Weekly Round-up on Tax and Corporate Laws | 01st to 06th June 2026

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from June 01^st  to 06^th 2026, namely:

1. Govt Introduces Income-Tax (Amendment) Ordinance, 2026; Exempts FIIs & BIS from Tax on Govt. Securities Income
2. RBI Announces Key Monetary Policy and Capital Flow Measures
3. Temporary Status Casual Labourers Entitled to Pensionary Benefits on Superannuation Despite No Regularisation: SC
4. General Penalty Not Sustainable Where Specific Late Fee Levied for Delayed GST Return; Attachment Lifted on Deposit of Late Fee: HC
5. Non-Supply of RUDs Before Confirming Demand Violates Natural Justice; Order Set Aside for Fresh Adjudication: HC
6. ICAI Issues Revised Code of Ethics – A Three-Volume Ethical Framework for the Modern Profession
7. Over Time or Point in Time – How Does Ind AS 115 Determine Revenue Recognition?

1. Govt Introduces Income-Tax (Amendment) Ordinance, 2026; Exempts FIIs & BIS from Tax on Govt. Securities Income

The Government has introduced the Income-tax (Amendment) Ordinance, 2026, to amend Schedule IV of the Income-tax Act, 2025. Section 11, read with Schedule IV, of the Income-tax Act, 2025 (ITA 2025), provides an exclusive list of income that does not form part of the total income of a non-resident or a foreign company.

The Income-tax (Amendment) Ordinance 2026 inserts two new entries, 13D and 13E, into Schedule IV with effect from 01-04-2026. Entry No. 13D provides the exemption for the interest on government securities (G-Sec) and capital gains from the sale, exchange or transfer of such securities to the Foreign Institutional Investors (FIIs). Entry 13E extends a similar exemption to the Bank for International Settlements (BIS).

Further, note 4(c) to Schedule IV defines the term “government security” for the purposes of the exemption under this schedule. It provides that “Government security” shall have the same meaning as assigned to it in section 2(f) of the Government Securities Act, 2006.

Read the Ordinance 

Read the Article

2. RBI Announces Key Monetary Policy and Capital Flow Measures

On June 5, 2026, the Governor of the Reserve Bank of India (RBI) announced a series of measures to strengthen financial markets and enhance foreign capital inflows. These measures aim to improve the attractiveness of Indian financial markets, facilitate overseas investment, and support the Government’s borrowing programme. The key measures include:

(a) Widening foreign investor access to government securities,

(b) Keeping the repo rate unchanged at 5.25%,

(c) Increasing investment limits for overseas individual investors, and

(d) Restoring the timeline for the realisation and repatriation of export proceeds.  The Key measures are as follows:

2.1 RBI Keeps Repo Rate Unchanged at 5.25% and Retains Neutral Policy Stance

The Monetary Policy Committee (MPC) of the RBI has unanimously decided to keep the policy repo rate under the Liquidity Adjustment Facility unchanged at 5.25%. Consequently, the Standing Deposit Facility (SDF) rate remains at 5.00%, and the Marginal Standing Facility (MSF) rate and the Bank Rate remain at 5.50%. The MPC has also decided to maintain a neutral policy stance, projecting real GDP growth at 6.6% and CPI inflation at 5.1% for FY 2026-27.

2.2 Wider Foreign Access to Long-term Government Securities

On March 30, 2020, the RBI, vide A.P. (DIR Series) Circular No. 25, in consultation with the Government of India, introduced a separate channel, called the ‘Fully Accessible Route’ (FAR), to enable non-residents to invest in specified Government of India dated securities.

Under the FAR, eligible investors can invest in specified Government securities without being subject to any investment ceilings.

Now, the RBI has expanded the Fully Accessible Route to include all new 15-year, 30-year and 40-year government securities.

With this move, the foreign investors will gain wider access to longer-tenor Indian government bonds. This measure is aimed at broadening overseas participation in India’s sovereign debt market, enhancing liquidity in government securities and supporting higher foreign capital inflows.

