends, and central bank policy actions. Fiscal Metrics: Analysis of taxation, revenue collection, and government spending. Labour & Society: Reporting on labour trends and the intersection of economic policy with employment. Her expertise lies in interpreting high-frequency economic indicators to explain the broader trajectory of the Indian economy. Personal Interests: Beyond the world of finance and statistics, Aanchal maintains a deep personal interest in the history of her homeland, Kashmir. In her spare time, she reads extensively about the region's culture and traditions and works to map the complex journeys of displacement associated with it. Find all stories by Aanchal Magazine here ... Read More