Govt announces decriminalisation of non-production of books of accounts where payment made in kind

Alongside the decriminalisation measures, the finance minister proposed changes in timelines and processes for filing income tax returns to provide greater flexibility to taxpayers.

• Non-production of accounts decriminalized, now incurs fines for minor offenses.
• Taxpayers get extended time to revise returns, up to March 31 with a nominal fee
• Small foreign asset holders, students get immunity for disclosures

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Non-production of books of accounts and related documentation will no longer be treated as a criminal offence, Finance Minister Nirmala Sitharaman announced during her Budget 2026 speech on Sunday, signalling a broader push towards reducing litigation and easing compliance.

“Non-production of books of accounts and documents and requirement of TDS payment where payment is made in kind is being decriminalised. Further minor offences will attract fine only. The remaining prosecutions will be graded commensurate with the quantum of offences. They will entail only simple imprisonment of maximum two years…” Sitharaman said.

Alongside the decriminalisation measures, the finance minister proposed changes in timelines and processes for filing income tax returns to provide greater flexibility to taxpayers. She said the government plans to stagger filing deadlines across categories and allow revisions over a longer period.

“I propose to extend time available for revising returns from 31st December to up to 31st March with the payment of a nominal fee. I also propose to stagger the timeline for filing of tax returns – individuals with ITR 1 and ITR 2 will continue to file till 31st July and non-audit business cases or trust are proposed to be allowed time till 31st August,” she said.

The Budget also addressed issues related to foreign asset disclosures, particularly for small-value holdings and specific groups such as students.

“There is no penalty presently for non-disclosure of non-immovable foreign assets with aggregate value of less than Rs 20 lakh. I propose to also provide them with immunity from prosecution with retrospective effect from October 1, 2024,” Sitharaman said.

She further announced, “For 1-time six-month foreign asset disclosure scheme for a special set of people including students who didn’t disclose overseas assets/income (limit Rs 1 crore) and those who did disclose such assets or income (asset value up to Rs 5 crore).”

Taken together, the proposals claim to simplify tax administration, reduce criminal proceedings for procedural lapses, and encourage voluntary compliance through more accommodative policies.