2.3 Removal of Investment Restrictions for FPIs Under the General Route

On May 8, 2025, the RBI notified amendments to the Master Direction – RBI (Non-resident investment in Debt Instruments) Directions, 2025, governing investments by Foreign Portfolio Investors (FPIs) in corporate debt securities.

Under the General Route, an FPI’s investment in corporate debt securities with a residual maturity of up to one year was previously restricted to 30% of its total investment in such securities.

Further, under the concentration limits, an FPI’s investment in corporate debt securities could not exceed 15% of the prevailing investment limit in the case of long-term FPIs and 10% of the prevailing investment limit in the case of other FPIs.

The RBI has now removed the restrictions relating to short-term investments, concentration limits and individual security-wise investment limits applicable to FPIs investing in Government securities through the General Route. This measure provides FPIs with greater flexibility in managing their debt investments and is expected to encourage increased participation in the Indian debt market.

2.4 Higher Equity Investment Limits for NRIs, OCIs and Persons Resident Outside India

The RBI has announced higher investment limits for NRIs and OCIs in equity instruments traded on the stock market without requiring SEBI registration. Further, the same facility has been extended to all individuals, Persons Resident Outside India (PROIs), placing them at par with NRIs and OCIs.

This will enable overseas individual investors to make larger investments in the Indian stock market without requiring SEBI registration. The measure is expected to enhance foreign participation in Indian equity markets, broaden the investor base, and support increased capital inflows into the country.

2.5 Extension of Concessional Forex Swap Facility for ECBs Raised by PSUs

The RBI has extended the Concessional forex swap facility for External Commercial Borrowings (ECBs) raised by PSUs till September 30, 2026. ECBs are loans raised by eligible Indian entities from overseas lenders.

A ‘concessional forex swap facility’ is a mechanism under which the RBI allows banks or other institutions to exchange foreign currency for Indian Rupees at a concessional rate relative to standard market rates.

The extension is expected to reduce the cost of overseas borrowings for PSUs and encourage them to access international debt markets.

2.6 Extension of Hedging Cost Benefit for FCNR(B) Deposits

The RBI has extended the hedging cost benefit for banks raising Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities of 3 to 5 years until September 30, 2026. FCNR(B) deposits are foreign currency deposits accepted by Indian banks from non-resident Indians.

The extension is expected to encourage banks to attract more FCNR(B) deposits from NRIs, thereby increasing foreign currency inflows. These deposits can serve as a stable source of foreign currency funding, particularly during periods of external stress.

2.7 Proposal to Restore the Time Limit for Realisation of Export Proceeds to 9 Months

On November 13, 2025, the RBI notified the Foreign Exchange Management (Export of Goods and Services) (Second Amendment) Regulations, 2025, which extended the time period for realisation and repatriation of export proceeds from 9 months to 15 months.

Subsequently, on January 13, 2026, the RBI notified the FEM (Export and Import of Goods and Services) Regulations, 2026. These Regulations shall come into force w.e.f October 1, 2026.

Under these regulations, the export value of goods and services must be realised and repatriated by the exporter within the following periods:

• 15 months from the date of shipment in the case of goods (other than goods exported to a warehouse outside India) and from the date of invoice in the case of services;
• 15 months from the date of sale of goods from the warehouse, in the case of goods exported to a warehouse outside India;
• As per the payment terms of the contract, in the case of project exports

Now, the RBI vide FEMA Notification dated June 05, 2026, has restored the time limit for the realisation and repatriation of export proceeds from 15 months to 9 months. While this move shortens the flexibility previously available to exporters to realise export proceeds, it is expected to improve the frequency of foreign exchange inflows into the country.

Read the Press Release

3. Temporary Status Casual Labourers Entitled to Pensionary Benefits on Superannuation Despite No Regularisation: SC

The Supreme Court, in Bhikhani Devi vs. Union of India [2026] 187 taxmann.com 61 (SC), held that casual labourers granted ‘temporary status’ are entitled to pensionary benefits upon superannuation even in the absence of formal regularisation.

3.1 Brief Facts of the Case

In the instant case, the appellants were casual labourers (Night Guards) engaged by the Department of Posts who rendered long and continuous service till superannuation. Pursuant to the 1991 Scheme, they were granted temporary status in 1992 with effect from 29-11-1989.

