New Tax Regime FY 2026-27: Standard Deduction, Section 10(14) Allowances, Leave Encashment & Gratuity Exemption — Tax Planning Framework for Salaried Employees

By CA Surekha Ahuja

"The new tax regime has not ended tax planning. It has changed the art of tax planning from investment selection to intelligent salary structuring and benefit optimisation."

In Part 1 of this series, we examined the misconception that the new tax regime has eliminated all tax-saving opportunities.

In Part 2, we discussed Section 80CCD(2) — Employer Contribution to NPS, which has become one of the most powerful tax planning tools available to salaried employees.

However, employer NPS contribution is not the only benefit that survives under the new tax regime.

Several other important provisions continue to provide tax relief, including:

• Standard Deduction under Section 16(ia)
• Duty-related allowances under Section 10(14)
• Leave Encashment exemption under Section 10(10AA)
• Gratuity exemption under Section 10(10)
• Rebate under Section 87A subject to applicable conditions

The key is to understand that the new tax regime does not reward traditional investment-based tax saving.

Instead, it rewards:

Genuine employment benefits + retirement planning + proper salary design.

1. Standard Deduction: The Simplest Benefit Available to Every Salaried Employee

The standard deduction remains one of the most important benefits under the new tax regime because:

• It is automatic
• No investment is required
• No proof or documentation is required
• It is available to eligible salaried taxpayers

Section 16(ia): Standard Deduction

For Financial Year 2026-27:

Standard Deduction: ₹75,000

This means salary income is reduced by ₹75,000 before calculating taxable income.

Example:

Particulars	Amount
Gross Salary	₹15,00,000
Less: Standard Deduction	₹75,000
Taxable Salary	₹14,25,000

The importance of standard deduction increases under the new regime because several other deductions are no longer available.

2. Section 10(14): Duty-Related Allowances — A Frequently Misunderstood Benefit

A common misconception among employees is:

"All allowances are taxable under the new tax regime."

This is incorrect.

Certain allowances granted for performing official duties continue to receive exemption under Section 10(14), subject to prescribed conditions.

The principle is simple:

Where an allowance is provided to meet expenses incurred wholly, necessarily and exclusively for official duties, tax exemption may continue.

Types of Duty-Related Allowances Covered Under Section 10(14)

Examples include:

Allowance	Tax Treatment
Travel allowance for official duties	Exempt subject to conditions
Conveyance allowance for official duties	Exempt subject to conditions
Helper allowance	Exempt to the extent of eligible expenditure
Academic/research allowance	Exempt subject to conditions
Uniform allowance	Exempt to the extent utilised

The exemption is generally linked to:

• Actual expenditure incurred
• Purpose of allowance
• Prescribed limits
• Employer records

Documentation is Critical

Employees often lose legitimate tax benefits because of poor documentation.

Important records include:

✓ Employer policy
✓ Salary structure details
✓ Bills and supporting documents wherever required
✓ Proof of official purpose
✓ Internal reimbursement records

A genuine business-related expense should be properly supported.

3. Leave Encashment Exemption Under Section 10(10AA)

Leave encashment is an important retirement-related benefit for salaried employees.

Under the new tax regime, eligible leave encashment exemption continues to be available.

For employees other than Government employees, exemption is subject to prescribed conditions and limits.

The exemption is calculated based on the prescribed formula involving:

• Actual leave encashment received
• Average salary
• Unutilised earned leave
• Statutory ceiling

Maximum Exemption Limit

For eligible non-government employees:

₹25 lakh (lifetime limit)

subject to fulfilment of conditions.

Important Point for Employees Changing Jobs

In today's employment environment, many employees change jobs multiple times during their career.

Employees should remember:

Leave encashment exemption is subject to lifetime limits.

Therefore, employees should maintain records of exemptions already claimed from earlier employers.

Failure to track earlier claims may result in incorrect tax calculations.

4. Gratuity Exemption Under Section 10(10)

Gratuity is a statutory retirement benefit provided to employees who complete the prescribed period of service.

The tax treatment depends upon the category of employee.

Broadly:

Employee Category	Tax Treatment
Government employees	Exempt subject to conditions
Employees covered under Payment of Gratuity Act	Exemption subject to statutory formula
Other employees	Exemption subject to prescribed conditions

For eligible employees, the maximum exemption limit is:

₹25 lakh

subject to applicable conditions.

Gratuity Planning in the New Employment Era

Earlier, gratuity was generally associated only with retirement.

Today, employees frequently:

• Change organisations
• Move between sectors
• Receive gratuity after completing eligibility periods

Therefore, understanding gratuity taxation has become important even for younger professionals.

