You could get relief from income tax penalties; here is how you can get them waived..
The Central Board of Direct Taxes (CBDT) issued a revised format of Form 161 under the Income Tax Rules on October 8, 2026. Through this, eligible taxpayers can apply for a waiver of penalties imposed for misreporting income or in other specified cases. However, certain conditions must be met to avail of this.
If the Income Tax Department has imposed a penalty on you, you may have an opportunity to obtain relief. The CBDT has modified Form 161, enabling eligible taxpayers to apply for penalty waivers and, in certain instances, relief from legal proceedings. Previously, the option for relief under this process was not available for certain cases involving the misreporting of income.
**The Change**
According to notification G.S.R. 871(E) published in the e-Gazette of India, the revised form came into effect on October 8, 2026. The objective of this change is to expedite the resolution of tax disputes and provide an opportunity to avoid protracted legal proceedings. Experts believe the new form will clarify the process for eligible taxpayers seeking penalty waivers and relief from prosecution. However, this relief is not automatic; statutory conditions must be fulfilled.
**What are the conditions for penalty waiver?**
To seek relief under Section 440 of the Income Tax Act, 2025, the taxpayer must pay the tax and interest within the stipulated timeframe, in accordance with the assessment or reassessment order. In specified cases involving income misreporting, the taxpayer may also be required to pay an additional tax amount equal to the tax liability on the under-reported income. In certain other specified cases, this amount would be 120% of the relevant tax. Furthermore, the taxpayer must not have filed an appeal against the relevant assessment and penalty orders. Form 161 must be submitted to the Assessing Officer (AO) within one month from the end of the month in which the relevant order is received.
The form must provide details regarding the assessment, under-reported income, tax liability, and payments made. Additionally, a declaration stating that no appeal will be filed must be submitted. This relief is not available if prosecution proceedings under the relevant chapter have already been initiated.
What happens after the application is submitted?
Upon receipt of the application, the Assessing Officer must examine it and decide within three months from the end of the month in which the application was received. The taxpayer will be allowed to present their case before the application is rejected. If the application is accepted, the taxpayer will be barred from subsequently challenging the relevant assessment or reassessment order through an appeal or revision.
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