The Circular dated 30-11-1992 provided that casual labourers who had completed three years’ of service under temporary status would be treated at par with temporary Group ‘D’ employees and would be entitled to the benefits admissible to such employees.

The appellants were never formally regularised and retired in 2008 and 2015, respectively. Their claims for pensionary benefits and family pension were rejected on the ground that formal regularisation as Group ‘D’ employees was a mandatory prerequisite for pension. The High Court upheld the rejection on the grounds of delay and the absence of regularisation. Thereafter, an appeal was filed before the Supreme Court.

3.2 Supreme Court Observations

It was noted that the appellants had been treated at par with temporary Group ‘D’ employees from 1992 till superannuation, thereby rendering service far in excess of the minimum qualifying period of ten years prescribed under Rule 10(1-B) of the Central Civil Services (Temporary Service) Rules, 1965, read with the Central Civil Services (Pension) Rules, 1972.

The Supreme Court observed that the temporary status casual labourers who were treated at par with temporary Group ‘D’ employees and had completed qualifying service under Rule 10(1-B) of the Rules were entitled to pensionary benefits even in the absence of formal regularisation.

3.3 Supreme Court Ruling

The Supreme Court held that a claim for pensionary benefits constitutes a continuing cause of action and therefore could not be denied merely on the ground of delay. However, the payment of arrears was restricted to the period of three years and two months preceding the filing of the Original Applications.

Consequently, appellants were entitled to pensionary and consequential retirement benefits. Thus, the widow of the deceased employee was entitled to a family pension. Accordingly, the impugned judgments of the High Court were liable to be set aside, with a direction to release the benefits within three months, failing which interest at the rate of 6% per annum would be payable.

Read the Ruling

4. General Penalty Not Sustainable Where Specific Late Fee Levied for Delayed GST Return; Attachment Lifted on Deposit of Late Fee: HC

The High Court held that a general penalty under Section 125 of the CGST Act cannot be imposed for non-filing of returns where a specific late fee is prescribed under the GST law for such default. Relying on its earlier decision in Ms Kandan Hardware Mart, the Court observed that Section 125 applies only where no specific penalty is provided, and therefore, the petitioner’s liability was confined to payment of a late fee under Section 47 of the CGST Act. This was held in NKR Traders vs. State Tax Officer – [2026].

4.1 Facts

The petitioner failed to file GST returns for the financial year 2020-21 and was subjected to late fee under the GST law. Subsequently, the tax authorities also imposed a general penalty under Section 125 and attached the petitioner’s bank account for recovery. The petitioner challenged the levy of general penalty on the ground that where a specific late fee was prescribed for non-filing of returns, imposition of an additional general penalty was impermissible. The petitioner further sought lifting of the bank account attachment while expressing willingness to pay the applicable late fee.

4.2 Held

The High Court held that the issue was squarely covered by its earlier decision in Ms. Kandan Hardware Mart, wherein it was held that a general penalty under Section 125 could be imposed only where no specific penalty was provided under the GST law. It was observed that since the petitioner was already liable to pay late fee under Section 47 for non-filing of returns, the levy of general penalty could not be sustained. Accordingly, the impugned order was quashed to the extent it imposed general penalty, and the petitioner’s liability was confined to payment of late fee alone. The Court further directed that the attachment of the petitioner’s bank account be lifted upon deposit of the applicable late fee for the financial year 2020-21.

Read the Ruling

5. Non-Supply of RUDs Before Confirming Demand Violates Natural Justice; Order Set Aside for Fresh Adjudication: HC

The High Court held that where a demand is proposed on the basis of relied-upon documents, copies of such documents must be furnished before confirmation of the demand. The Court observed that failure to provide the relied-upon documents deprived the petitioner of an effective opportunity to respond to the allegations, warranting fresh adjudication after furnishing the documents and granting adequate opportunity, including cross-examination wherever statements are relied upon. This was held in Sai Auto Mobiles vs. Commissioner Central Goods Service Tax and Central Excise [2026].