Employees should maintain:

• Previous employment records
• Gratuity received details
• Service period details

5. Section 87A Rebate: The Zero Tax Possibility

The new tax regime provides rebate benefits under Section 87A subject to applicable income limits and conditions.

For eligible taxpayers, proper utilisation of:

• Standard deduction
• Employer NPS contribution
• Section 10(14) exemptions
• Retirement benefit exemptions

can significantly reduce taxable income.

In suitable cases, this may result in:

Tax liability becoming zero.

However, taxpayers must carefully examine eligibility conditions before planning.

Complete New Tax Regime Salary Planning Framework

A practical salary planning approach should consider the following:

Benefit	Planning Approach
Standard Deduction	Automatically available
Employer NPS Contribution	Request inclusion in salary structure
Duty Allowances	Ensure genuine business purpose and documentation
Leave Encashment	Track lifetime exemption utilisation
Gratuity	Maintain employment records
Section 87A Rebate	Check eligibility before planning

New Tax Regime: What Employees Should Stop Doing

Many employees continue following old tax planning habits.

They should reconsider:

❌ Making unnecessary investments only for tax saving
❌ Ignoring employer-provided benefits
❌ Choosing salary structure without tax analysis
❌ Comparing regimes only on the basis of deductions

What Employees Should Start Doing

The new approach should be:

✓ Review salary structure annually
✓ Evaluate employer NPS option
✓ Understand exempt allowances
✓ Maintain proper documentation
✓ Compare old and new regimes before final selection

Final Takeaway

The new tax regime does not say:

"Tax planning is over."

It says:

"Tax planning must become smarter."

The era of blindly investing ₹1.5 lakh under Section 80C to save tax is changing.

The future of salary tax planning lies in:

Smart compensation design + retirement planning + understanding surviving exemptions.

For salaried employees, the biggest opportunity is not hidden in tax-saving investments.

It is hidden inside their salary structure.

Section 80CCD(2) Under New Tax Regime FY 2026-27: The Hidden Tax Savings Every Salaried Employee Should Know - Part 2

 By CA Surekha Ahuja

The new tax regime has taken away many traditional deductions, but it has not taken away the opportunity to plan taxes. The difference is that tax planning has moved from personal investments to intelligent salary structuring.

In Part 1 of this series, we examined an important misconception among salaried employees:

"The new tax regime has no tax-saving opportunities."

This belief is incorrect.

While deductions such as Section 80C, Section 80D, HRA and LTA are no longer available in the same manner under the new tax regime, the law continues to encourage certain benefits that promote:

• Long-term retirement security
• Employer-sponsored savings
• Genuine employment-related benefits
• Financial discipline

Among all the benefits that continue under the new tax regime, Section 80CCD(2) has emerged as one of the most powerful tax planning tools for salaried employees.

It is unique because:

The employee does not need to invest his or her own money.
The employer contributes to NPS, and the employee gets the tax benefit.

This makes Section 80CCD(2) different from traditional tax-saving investments. It is not merely a tax deduction; it is a structured approach to building retirement wealth while reducing taxable income.

Section 80CCD(2): The Tax Benefit That Survived the New Tax Regime

Section 80CCD(2) allows an employee to claim deduction for the contribution made by the employer towards the employee’s National Pension System (NPS) Tier I account.

The benefit is available over and above many other deductions and continues even when the employee opts for the new tax regime.

The key principle is:

Employer contribution to NPS is not treated merely as salary. It becomes a tax-efficient retirement benefit.

Why Section 80CCD(2) Has Become the Cornerstone of New Tax Regime Planning

Under the old tax regime, employees commonly planned taxes through:

• Section 80C investments
• Life insurance premiums
• Public Provident Fund
• ELSS investments
• Home loan benefits
• Medical insurance deductions

However, under the new tax regime, the focus has shifted.

The question is no longer:

"How much can I invest to save tax?"

The better question is:

"How can my salary structure be designed to maximise tax efficiency?"

Section 80CCD(2) directly addresses this change.

How Section 80CCD(2) Works

The mechanism is simple:

Employer contributes → Employee's NPS account receives contribution → Employee claims deduction → Taxable income reduces

Example:

An employee has:

Particulars	Amount
Basic Salary	₹15,00,000
Employer NPS contribution @14%	₹2,10,000

The employee can claim deduction of ₹2,10,000 under Section 80CCD(2), subject to applicable conditions.

The benefit:

Particulars	Amount
Reduction in taxable income	₹2,10,000
Approximate tax saving at 30% slab plus cess	Around ₹65,500

Thus, the employee receives a dual advantage:

Immediate tax saving + long-term retirement corpus creation

Who Can Claim Benefit Under Section 80CCD(2)?

The benefit is available only where there is an employer-employee relationship.

