Income Tax Rules Changed: The Central Board of Direct Taxes (CBDT) has taken a significant step toward simplifying taxpayers and income tax-related processes. Through an official notification (Income-tax Sixth Amendment Rules, 2026) issued on October 8, 2026, the CBDT made a major amendment to Income Tax Form 161.
Under this new amendment, the phrase “or Waiver” has been inserted alongside “Imposition” in Rule 231 of the Income Tax Rules. The previous Form 161 has been entirely replaced by an updated and detailed version.
Let’s explore how this refreshed Form 161 has opened doors for penalty waivers, who’s eligible to apply, and what advantages and requirements come with it.
What modifications have been made to Form 161?
Pursuant to the Income Tax Act, 2025, when a taxpayer gets a penalty notice for under-reporting or mis-reporting (declaring lower income or furnishing inaccurate details) following assessment or re-assessment, they can use Form 161 to request relief.
In the past, Rule 231 only dealt with protection against penalty imposition. By incorporating the term “waiver” in the recent amendment, taxpayers now have the ability to request waiver of penalties even when a penalty order has previously been issued. Additionally, the updated Form 161 now demands complete information regarding the earlier penalty order and documentation of extra income tax paid.
What do sections 533, 440, and Rule 231 represent?
According to tax professionals, these three rules serve distinct functions:
Section 533: This provision grants the CBDT authority to establish rules and define forms/procedures.
Section 440: This is the primary provision that authorizes the Assessing Officer (AO) to grant penalty waivers for under-reporting/mis-reporting and provide exemption from legal action.
Rule 231 & Form 161: This provision outlines the complete procedural framework for submitting an application via Form 161 and the approach for determining supplementary tax.
Who is eligible to request a penalty waiver?
If you’re subject to a penalty under Section 439, you may submit Form 161 provided you satisfy these requirements:
Payment of tax and interest: The entire amount of tax and interest demanded in the assessment order must be paid within the time limit specified in the notice.
Payment of Additional Tax: In lieu of penalty waiver, the prescribed additional income tax (which in some cases may range from 100% to 120% of the relevant tax) will have to be paid.
Affidavit of non-appeal: The taxpayer has not filed any appeal against the assessment order and undertakes not to file any appeal in future.
No criminal case: If a criminal prosecution has already been initiated under Chapter XXII, then this relief will not be available.
The deadline for filing Form 161
File Form 161 within one month from the end of the month in which the assessment or reassessment order is received. The Assessing Officer (AO) must deliver his decision within three months from the end of the month in which the application is received. The application cannot be rejected without providing an opportunity for hearing