The Ministry of Finance, Department of Revenue, through the Central Board of Direct Taxes (CBDT), has notified the Income-tax (Seventh Amendment) Rules, 2026, vide Notification No. 137/2026, G.S.R. 901(E), dated October 19, 2026, introducing Rule 281A and Form No. 173A in the Income-tax Rules, 2026. The amendment prescribes a reporting framework for claiming exemptions on interest income and capital gains arising from Government securities under Serial Numbers 13D and 13E of the table in Schedule IV to the Income-tax Act, 2025. The rules have been issued in exercise of powers conferred under Section 533, read with Section 11 and Schedule IV of the Income-tax Act, 2025, and came into force on the date of publication in the Official Gazette.
Under the amendment, Rule 281A has been inserted after Rule 281 of the Income-tax Rules, 2026. The newly introduced rule provides that an assessee seeking exemption under Serial Numbers 13D and 13E of Schedule IV must furnish the prescribed information in Form No. 173A. The provision establishes a specific reporting requirement for exemption claims relating to interest and capital gains from Government securities covered under the relevant entries of the Income-tax Act, 2025.
The CBDT has also introduced Form No. 173A, titled “Information to be furnished for claiming exemption on interest and capital gains from Government securities”, after Form No. 173 in the Income-tax Rules, 2026. The new form has been structured into two parts, covering basic information of the assessee and details of exempt income claimed on Government securities. The prescribed format is intended to facilitate systematic reporting of relevant securities holdings, transactions and income while claiming exemptions under the specified provisions.
Part A of Form No. 173A requires the assessee to furnish basic identification and contact details, including full name, country of residence, address in the country of residence or headquarters, Permanent Account Number (PAN), Tax Identification Number (TIN) in the country of residence, and registration number with the Securities and Exchange Board of India (SEBI) as a Foreign Portfolio Investor (FPI) or Foreign Institutional Investor (FII), wherever applicable. The assessee must also specify the tax year for which the exemption is claimed, along with an email address and contact number, including the country code.
Part B of Form No. 173A provides for reporting detailed information relating to Government securities on which exemption is claimed. The prescribed form requires disclosure of the International Securities Identification Number (ISIN), type of Government security and its tenor. The categories of securities specified in the form include Treasury Bills, fixed-rate bonds, floating-rate bonds, State Development Loans (SDLs) and other Government securities, which must be identified separately where applicable.
The notification further requires the assessee to furnish the total value of Government securities held as on 1 April, the value of securities purchased during the year, the sale consideration of securities sold during the year and the total value of securities held as on 31 March. These disclosures provide details of securities holdings and transactions undertaken during the relevant tax year and form part of the information prescribed for claiming exemption.
In addition to information on holdings and transactions, the assessee is required to report the gross amount of interest received or accrued during the tax year and the capital gains earned during the tax year in respect of the relevant Government securities. The prescribed form allows the securities-related information to be repeated wherever required, enabling separate reporting of multiple securities for which exemption is claimed.
The prescribed Form No. 173A also includes a declaration requiring confirmation that the information furnished is true to the best of the declarant’s knowledge and belief and is in accordance with the provisions of Schedule IV, Serial Numbers 13D and 13E, of the Income-tax Act, 2025. The declaration provides for the date, place, signature and name of the principal officer. The accompanying instructions specify that monetary amounts must be reported in Indian rupees unless otherwise provided.
The notification also provides a specific relaxation for the Bank for International Settlements (BIS). Under the notes accompanying Form No. 173A, disclosure of the Tax Identification Number in the country of residence and the SEBI registration number as an FPI or FII, corresponding to items 1(v) and 1(vi) of the form, has been made optional for the BIS. The relaxation is limited to these specified reporting particulars.
The introduction of Rule 281A and Form No. 173A establishes a defined information-reporting mechanism for taxpayers claiming exemptions on interest and capital gains from Government securities under the specified entries of Schedule IV. The prescribed disclosures are expected to facilitate verification of exemption claims through information on taxpayer identity, Government securities holdings, transactions and income, while bringing greater clarity to the procedural requirements for claiming these exemptions.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/Notification-of-Rule-281A-and-form-No.-173A-in-respect-of-exemptions-provided-under-Sl.-No.-13D-and-13E-of-schedule-IV-to-Income-tax-Act-2025.pdf