Employee Category	Eligibility
Private sector employees	Available
Central Government employees	Available
State Government employees	Available
Employees covered under NPS	Available subject to conditions
Self-employed individuals	Not available

A self-employed person cannot claim this benefit because there is no employer contribution involved.

Quantum of Deduction Under Section 80CCD(2)

For employees covered under the new tax regime, employer contribution up to:

14% of Salary

is eligible for deduction, subject to prescribed conditions.

For this purpose, salary generally means:

Basic Salary + Dearness Allowance (where applicable)

It does not include:

• Bonus
• Commission
• Other allowances
• Perquisites

Therefore, salary structure becomes extremely important.

Employer NPS Contribution vs Employee NPS Contribution

A common area of confusion is the difference between employee contribution and employer contribution.

Particulars	Employee Contribution	Employer Contribution
Relevant section	Section 80CCD(1) / 80CCD(1B)	Section 80CCD(2)
Who contributes?	Employee	Employer
Personal funds required?	Yes	No
Benefit under new tax regime	Limited	Available
Salary restructuring required	No	Yes

The practical advantage of Section 80CCD(2) is that it provides an additional tax planning avenue without requiring the employee to reduce current savings.

The ₹7.5 Lakh Overall Employer Contribution Limit

Employees should also be aware of the combined ceiling prescribed under the Income-tax Act.

The aggregate employer contribution towards:

• NPS
• Recognised Provident Fund
• Approved Superannuation Fund

is considered for the purpose of determining taxable perquisite.

If the aggregate employer contribution exceeds ₹7.5 lakh during the financial year, the excess amount becomes taxable.

Therefore, employees receiving high employer retirement benefits should carefully monitor this limit.

Salary Restructuring: The Real Power of Section 80CCD(2)

The biggest advantage of Section 80CCD(2) comes through salary structuring.

Consider an employee with a fixed annual CTC.

Instead of receiving the entire amount as taxable salary, part of the compensation can be structured as employer NPS contribution.

Example:

Before Restructuring

Component	Amount
Basic Salary and taxable components	₹40,00,000
Total CTC	₹40,00,000

After Restructuring

Component	Amount
Basic Salary and other components	₹37,20,000
Employer NPS Contribution	₹2,80,000
Total CTC	₹40,00,000

The employee gets:

✓ Lower taxable income
✓ Tax saving
✓ Retirement corpus creation
✓ No personal cash outflow

Important Points Employees Should Consider

1. Employer Approval is Necessary

An employee cannot independently contribute to NPS and claim Section 80CCD(2).

The benefit is available only when:

The employer makes the contribution as part of the salary structure.

2. Optimum Timing Matters

The benefit should ideally be considered:

• At the time of joining employment
• During annual salary restructuring
• During appraisal discussions

Waiting until the end of the year may limit the opportunity.

3. Employees Changing Jobs Must Track Contributions

In today's employment environment, where job changes are frequent, employees should maintain records of:

• Employer NPS contributions by previous employer
• Employer NPS contributions by current employer
• Total contribution during the financial year

This becomes important for monitoring the overall ₹7.5 lakh ceiling.

Common Mistakes Employees Make

Mistake 1: Assuming New Regime Means No Tax Planning

The new regime has changed the method of planning, not eliminated planning.

Mistake 2: Ignoring Employer NPS Option

Many employees prefer higher monthly cash salary without considering the long-term tax impact.

Mistake 3: Confusing Personal NPS with Employer NPS

Personal NPS contribution and employer NPS contribution operate under different provisions and provide different benefits.

Can Section 80CCD(2) Help in Zero Tax Planning?

For eligible employees, tax planning under the new regime requires a combined approach:

• Standard deduction
• Employer NPS contribution under Section 80CCD(2)
• Eligible Section 10(14) allowances
• Retirement benefit exemptions
• Proper salary restructuring

In suitable cases, these provisions can significantly reduce taxable income and may help eligible taxpayers utilise rebate benefits under Section 87A.

Key Takeaway

The new tax regime has changed the language of tax planning.

Earlier, employees asked:

"Which investment should I make to save tax?"

Today, the smarter question is:

"How should my salary package be structured to reduce tax legally and build financial security?"

Section 80CCD(2) represents this new approach.

It is not merely a tax deduction.

It is a bridge between:

Today's tax efficiency and tomorrow's retirement security.

New Tax Regime FY 2026-27: What Still Saves Tax for Salaried Employees? The Benefits You Cannot Afford to Miss | Part 1

 By CA Surekha Ahuja

Part 1 – What Still Saves Tax Under the New Regime? The Truth Every Salaried Employee Should Know

"The new tax regime has removed many deductions. It has not removed tax planning."

That is perhaps the biggest misconception among salaried taxpayers today.

Ever since the new tax regime became the default tax regime, many employees have assumed that tax planning is no longer possible because deductions such as Section 80C, 80D, HRA and LTA are no longer available in most cases.

