Weekly Round-up on Tax and Corporate Laws | 23rd to 28th March 2026

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Mar 23^rd  to Mar 28^th 2026, namely:

1. Analysis of Changes Introduced in the Finance Bill 2026, as Passed by the Lok Sabha
2. Govt. Introduces FCRA Amendment Bill, 2026 to Tighten Asset Control, Add Designated Authority & Streamline Compliances
3. SAIL Can Withhold Gratuity if an Ex-Employee Fails to Vacate Staff Quarters After Retirement: SC
4. Arrest for Fake GST Invoicing Held Infirm as IO Failed to Comply with BNSS Sec. 35(3) Notice Procedure: HC
5. Interest Payable on Excess TRAN-1 Credit Wrongly Availed and Retained; Adjustment from Refund Upheld: HC
6. Classification of Interest on Delayed Statutory Payments – Finance Cost vs Other Expense under Ind AS
7. NFRA Issues Six Inspection Reports on Chartered Accountant Firms to Strengthen Audit Quality and Compliance

1. Analysis of Changes Introduced in the Finance Bill 2026, as Passed by the Lok Sabha

The Lok Sabha passed the Finance Bill 2026 [hereinafter called ‘Finance Bill (Lok Sabha)’] on March 25, 2026. While the Finance Bill, as passed by the Lok Sabha, largely retains the proposals made in the Finance Bill, certain noteworthy modifications have been made to provisions relating to buyback of shares, capital gains, assessment and more.

We have analysed all amendments in the Finance Bill, 2026, as passed by the Lok Sabha vis-à-vis the Bill as originally introduced, and present them in this article, covering:

• 12% surcharge to be levied on the additional tax payable on buyback under section 69. Further, an additional tax is applicable only if the buyback is as per Section 68 of the Companies Act 2013
• The benefit of exemption for capital gain arising on the transfer of a specified capital asset under the Andhra Pradesh Capital City Land Pooling Scheme is extended to the Income-tax Act 2025. However, the Finance Bill 2026 has made the exemption time-bound, limiting it to 5 years till 31-03-2031.
• Section 245(1) of the ITA 1961 is amended to allow a refund set-off against dues under both the ITA 1961 and the ITA 2025. Correspondingly, Section 438 of ITA 2025 is amended to permit set-off of refunds against dues under both ITA 2025 and ITA 1961.
• Section 280 of the ITA 2025 and its corresponding Section 148 of the ITA 1961 are amended to provide that a minimum of 30 days must be given to the assessee to furnish the return of income in response to the notice issued by the AO.
• A new Section 292BC is inserted into the ITA 1961, and a sub-section (3) is inserted into Section 522 of the ITA 2025, to validate approvals issued by the tax authorities without sufficient reasons, and orders lacking proper authentication or a digital signature, only when such approval was granted electronically.
• Schedule VII of the ITA 2025 deals with “persons exempt from tax.” The Finance Bill 2026 has expanded the list of eligible persons in this Schedule by inserting SI. No. 49, which pertains to the ‘New Development Bank’. The exemption is subject to the condition that information is provided in the prescribed form and manner.
• Section 140 of ITA 2025 (corresponding to Section 80-IAC of the ITA 1916) is amended with effect from 01-04-2026, to increase the turnover limit from Rs. 100 crores to Rs. 300 crores. Hence, a start-up, whose turnover in the relevant tax year does not exceed Rs. 300 crores, will be eligible for a deduction under Section 140.

Editorial Note – The Finance Act, 2026, received the President’s assent on 30-04-2026.

Read the Analysis

2. Govt. Introduces FCRA Amendment Bill, 2026 to Tighten Asset Control, Add Designated Authority & Streamline Compliances

On March 25, 2026, the Government introduced the FCRA Amendment Bill, 2026, to create a structured framework for the vesting, management, and disposal of foreign contributions and assets of any person whose certificate has been cancelled, surrendered or has otherwise ceased, through a Designated Authority.  The vesting includes provisional and permanent vesting.

