Rule 177 of the Draft Income-tax Rules, 2026 prescribes the procedure for filing a modified return of income by a successor entity pursuant to a business reorganisation under section 314 of the Act. It mandates that the successor entity furnish a modified return for the relevant tax year in Form ITR-A, duly verified in the specified manner and filed electronically under a digital signature. The rule ensures that tax records align with the order of business reorganisation by empowering the Assessing Officer to modify the total income already determined in completed assessments or reassessments, or to complete pending proceedings in accordance with the reorganisation order and the details furnished in ITR-A. This mechanism ensures that tax liability accurately reflects structural changes arising from mergers, demergers, or other forms of reorganisation. Additionally, the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) is entrusted with prescribing procedures, formats, and technical standards to ensure secure electronic filing, data capture, transmission, archival, and retrieval. Overall, Rule 177 creates a structured and technology-driven compliance framework to seamlessly integrate business reorganisation outcomes into the income-tax assessment process while maintaining digital security and administrative consistency.
Extract of Rule No. 177 of Draft Income-tax Rules, 2026
Rule 177
Modified return of income in respect of business reorganisation under section 314 of the Act.
(1) The modified return of income to be furnished by a successor entity to a business reorganisation, as referred to in section 314, for a tax year, shall be in the Form ITR-A and verified in the manner specified therein.
(2) ITR-A shall be furnished electronically under digital signature.
(3) If the assessment or reassessment proceedings for a tax year to which the order of the business reorganisation applies have been completed or are pending on the date of furnishing ITR-A, the Assessing Officer shall, pass an order modifying the total income of the relevant tax year determined in such assessment or reassessment, or proceed to complete the assessment or reassessment proceedings, as the case may be, in accordance with the order of the business reorganisation and the ITR-A so furnished.
(4) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the return in the manner specified in sub-rule (2).
