The Finance Bill, 2026 proposes corrective amendments to align provisions of the Income-tax Act, 2025 with long-standing principles under the Income-tax Act, 1961 and remove interpretational gaps. First, section 21(5) is corrected to clarify that the annual value of property held as stock-in-trade shall be taken as nil for two years from the end of the financial year in which the completion certificate is obtained, bringing certainty for real estate inventory. Second, section 22(2) relating to deductions from income from house property is amended to expressly include prior-period interest on borrowed capital within the ₹2 lakh ceiling for self-occupied properties, aligning it with the earlier law. Third, section 262(10)(c) is amended to expand the rule-making power of the CBDT to mandate quoting of Permanent Account Number in specified transactions even where they do not relate to business or profession. All amendments take effect from 1 April 2026.
Correction in provisions relating to Income from House Property and Permanent Account Number
1. Correction is proposed to be made in section 21(5) of the Income-tax Act, 2025 to align with the corresponding provision of Income-tax Act, 1961 so as to provide that annual value of property held as stock-in-trade to be taken as nil upto two year from the end of the financial year in which certificate of completion of construction is obtained from the competent authority.
2. Section 22 of the Act deals with deductions in the case of income from house property. Further, section 22(2) provides that, the aggregate amount of deduction in the case of self-occupied property shall not exceed Rs. 2 lakh where property is acquired or constructed with borrowed capital. However, this ceiling of Rs. 2 lakhs has not included the deduction of prior-period interest payable for the acquisition or construction of property.
2.1 It is pertinent to mention that section 22 of the Act corresponds to section 24 of the Income-tax Act, 1961. In the Income-tax Act, 1961, aggregate amount of deduction for the interest on the borrowed capital was inclusive of prior period interest payable
2.2 In this regard, it is proposed to amend section 22(2) of the Act so as to provide that aggregate amount of deduction for interest on borrowed capital shall be inclusive of prior-period interest payable.
3. Section 262(10)(c) provides that Central Board of Direct Taxes (CBDT) may make rules for categories of documents pertaining to business or profession in which Permanent Account Number shall be quoted by every person. However, the said section 262(10)(c) does not specify the power of the CBDT to make rules for quoting of Permanent Account Number (PAN) in such documents which does not relate to business or profession.
3.1 It is pertinent to mention that section 262(10)(c) of the Act corresponds to section 139A(5)(c) of the Income-tax Act, 1961 which provides that every person shall quote such number in all documents pertaining to such transactions as may be prescribed by the Board in the interest of revenue.
3.2 In this regard, it is proposed to amend section 262(10)(c) to enable Central Board of Direct Taxes (CBDT) to make rules for quoting of Permanent Account Number in documents related to such transactions which do not relate to business or profession.
4. These amendments will take effect from 1st April, 2026.
[Clause 29, 30, 56]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 29 of the Bill seeks to amend section 21 of the Income-tax Act, 2025 relating to determination of annual value.
Sub-section (5) of the said provides that where a property is held as stock-in-trade and is not let wholly or partly at any time during the tax year, the annual value of such property or part thereof shall be nil for two years from the end of the financial year in which the certificate for completion of construction is obtained from the competent authority.
It is proposed to amend the said sub-section so as to change the annual value of property or part thereof to be treated as nil “for two years” instead of “up to two years”.
This amendment will take effect from 1st April, 2026.
Clause 30 of the Bill seeks to amend section 22 of the Income-tax Act, 2025 relating to deductions from income from house property.
The said section deals with deductions in the case of income from house property. Further, sub-section (2) of the said section provides that the aggregate amount of deduction in the case of self-occupied property shall not exceed ₹ 2 lakhs where property is acquired or constructed with borrowed capital. However, this ceiling of ₹ 2 lakhs has not included the deduction of prior-period interest payable for the acquisition or construction of property.
It is proposed to amend the said sub-section so as to provide that aggregate amount of deduction for interest on borrowed capital shall be inclusive of prior-period interest payable.
This amendment will take effect from 1st April, 2026.
Clause 56 of the Bill seeks to amend section 262 of the Income-tax Act, 2025 relating to Permanent Account Number.
The said section provides that the Board may make rules to provide for categories of documents pertaining to business or profession in which Permanent Account Number shall be quoted by every person;
It is proposed to amend clause (c) of sub-section (10) of the said section so as to enable the Central Board of Direct Taxes to make rules for quoting of Permanent Account Number in documents in such transactions which do not relate to business or profession.
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
29. Amendment of section 21.
In section 21 of the Income-tax Act, in sub-section (5), for the words “nil for”, the word “nil up to” shall be substituted.
30. Amendment of section 22.
In section 22 of the Income-tax Act, in sub-section (2), for the word, brackets, figure and letter “sub-section (1)(b)”, the words, brackets, figure and letters “sub-section (1)(b) and (c)” shall be substituted.
53. Amendment of section 228.
In section 228 of the Income-tax Act, in sub-section (3), in clause (b), in sub-clause (ii), in item (A), after the words “passenger ships”, the words “or inland vessels” shall be inserted.