Unfortunately, this misunderstanding has resulted in thousands of employees paying significantly higher taxes than necessary or missing valuable retirement benefits simply because they were unaware of the provisions that continue to be available.

The reality is very different.

The Government has consciously shifted the focus from encouraging personal tax-saving investments to promoting retirement planning, genuine employment-related reimbursements and a simpler tax structure. Consequently, while several traditional deductions have been withdrawn, some of the most valuable tax benefits have been retained under the new regime.

For many salaried employees, these surviving provisions can still reduce taxable income substantially. In suitable cases, they may even help bring taxable income within the limit eligible for rebate under Section 87A, resulting in nil tax liability.

Understanding these provisions is therefore no longer optional. It is an essential part of salary structuring and financial planning.

In this comprehensive guide, we shall examine the important deductions, exemptions and planning opportunities that continue under the new tax regime, with special emphasis on:

• Employer's contribution to the National Pension System under Section 80CCD(2)
• Duty-related allowances exempt under Section 10(14)
• Standard deduction
• Leave encashment and gratuity exemptions
• The ₹7.5 lakh aggregate employer contribution ceiling
• Practical salary restructuring strategies
• The zero-tax planning framework for eligible employees
• Important considerations for employees changing jobs during the year

Before discussing each provision in detail, it is useful to understand what actually survives under the new tax regime.

What Still Survives Under the New Tax Regime?

One of the biggest myths surrounding the new tax regime is that "there are no deductions left."

This statement is incorrect.

Although several popular deductions have been withdrawn, Parliament has consciously retained provisions that encourage long-term retirement savings, reimburse genuine official expenses and protect important retirement benefits.

The following table provides a complete snapshot of the principal deductions and exemptions that continue to be available under the new tax regime.

Table 1 – Major Deductions and Exemptions Available Under the New Tax Regime (FY 2026–27)

Section	Nature of Benefit	Maximum Benefit / Condition	Status
Section 16(ia)	Standard Deduction	₹75,000	Available
Section 80CCD(2)	Employer's contribution to NPS Tier I	Up to 14% of Basic Salary plus Dearness Allowance, subject to overall limits	Available
Section 10(10AA)	Leave Encashment	Exemption up to ₹25 lakh (lifetime limit subject to law)	Available
Section 10(10)	Gratuity	Exemption up to ₹25 lakh (subject to applicable conditions)	Available
Section 10(14)(i)	Duty-related allowances	Exempt to the extent of actual expenditure incurred	Available
Section 10(14)(ii)	Specified prescribed allowances	Exemption subject to prescribed monetary limits	Available
Section 17(2)(vii)	Aggregate employer contribution to retirement funds	Excess over ₹7.5 lakh taxable as perquisite	Restriction
Section 87A	Rebate	Subject to prescribed taxable income limit	Available

What Has Actually Changed?

The philosophy of the new tax regime is fundamentally different from the earlier regime.

Earlier, the tax law rewarded taxpayers who invested in specified financial products such as LIC policies, PPF, ELSS, tax-saving fixed deposits and medical insurance.

The new regime, on the other hand, rewards taxpayers who build long-term retirement savings through employer-sponsored retirement schemes and who receive genuine reimbursements for expenses incurred in the course of employment.

In simple words,

Personal tax-saving investments have largely disappeared.

Retirement-oriented employer contributions continue to enjoy significant tax benefits.

Official duty-related reimbursements continue to receive tax exemption.

This distinction is extremely important because many employees continue making investment decisions based on the old regime without reviewing whether their salary structure itself can be made more tax efficient.

The Four Biggest Tax Benefits Still Available

Even after the introduction of the new tax regime, four provisions continue to play a central role in tax planning.

1. Standard Deduction

Every eligible salaried employee continues to receive the standard deduction without making any investment or incurring any expenditure.

This deduction directly reduces taxable salary.

2. Employer's Contribution to NPS under Section 80CCD(2)

This is arguably the single most powerful tax-saving provision available under the new tax regime.

Where the employer contributes to the employee's Tier I NPS account, the employee may claim deduction under Section 80CCD(2), subject to the prescribed conditions.

Unlike many deductions under the old regime, this benefit can substantially reduce taxable income while simultaneously creating a retirement corpus.

We shall discuss this provision in detail in the next part of this guide.

3. Duty-Related Allowances under Section 10(14)

Many taxpayers incorrectly assume that every allowance has become taxable.

That is not correct.

Allowances granted exclusively for the performance of official duties, such as specified conveyance, travel, helper, uniform and similar allowances, continue to enjoy exemption to the extent of actual expenditure incurred, subject to the statutory conditions.

Proper documentation, bills and employer policies become extremely important while claiming these exemptions.

