CBDT drops arrest, detention provisions from tax recovery rules

The Central Board of Direct Taxes (CBDT) has eliminated arrest and detention provisions from tax recovery rules, effective from April 1, 2026. Tax officers are barred from arresting individuals for tax defaults. The amendment, introduced in the Income-tax (Fourth Amendment) Rules, 2026, also removes the "arrest and detention" clause when the defaulter passes away.

This change aligns with the Budget 2026-27's decision to decriminalize technical defaults, such as failure to produce books of accounts and documents, and TDS payments. The Budget emphasized that only minor offenses will result in fines, not prosecution. The CBDT amended Rule 225 of the Income-tax Rules, 2026, which governs tax arrears recovery, including the attachment and sale of movable and immovable property.

Richa Sawhney, a tax partner at Grant Thornton Bharat, noted that tax recovery will continue through asset attachment and sale, but personal arrest will no longer be part of the recovery process. The amendment brings Rule 225 in line with the Finance Act, 2026, shifting towards property-based recovery measures. Existing valuers and authorized income-tax practitioners have an additional six months, until March 31, 2027, to complete registration under the new Income-tax Act, 2025 framework.

The registration forms now require detailed disclosures about qualifications, experience, and eligibility. Form 169 is used by individuals seeking valuer registration, while Form 171 is for authorized income-tax practitioners. The registration framework aims to ensure that valuation assignments for tax purposes are conducted by qualified and independent professionals.