The Bill also introduces timelines for utilising foreign funds, provides for the cessation of registration, restricts the handling of assets during suspension, rationalises penalties, and mandates prior Central Government approval for investigations, with a view to addressing compliance gaps and mitigating misuse risks.

2.1 Key Highlights of the Bill

The key highlights of the bill are as follows:

(a) Introduction of a new Chapter on ‘Designated Authority’ for disposal of foreign contributions and assets

Section 15 of the FCRA provides for ‘management of foreign contribution of a person whose certificate has been cancelled or surrendered’. It states that the foreign contribution and assets created out of the foreign contribution of any person whose certificate has been cancelled, surrendered, or ceased shall vest in the authority as may be prescribed.

The term ‘vesting’ refers to the transfer of ownership and control of foreign contributions and assets to the prescribed or designated authority appointed by the Government.

Accordingly, the Bill proposes to introduce a new Chapter IIIA relating to ‘vesting of foreign contribution and assets in designated authority’ in cases where FCRA registration certificates have been cancelled, surrendered or have ceased.

The Chapter lays down a comprehensive framework for the vesting, supervision, management, and disposal of foreign contributions and assets through a designated authority, including both provisional and permanent vesting.

The term ‘Designated authority’ means such officer or authority as may be notified by the Central Government for the purposes of this Act.

(b) Definition of ‘Key functionary’ introduced

The term ‘Key Functionary’ is presently not defined. The bill proposes to insert a new definition of ‘Key functionary’ under section 2(ja) of the Act. The definition includes the following:

• The director of a company
• A partner in a firm
• A trustee of a trust
• The Karta of a HUF
• An office bearer, member of the governing body, managing committee or other controlling authority of a society, trust, trade union or association of individuals and
• Any other officer or person who has control over or responsibility for the management or affairs of such organisation

(c) Fixed Timelines for receipt and utilisation of foreign funds

The Bill proposes to prescribe fixed timelines for the receipt and utilisation of foreign funds under the ‘Prior Permission’ category (i.e., where entities that are not registered under FCRA apply for prior permission to receive a fixed sum of foreign funds from a specific donor).

(d) Automatic cessation of certificates upon expiry/non-renewal/refusal

The Bill proposes to insert a new section 14B relating to ‘Cessation of certificate’. It provides that the certificate of registration shall be deemed to have ceased upon the expiry of its period of validity if a renewal application has not been made, a renewal application has been refused, or the certificate is not renewed before its expiry.

Further, a person whose certificate has ceased to exist must not receive or utilise the foreign contribution unless the certificate is renewed.

(e) Restriction on dealing with assets during suspension

Section 13 of the FCRA Act, 2010, deals with ‘Suspension of certificate’. The Bill proposes to insert a new clause to section 13(2), to provide that every person whose certificate has been suspended must not alienate, encumber, or otherwise deal with any asset created out of a foreign contribution, except with the prior approval of the Central Government.

(f) Reduced imprisonment for contravention of any provisions of FCRA

Section 35 of FCRA, 2010, deals with ‘Punishment for contravention of any provisions of the Act’. It states that whoever accepts, or assists any person, political party or organisation in accepting, any foreign contribution or any currency or security from a foreign source, in contravention of provisions of this Act or rule or order made thereunder, must be punished with imprisonment for a term which may extend to 5 years or with a fine or with both.

The Bill now proposes to reduce the maximum imprisonment from 5 years to 1 year, along with the rationalisation of penalties.

(g) Prior approval of the Central Government for initiation of investigations into FCRA-related complaints

Section 43 of the Act deals with ‘Investigation into cases under FCRA’. It states that any offences punishable under this Act may be investigated into by such authority as the Central Government may specify in this behalf.

The Bill proposes that prior approval from the Central Government must be obtained before initiating an investigation into FCRA-related complaints.