4. Retirement Benefits

Certain retirement-related receipts continue to enjoy substantial tax exemptions even under the new regime, including:

• Leave encashment
• Gratuity
• Other eligible retirement benefits subject to the respective statutory provisions

These exemptions often become relevant not only on retirement but also when employees change jobs during their careers.

Key Takeaway

The new tax regime should not be viewed as a regime without deductions.

Instead, it should be viewed as a regime that rewards structured salary planning rather than investment-driven tax planning.

Employees who understand employer NPS contributions, official reimbursements, retirement exemptions and salary structuring can still achieve significant tax efficiency without relying on traditional deductions such as Section 80C or Section 80D.

The most important of these surviving provisions is Section 80CCD(2), which has become the cornerstone of tax planning for salaried employees under the new regime.

In the next part, we shall examine this provision in detail, including eligibility, conditions, salary definition, employer obligations, practical illustrations and common mistakes that employees and HR departments frequently make.

Resignation, Retirement, VRS & Lay-Off Tax Rules: Gratuity, Leave Encashment and Exit Benefits Guide AY 2026-27

 By CA Surekha S Ahuja

Your exit from employment is not just a career decision; it is also a financial decision. Understanding the tax treatment of resignation, retirement, VRS and lay-off benefits can help you protect your hard-earned money.

Understand tax rules for resignation, retirement, VRS and layoffs. Complete guide on gratuity exemption, leave encashment under Section 10(10AA), VRS compensation under Section 10(10C) and retrenchment compensation under Section 10(10B).

Introduction: Why Understanding Job Exit Tax Rules Matters

With frequent job changes, corporate restructuring and layoffs becoming common, employees must understand the difference between:

• Resignation
• Retirement
• Voluntary Retirement Scheme (VRS)
• Termination
• Lay-off and Retrenchment

The mode of separation determines the treatment of important benefits such as:

✔ Gratuity
✔ Leave encashment
✔ VRS compensation
✔ Retrenchment compensation
✔ Provident Fund
✔ Pension benefits

A simple difference in terminology used in your relieving letter or settlement document can impact your tax position.

Resignation vs Retirement vs VRS vs Lay-Off: Key Differences

Type of Exit	Meaning	Who Initiates	Tax & Benefit Impact
Resignation	Employee voluntarily leaves service before retirement age	Employee	Normal exit benefits; no VRS exemption
Retirement	Exit on attaining retirement age or under service rules	Employer/Employee as per rules	Retirement benefits become payable
VRS	Early retirement under an employer-approved scheme	Employee under employer scheme	Section 10(10C) benefit may apply
Termination	Employer ends employment	Employer	Depends on reason and settlement terms
Lay-off/Retrenchment	Job loss due to business restructuring	Employer	Retrenchment compensation provisions may apply

Leave Encashment Tax Exemption under Section 10(10AA)

One of the Most Misunderstood Employee Benefits

Many employees believe that leave encashment exemption is available only on retirement.

However, Section 10(10AA) covers leave encashment received:

• On retirement,
• On resignation,
• Or on other cessation of employment.

Therefore, leave encashment received at the time of resignation may also qualify for exemption, subject to the conditions and limits prescribed under the Income-tax Act.

Tax Treatment of Leave Encashment

Category of Employee	Tax Treatment under Section 10(10AA)
Government employee	Fully exempt
Non-government employee	Exempt up to the prescribed limit; balance taxable

For non-government employees, exemption is restricted to the least of the prescribed conditions, including:

• Actual leave encashment received,
• Prescribed monetary ceiling,
• Salary-based calculation,
• Value of eligible accumulated leave.

Any amount exceeding the exemption limit is taxable under the head Income from Salary.

Gratuity Tax Exemption under Section 10(10)

Gratuity is payable to eligible employees who satisfy the conditions under the applicable gratuity law or employer scheme.

The exemption under Section 10(10) depends upon:

• Whether the employee is covered under the Payment of Gratuity Act,
• Type of employer,
• Salary and service period,
• Statutory limits applicable at the time of payment.

Employees should obtain a proper gratuity calculation before accepting the final settlement.

VRS Compensation Tax Benefit under Section 10(10C)

A genuine Voluntary Retirement Scheme (VRS) can provide a specific tax benefit.

Compensation received under a qualifying VRS may be exempt up to ₹5 lakh under Section 10(10C), provided the scheme satisfies the conditions prescribed under Rule 2BA of the Income-tax Rules.

Important:

A voluntary resignation with an ex-gratia payment is not automatically a VRS.

Employees should check:

✔ Whether a formal VRS scheme exists
✔ Whether Rule 2BA conditions are fulfilled
✔ Whether the payment is correctly described in settlement documents

Retrenchment Compensation and Lay-Off Benefits

When an employee loses a job due to:

• Business restructuring,
• Role elimination,
• Workforce reduction,

the payment may be treated as retrenchment compensation.

