The Bombay Chartered Accountants’ Society (BCAS) has submitted a post-Budget representation to the Finance Ministry, flagging concerns and suggesting amendments to provisions in the Finance Bill, 2026.
In its memorandum addressed to Finance Minister Nirmala Sitharaman and CBDT Chairman Ravi Agrawal, the society acknowledged the government’s efforts toward tax simplification and compliance reforms, but sought reconsideration of several proposed changes relating to direct taxes.
Combined assessment and penalty orders
Among key issues, BCAS has opposed the proposal to issue a combined order for assessment and penalty. It argued that assessment proceedings, which determine taxable income, and penalty proceedings, which are quasi-criminal in nature, are fundamentally distinct. According to the representation, merging the two could result in mechanical levy of penalties, higher reflected tax demands, and increased litigation rather than reduced pendency.
The society also warned that, in the case of listed companies, higher combined demands could trigger mandatory disclosures and potentially create market volatility. It recommended maintaining the existing framework of separate orders.
Interest deduction against dividend income
BCAS has also objected to the proposed restriction on deduction of interest expenses against dividend income. Currently, interest expenditure up to 20% of dividend income is allowed as a deduction. The society said removal of this benefit could adversely affect sectors such as infrastructure, real estate and financial services, especially where borrowings are undertaken at the parent or REIT level. It recommended maintaining the status quo and preserving the principle of taxing “real income”.
Minimum Alternate Tax (MAT) changes
On MAT provisions, BCAS has suggested that the exemption for foreign companies under presumptive taxation should not be restricted only to those deriving income “solely” from specified businesses. It argued that incidental income such as bank interest or capital gains should not disqualify such entities from MAT relief.
It further sought parity in carry-forward of MAT credit for companies transitioning to the new tax regime, recommending that entities shifting in Assessment Year 2026-27 should also be allowed to carry forward accumulated credits.
Prosecution and decriminalisation
Referring to recommendations of NITI Aayog, BCAS has called for full decriminalisation of TDS/TCS and return-filing lapses, stating that prosecution provisions currently apply even to unintentional defaults. It has also sought removal of the “reverse burden of proof” on taxpayers in prosecution matters and recommended narrowing proposed restrictions on immunity from penalty and prosecution.
Other tax proposals
The representation covers a range of additional issues, including:
- Seeking grandfathering of capital gains exemption on Reserve Bank of India-issued Sovereign Gold Bonds purchased in the secondary market, with prospective application of any withdrawal of exemption.
- Allowing reasonable cause relief in cases of delay in furnishing tax audit reports, instead of imposing a mandatory graded fee.
- Rationalising TDS rates on professional and technical services to reduce classification disputes.
- Clarifying surcharge applicability on additional tax in buyback cases involving promoters.
- Granting retrospective effect to curative amendments to reduce litigation.
- Ensuring interest under Section 234B is not levied in cases where tax arises due to retrospective amendments.
FAST Disclosure Scheme 2026
On the proposed FAST Disclosure Scheme, BCAS has recommended removal of the ₹5 crore asset-value threshold for eligibility in certain cases, particularly where there is no tax loss to the exchequer and the lapse relates only to non-disclosure of foreign assets in the return.
It also sought clarification that a single fee of ₹1 lakh should apply per assessment year in aggregate, rather than per asset, and recommended broadening eligibility to cover cases where assets were disclosed elsewhere in the return but not in the specified schedule.
BCAS said its suggestions are intended to provide “constructive, practical and implementable inputs” while finalising the Finance Bill, 2026, and framing subsequent rules and guidelines.