Read the FCRA Amendment Bill, 2026

3. SAIL Can Withhold Gratuity if an Ex-Employee Fails to Vacate Staff Quarters After Retirement: SC

The Supreme Court, in the matter of Management of Steel Authority of India v. Shambhu Prasad Singh [2026] 184 taxmann.com 407 (SC), held that where ex-employees failed to vacate staff quarters allotted to them during their service and continued to retain the same beyond the permissible period under SAIL’s policy, the management was entitled to withhold the gratuity amount payable to them for non-compliance with the company’s rules.

3.1 Brief Facts of the Case

In the instant case, the respondent, along with other ex-employees, was allotted staff quarters during the course of employment. Upon retirement, they sought permission to retain the quarters beyond the permitted period under SAIL’s policy, however the management declined the request. Notices were issued directing them to vacate the premises; however, they continued in possession.

The respondent challenged the eviction notices before the High Court, but the writ petition was dismissed. Subsequent appeals and review petitions were also dismissed. Aggrieved, the management carried the matter before the Supreme Court.

3.2 Supreme Court Observations

The Supreme Court observed that Rule 3.2.1(c) of the SAIL Gratuity Rules, 1978, expressly empowers the management to withhold gratuity in cases of non-compliance with company rules, including failure to vacate company accommodation. Further, it was noted that the unauthorised retention of staff quarters beyond the permissible period constitutes a breach of service conditions.

The Court further clarified that withholding of gratuity in such circumstances is justified and does not attract payment of interest for the period of such unauthorised occupation.

3.3 Supreme Court Ruling

The Supreme Court held that the management was justified in withholding gratuity payable to ex-employees who failed to vacate staff quarters within the prescribed period. Further, no interest shall be payable on the gratuity amount so withheld during the period of unauthorised occupation.

However, the Court directed that a reasonable rent of Rs. 1,000 per month shall be charged for the period of retention beyond the permissible grace period.

Read the Ruling

4. Arrest for Fake GST Invoicing Held Infirm as IO Failed to Comply with BNSS Sec. 35(3) Notice Procedure: HC

The High Court held that arrest is vitiated where the assessee is arrested prior to the time stipulated in the notice issued under section 35(3) of the BNSS, without recording reasons for such deviation. It was observed that non-compliance with the mandatory notice procedure, akin to section 41A CrPC, renders the arrest procedurally defective in the absence of justified reasons. This was held in Sameer Malik vs. Union of India [2026].

4.1 Facts

The petitioner was subjected to arrest by the Anti-Evasion Unit in connection with an investigation alleging issuance of fake invoices and wrongful availment of Input Tax Credit (ITC) through non-existent firms. Prior to such arrest, a notice under section 35(3) of the Bharatiya Nagarik Suraksha Sanhita (BNSS) was issued requiring the petitioner to appear before the investigating officer at a specified time on the same day. However, the petitioner was arrested before the scheduled time of appearance, and it was contended that such action was taken without recording any reasons for bypassing the statutory procedure prescribed for securing appearance. The petitioner sought bail on the ground that there was non-compliance with the mandatory procedural safeguards, while the investigating officer (IO) admitted that the timing mentioned in the notice was erroneous but failed to justify the premature arrest. The matter was accordingly placed before the High Court.

4.2 Held

The High Court held that the procedural safeguards embodied under section 35(3) of the BNSS, akin to those under section 41A of the Code of Criminal Procedure, were applicable to arrests made in connection with offences under section 69 read with section 132 of the CGST Act. It was observed that in cases where an arrest is effected without ensuring compliance with the notice procedure, the investigating officer is required to record valid reasons for such deviation. The Court noted that since the arrest was effected prior to the time fixed for appearance on the same day, the notice could not be said to have been effectively complied with, thereby rendering the arrest procedurally defective. In the absence of any justification for such deviation, the arrest was held to be infirm in law. Consequently, the petitioner was held entitled to a grant of bail.

Read the Ruling

5. Interest Payable on Excess TRAN-1 Credit Wrongly Availed and Retained; Adjustment from Refund Upheld: HC

The High Court held that interest is payable on excess TRAN-1 credit availed and retained. Further, the adjustment of such interest liability from refund is legally sustainable. It was observed that mere non-reflection of credit in the ECL does not absolve interest liability under section 50 of the CGST Act. This was held in KJV Alloys Conductors (P.) Ltd. vs. Union of India [2026].