Eligible retrenchment compensation may qualify for exemption under Section 10(10B), subject to applicable conditions.

The reason mentioned in the termination letter is extremely important.

Exit Benefits Tax Comparison

Benefit	Resignation	Retirement	VRS	Lay-Off/Retrenchment
Gratuity	Subject to eligibility	Available	Available	Available if eligible
Leave Encashment	Section 10(10AA) subject to limits	Section 10(10AA)	Section 10(10AA)	Section 10(10AA)
VRS Compensation	Not available	Not applicable	Section 10(10C) possible	Not available
Retrenchment Compensation	Not applicable	Not applicable	Not applicable	Section 10(10B) possible

Common Mistakes Employees Make During Job Exit

❌ Treating voluntary separation as VRS without checking conditions

❌ Accepting settlement documents without checking tax treatment

❌ Ignoring leave encashment exemption under Section 10(10AA)

❌ Not preserving relieving letters and settlement documents

❌ Withdrawing PF/superannuation benefits without tax planning

Checklist Before Leaving Your Job

Before signing your exit documents, collect:

✅ Resignation acceptance / retirement order / VRS approval letter
✅ Full and final settlement statement
✅ Form 16
✅ Gratuity calculation
✅ Leave encashment calculation
✅ VRS scheme document (if applicable)
✅ PF and pension transfer details

Key Takeaways

✔ Resignation, retirement, VRS and lay-off are not the same under tax law.

✔ Section 10(10AA) provides an important exemption for leave encashment, including cases of resignation, subject to limits.

✔ Section 10(10C) applies only to genuine qualifying VRS schemes.

✔ Section 10(10B) may provide relief for eligible retrenchment compensation.

✔ Correct documentation is as important as correct computation.

Final Thought

A career exit is not merely the end of employment; it is a financial transaction involving your accumulated rights and benefits.

Before signing your resignation, retirement or separation papers, understand the tax implications of every component of your settlement. The right classification of your exit can protect your benefits and reduce avoidable tax costs.

CBDT Brings Foreign Asset & Income Data into AIS and Form 26AS: What Every Taxpayer Must Know Before Filing the Next ITR

 By CA Surekha Ahuja

A Complete 2026 Guide to AEOI Reporting, Foreign Asset Disclosure, Schedule FA, Black Money Act Risks and Practical Compliance

The Income-tax Department is not getting new information about your foreign assets. It has been receiving it for years. What has changed is that you will now be able to see much of that information yourself.

That single change could significantly reshape how taxpayers with overseas financial interests approach compliance.

On 8 July 2026, the Central Board of Direct Taxes (CBDT) issued an important order authorising the Director General of Income-tax (Systems) to upload information received under the Automatic Exchange of Information (AEOI) framework into the Annual Information Statement (AIS – Form 168) and Form 26AS.

This order does not introduce a new tax, nor does it create any new disclosure obligation. Instead, it makes information that the Income-tax Department has already been receiving under international information-sharing agreements visible to taxpayers through their tax portal.

For many taxpayers, this will be the first opportunity to compare what foreign financial institutions have reported to India with what has actually been disclosed in their Income-tax Returns.

The message is simple:

The era of "the Department may not know" is ending. The era of proactive reconciliation has begun.

At a Glance

Particulars	Details
CBDT Order	8 July 2026
Legal basis	Section 239 of the Income-tax Act, 2025 read with Rule 245(2) of the Income-tax Rules, 2026
What changes	AEOI information will be uploaded into AIS and Form 26AS
Initial upload	CY 2022 and the combined block of CY 2023–2024
Future uploads	Rolling uploads within 90 days from receipt
Who should review	Every taxpayer with overseas financial interests

Who Should Read This Article?

This guide is especially relevant if you are:

• A resident holding a foreign bank account or investment.
• An NRI who became resident during any part of the year.
• An employee with foreign ESOPs or RSUs.
• A person who has remitted funds overseas under the Liberalised Remittance Scheme (LRS).
• A student who studied or worked abroad.
• A returning Indian.
• A seafarer.
• A Chartered Accountant advising clients with cross-border financial interests.

Why This CBDT Order Matters

For years, India has been receiving financial information from numerous jurisdictions under the Common Reporting Standard (CRS), FATCA-related arrangements, and tax treaties.

Until now, much of this information remained within the Department for risk assessment and scrutiny selection.

The CBDT order changes that by allowing taxpayers to view much of the same information through AIS and Form 26AS.

This promotes transparency, encourages voluntary compliance and allows genuine reporting errors to be identified before they become assessment issues.

What Information May Appear?

