Apply for waiver of tax penalty using new form

On October 8, 2026, the Central Board of Direct Taxes (CBDT) introduced a revised Form 161, allowing eligible taxpayers to apply for waiver of penalties due to misreporting of income or other cases. This revision enables taxpayers to resolve tax disputes earlier, reduce litigation, and avoid higher penalty liabilities. Previously, Form 161 did not permit applications for penalties involving misreporting of income.

Chartered Accountant Suresh Surana welcomed the amendment, stating it provides a clearer procedure for taxpayers to seek relief and immunity under the Income-tax Act, 2025. However, the relief is conditional and subject to specific requirements outlined in Section 440 of the Income-tax Act, 2025.

To apply for penalty waiver through Form 161, taxpayers must fulfill several conditions. They must pay the tax and interest due within the specified period mentioned in the notice of demand, and for penalties related to misreporting of income under Sections 439(11)(a) to (f), pay an additional income-tax equivalent to 100% of the tax on the under-reported income. For misreporting under Section 439(11)(g), the additional tax is 120% of the tax on the under-reported income, also payable within the specified period.

Moreover, taxpayers cannot have filed an appeal against the relevant assessment or penalty order, and the application must be submitted to the Assessing Officer within one month of receiving the order. The revised form requires detailed information about the assessment, under-reported income, tax liability, and payments made, along with a declaration and an undertaking not to file an appeal during the specified period.

After submitting Form 161, the Assessing Officer will examine the application within three months and provide an opportunity for the taxpayer to be heard before rejecting it. If accepted, the taxpayer cannot appeal the assessment or reassessment order. Taxpayers must assess their eligibility, ensure timely payment of taxes and additional tax, and consider the implications of waiving their right to appeal.