5.1 Facts

The petitioner carried forward transitional credit through TRAN-1, which did not reflect in the electronic credit ledger (ECL) but was reported in GSTR-3B. The petitioner subsequently admitted that excess credit had been availed and reversed the same after a period of 630 days. The Department of Revenue demanded interest on such excess availment and retention and adjusted the same from the refund available in the cash ledger, which action was affirmed by the appellate authority. It was contended that since the credit was not reflected in the ECL, interest was not leviable and challenged the adjustment of refund towards such interest liability. The matter was accordingly placed before the High Court.

5.2 Held

The High Court held that interest liability under Section 50 read with Section 42 of the CGST Act is mandatory in cases of wrongful availment and retention of input tax credit. It was observed that the petitioner had admitted excess availment and retained such credit for a substantial period of 630 days without any evidence showing that the ECL balance had fallen below the wrongly availed amount. The Court held that mere non-reflection of credit in the ECL does not absolve liability where credit was availed and utilised through returns. It was further held that interest is compensatory in nature and arises automatically upon wrongful availment and retention of credit. Accordingly, the writ petition was dismissed.

Read the Ruling

6. Classification of Interest on Delayed Statutory Payments – Finance Cost vs Other Expense under Ind AS

The classification of interest on delayed statutory dues such as GST, TDS or municipal taxes under Ind AS is guided by the principle of substance over form, making it a matter of careful professional judgment. Although Schedule III to the Companies Act, 2013 requires disclosure of finance costs, it does not explicitly address such charges, leading to diversity in practice. ITFG Bulletin 17 (Issue 8) addresses this gap by underscoring that the presentation in the financial statements should be guided by the underlying substance of the charge, rather than merely its nomenclature.

The fundamental distinction lies in identifying whether the charge is compensatory or penal in nature. Compensatory charges arise due to delay in payment and are linked to the time value of money, thereby resembling a borrowing cost. For instance, where an entity delays payment of GST and incurs interest calculated based on the outstanding amount and the period of delay, it effectively enjoys the use of funds and pays a cost for that benefit. Such charges are therefore classified as finance costs. Conversely, charges that are imposed as a deterrent for non-compliance, such as fixed late filing fees that are not dependent on the amount or duration of delay, are penal in nature and should be recognised under other expenses.

This distinction becomes clearer through practical scenarios. Let’s say, a company delaying GST payment incurs interest computed over the period of delay, which represents compensation for the use of funds and is thus a finance cost. In another case, a company pays a fixed late filing fee for delayed compliance, which is unrelated to the time value of money and is therefore treated as an other expense.

In certain situations, both elements may coexist within a single transaction, requiring appropriate bifurcation to ensure accurate presentation. Proper classification is critical as it directly impacts financial metrics such as EBITDA, where finance costs are excluded but other expenses are included. Any misclassification can distort performance indicators, affect comparability, and potentially attract regulatory scrutiny.

Overall, the accounting treatment of such charges under Ind AS requires a principle-based evaluation, ensuring that the classification faithfully reflects the economic substance of the transaction and enhances the transparency and reliability of financial reporting.

Read the Story

7. NFRA Issues Six Inspection Reports on Chartered Accountant Firms to Strengthen Audit Quality and Compliance

The National Financial Reporting Authority (NFRA), under its mandate in Section 132 of the Companies Act, 2013, has issued six new inspection reports on Chartered Accountant firms as part of its ongoing audit quality review initiative.

These inspections, commenced in March 2025 in accordance with NFRA Rules, focus on evaluating firms’ compliance with auditing and accounting standards, the robustness of their quality control systems, governance frameworks, and audit documentation practices.

Through review of policies, targeted assessments, and sample checks of audit engagements, NFRA aims to identify gaps and drive improvements in audit quality. Importantly, these reports are not exhaustive evaluations or ratings, but are intended to highlight areas for enhancement and strengthen overall professional standards.

Read the News