Depending on what has been reported by the foreign jurisdiction, AIS may include:

Information	Examples
Foreign bank accounts	Institution, jurisdiction, balance, interest
Investment accounts	Foreign shares, ETFs, mutual funds
Dividend income	Overseas investments
Sale proceeds	Disposal of foreign securities
Custodial accounts	Brokerage holdings
Investment-linked insurance	Foreign insurance products
Interests in foreign entities	Shares, debt, partnership interests
Controlling person information	Certain trusts and entities

Myths vs Reality

Myth	Reality
My foreign account is not in AIS, so I need not disclose it.	Incorrect. Disclosure obligations arise under the law, not from AIS.
Every AIS entry is correct.	AIS should always be reconciled with your own records.
Small foreign balances are exempt.	Reporting obligations generally do not depend on the size of the balance.
Only wealthy taxpayers are affected.	Anyone with reportable foreign assets or income should review their position carefully.

The 8-Step Compliance Plan

1. Download AIS and Form 26AS.
2. Gather all overseas financial records.
3. Prepare a reconciliation statement.
4. Identify and address genuine omissions where legally permissible.
5. Submit AIS feedback if any entry is incorrect.
6. Re-evaluate your residential status.
7. Assess potential Black Money Act exposure with professional advice where appropriate.
8. Make AIS reconciliation an annual compliance exercise.

Common Mistakes

Some of the most frequent reporting errors include:

• Reporting foreign income but omitting Schedule FA.
• Ignoring dormant foreign bank accounts.
• Incorrect determination of residential status.
• Failure to disclose joint foreign accounts.
• Assuming ESOPs or RSUs require no reporting.
• Not reconciling foreign brokerage statements.
• Believing that small balances are immaterial.

What Should Taxpayers Do Now?

The best approach is proactive rather than reactive.

Before filing your next Income-tax Return:

• Review AIS and Form 26AS.
• Compare every overseas financial account with your own records.
• Verify reporting in Schedule FA and other relevant schedules.
• Correct genuine errors wherever legally possible.
• Preserve supporting documentation.
• Seek professional advice where significant exposures or complex issues exist.

Final Thoughts

This CBDT order represents a significant milestone in India's journey towards greater tax transparency.

It is not a new disclosure law. It is not a new tax. It is a new level of visibility.

For compliant taxpayers, this provides an opportunity to verify information, correct genuine mistakes and file more accurate returns.

For the tax administration, it enhances transparency and facilitates more focused compliance efforts.

The most effective strategy is therefore straightforward:

Review your AIS. Reconcile your overseas financial information. Make accurate disclosures. Resolve discrepancies early.

In today's data-driven tax environment, proactive compliance is no longer merely good practice—it is an essential part of responsible tax management.

Form 10BE & Form 10BD (Forms 114 & 113): Complete Guide for Donors and NGOs (FY 2025–26 & FY 2026–27) Part 2

 By Ca Surekha Ahuja

Part 2: Protecting Donation Deduction in ITR, Assessment Risks, Mismatch Resolution and Practical Compliance Guide

Part 1 explained the compliance framework of Form 10BE and Form 10BD, including the responsibilities of donors and charitable institutions.

The next practical question is:

After making a donation and receiving the certificate, how can a donor ensure that the deduction claim remains protected?

A genuine donation deserves a genuine tax benefit. However, the benefit is secured only when the entire compliance chain is complete.

The Donation Deduction Protection Framework

A donor's claim is strongest when the following five links are properly connected:

Compliance Link	What It Ensures
Donation made to eligible institution	Donation qualifies under applicable provisions
Payment trail available	Genuineness of transaction is established
Institution reports donation correctly	Records match with tax department reporting
Form 10BE/Form 114 available	Prescribed certificate supports the claim
Correct ITR disclosure	Deduction is properly claimed

A missing link can result in unnecessary clarification during return processing or assessment.

How to Claim Donation Deduction in ITR?

Form 10BE/Form 114 is a supporting document. It is not required to be uploaded with the Income-tax Return.

The donor should:

• enter eligible donation details in the applicable schedule;
• claim deduction as per the provisions applicable to that donation;
• retain Form 10BE/Form 114 and supporting documents.

The deduction should be claimed only after verifying:

• institution details;
• donation amount;
• eligibility category; and
• supporting documents.

What Details Should Be Checked Before Filing ITR?

Before claiming deduction, the donor should verify:

Particular	Verification Required
Name of institution	Should match certificate and records
PAN of institution	Should be correctly mentioned
Donation amount	Should match payment proof
Date of donation	Should relate to correct financial year
Deduction amount	Should be computed as per applicable rules

A simple reconciliation before filing the return can avoid future disputes.

Assessment Perspective: What May Be Verified?

