The Finance Bill, 2026 proposes an important clarification to section 400(2) of the Income-tax Act, 2025 to restore the binding nature of guidelines issued for resolving difficulties in the implementation of TDS and TCS provisions. Under the existing framework, the Board is empowered to issue such guidelines with prior approval of the Central Government, but the statute does not expressly state that these guidelines are binding. In contrast, the corresponding provision under the Income-tax Act, 1961 clearly provided that such guidelines were binding both on income-tax authorities and on persons responsible for deducting or collecting tax. To align legislative intent and ensure uniform application, the amendment expressly provides that guidelines issued by the Central Board of Direct Taxes shall be binding on tax authorities as well as deductors and collectors. The change aims to enhance certainty, consistency, and compliance in TDS/TCS administration. The amendment will take effect from 1 April 2026.
Guidelines to be binding on income-tax authorities and person liable to deduct or collect income-tax
Section 400(2) of the Act provides that the Board with the previous approval of Central Government, may issue guidelines to remove any difficulties arising in giving effect to provisions of TDS/TCS chapter and such guidelines shall be laid before each House of Parliament.
2. Corresponding provisions in the Income-tax Act, 1961 also provided that such guidelines shall be binding on income-tax authorities and on the person liable to deduct or collect income-tax. However, section 400(2) of the Act does not contain aforesaid clause which binds the guidelines.
3. In order to align with the intent of the provisions of the Income-tax Act, 1961, it is proposed that any guidelines issued to remove difficulties in giving effect to provisions of TDS/TCS chapter shall be binding on income-tax authorities and on the person liable to deduct or collect income-tax.
4. It is proposed to amend section 400(2) of the Act.
5. This amendment will take effect from 1st April, 2026.
[Clause 77]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 77 of the Bill seeks to amend section 400 of the Income-tax Act 2025 relating to power of Central Government to relax provisions of Chapter XIX.
Sub-section (2) of the said section provides that the Board may, with the previous approval of the Central Government, issue guidelines to remove any difficulty arising in giving effect to the provisions of the said Chapter and such guidelines shall be laid before each House of Parliament.
It is proposed to amend the said sub-section so as to provide that the guidelines issued shall be binding on the income-tax authorities and on the person liable to deduct or collect income-tax.
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
77. Amendment of section 400.
In section 400 of the Income-tax Act, for sub-section (2), the following sub-section shall be substituted, namely:—
“(2) The Board may, with the previous approval of the Central Government, issue guidelines to remove any difficulty arising in giving effect to the provisions of this Chapter and such guidelines shall be—
(a) binding on the income-tax authorities and on the person liable to deduct or, as the case may be, collect income-tax; and
(b) laid before each House of Parliament.”.