5.1 Facts

The petitioner challenged an adjudication order passed under the GST law on the ground that although the show cause notice was based on various relied-upon documents (RUDs), copies of such documents were never supplied before confirmation of demand. It was contended that in the absence of the relied-upon material, the petitioner was deprived of an effective opportunity to defend itself. The Revenue was unable to establish before the Court that copies of the relied-upon documents had been furnished to the petitioner prior to adjudication. The matter was accordingly placed before the Allahabad High Court.

5.2 Held

The High Court held that where a demand is proposed on the basis of relied-upon documents, supply of such documents is ordinarily mandatory before the demand is confirmed. It observed that the Revenue had failed to establish that copies of the relied-upon documents had been supplied to the petitioner despite specific pleadings to that effect. The Court further observed that denial of such material adversely affected the petitioner’s right to effectively respond to the allegations. Accordingly, the impugned order was set aside and the matter was remanded to the adjudicating authority with directions to furnish the relied-upon documents and proceed afresh after granting adequate opportunity, including opportunity of cross-examination wherever statements are relied upon. The writ petition was accordingly disposed of in favour of the assessee.

Read the Ruling

6. ICAI Issues Revised Code of Ethics – A Three-Volume Ethical Framework for the Modern Profession

ICAI has issued the revised Code of Ethics (13th Edition) comprising Volume I, Volume II, and Volume III, effective from April 1, 2026 (except the provision relating to Social Impact, CSR Impact and Sustainability assessments, effective from December 11, 2025).

Volume I focuses on the Indian regulatory and ethical framework, covering the Chartered Accountants Act, 1949, professional misconduct provisions, independence requirements, and permissible professional services. It also recognises emerging practice areas such as forensic accounting, AI consultancy, and sustainability-related services.

Volume II aligns with the IESBA Code of Ethics (2024 Edition) and introduces a principle-based approach. It emphasises public interest, ethical decision-making, professional judgment, and the Conceptual Framework for identifying, evaluating, and addressing ethical threats.

Volume III introduces dedicated Ethics Standards for Sustainability Assurance, including independence requirements. It provides guidance for sustainability assurance engagements, with strong emphasis on integrity, public trust, confidentiality, and professional responsibility in ESG and sustainability reporting.

Collectively, the revised Code strengthens ethical standards and equips Chartered Accountants to address evolving professional, technological, and sustainability-related challenges while maintaining public confidence in the profession.

Read the Update

7. Over Time or Point in Time – How Does Ind AS 115 Determine Revenue Recognition?

Ind AS 115 requires entities to recognise revenue when control of goods or services is transferred to the customer. A key aspect of applying the standard is determining whether a performance obligation is satisfied over time or at a point in time, as this directly affects the timing of revenue recognition. This assessment is particularly important for service contracts, construction arrangements and customer-specific manufacturing activities.

A performance obligation is satisfied over time when any one of three conditions is met. First, the customer simultaneously receives and consumes the benefits of the entity’s performance as the entity performs. This commonly applies to recurring service arrangements such as facility management, maintenance, security and support services, where customers continuously benefit from services rendered. In assessing such arrangements, entities may consider whether a replacement service provider would need to substantially re-perform work already completed. If not, it generally indicates that the customer has already received and consumed the benefits of prior performance.

Second, revenue is recognised over time when the entity’s performance creates or enhances an asset that the customer controls as the asset is being created. This is often seen in construction and infrastructure projects carried out on customer-owned land or assets, where the customer controls the work in progress throughout the construction period.

Third, a performance obligation may be satisfied over time where the asset being created has no alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. An asset may lack alternative use because of contractual restrictions that prevent diversion to another customer or because practical limitations make redirection economically unfeasible. However, the absence of alternative use alone is insufficient; the entity must also be entitled to compensation, including an appropriate profit margin, if the customer terminates the contract for reasons other than the entity’s failure to perform.

Thus, determining whether revenue should be recognised over time requires a careful evaluation of customer benefit, customer control, alternative use of assets and enforceable payment rights. Since these assessments often involve significant judgment, entities must focus on the economic substance of the arrangement to ensure that revenue recognition faithfully reflects the underlying transaction.

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