During processing or assessment, the tax authorities may examine whether:

1. The Donation Was Genuine

The donor should be able to establish:

• actual payment;
• identity of institution;
• supporting certificate; and
• proper reporting.

2. The Institution Was Eligible

The donor should ensure that the institution was eligible to receive donations qualifying for deduction under the relevant provisions.

3. The Reporting Trail Matches

The following should be consistent:

Donation payment
↓
Donation receipt
↓
Form 10BE/Form 114
↓
Institution reporting
↓
ITR claim

Red Flags for Donors

Before claiming a donation deduction, taxpayers should be cautious where:

⚠ Donation is made to an unknown or unverified institution.

⚠ A large donation is claimed without proper documentation.

⚠ The receipt amount differs from payment records.

⚠ Form 10BE/Form 114 is not available.

⚠ The institution requests incorrect donor details.

⚠ Donation is made through untraceable modes.

A genuine donation with proper records generally avoids unnecessary complications.

Common Issues and Practical Solutions

Issue 1: Form 10BE/Form 114 Not Received

Situation - The donor has made payment and received only a donation receipt.

Practical Solution

The donor should request Form 10BE/Form 114 from the institution before finalising the tax claim, particularly for substantial donations.

Issue 2: PAN Mismatch

Situation - The donor's PAN is incorrectly reported by the institution.

Risk - The donation may not reconcile properly during verification.

Solution

The donor should:

• inform the institution;
• provide correct PAN details;
• obtain corrected documentation.

Issue 3: Difference Between Payment and Certificate Amount

Situation- Bank records show ₹5,00,000 donation, but certificate reflects ₹50,000.

Solution

The donor should:

1. Preserve bank/payment proof.
2. Contact the institution.
3. Request correction.
4. Retain revised documents.

Issue 4: Donation Not Properly Reported by Institution

A donor may have fulfilled all obligations, but the institution may have made an error in reporting.

The donor should maintain evidence showing:

• genuine payment;
• certificate received;
• communication with institution; and
• correction request, if required.

Issue 5: Donation Made at Year End

March donations require additional attention.

Both donor and institution should verify:

• date of payment;
• financial year;
• accounting entry;
• reporting details.

Year-end errors are among the most common causes of mismatch.

Consequences Where Form 10BD/Form 113 Compliance Is Not Proper

The institution responsible for filing the statement may face:

Late Fee - Applicable late fee may arise:

₹200 per day of default

subject to prescribed limits.

Penalty - Penalty provisions may apply:

₹10,000 to ₹1,00,000

depending on facts and circumstances.

However, donors should remember:

A penalty imposed on the institution does not automatically validate every donor claim.

The donor should maintain independent evidence supporting the deduction.

Guidance for NGOs Before Closing Annual Compliance

A professional compliance review should include:

Donor Data Review

✓ Verify PAN details
✓ Check donor names
✓ Review large donations
✓ Identify incomplete records

Accounting Reconciliation

✓ Match donation register with books
✓ Match receipts with bank credits
✓ Review year-end donations
✓ Reconcile reported figures

Final Review

✓ Validate donor-wise details
✓ Complete filing within due date
✓ Issue certificates promptly
✓ Preserve records and acknowledgement

Special Guidance for Corporate Donors

Companies claiming donation deductions should maintain a stronger documentation file.

The file should generally contain:

• approval/authorisation documents wherever applicable;
• payment evidence;
• institution details;
• Form 10BE/Form 114;
• accounting records;
• ITR disclosure details.

For significant donations, review should be completed before filing the return rather than during assessment.

FAQs: Form 10BE and Form 10BD Practical Issues

Q1. Can I claim deduction if I do not have Form 10BE?

It is advisable to obtain Form 10BE/Form 114 before claiming significant deductions, as it provides prescribed support for the claim.

Q2. Do I need to upload Form 10BE with my ITR?

No. It should be retained as supporting evidence.

Q3. Is Form 10BE issued by the donor or NGO?

It is issued by the eligible institution receiving the donation.

Q4. What if the NGO has reported incorrect PAN?

The donor should request correction from the institution and preserve supporting communication.

Q5. What if donation amount in Form 10BE is incorrect?

The institution should rectify the error as per the applicable procedure and issue corrected details.

Q6. Is payment proof necessary after receiving Form 10BE?

Yes. Form 10BE and payment proof together provide stronger evidence.

Q7. Can UPI donation qualify for deduction?

Yes, subject to fulfilment of applicable conditions and proper documentation.

Q8. Are all donations eligible for deduction?

No. Eligibility depends on the nature of donation, institution approval and conditions prescribed under the law.

Q9. Should NGOs maintain donor records even after filing Form 10BD?

Yes. Records should be preserved for future verification and compliance purposes.

Q10. What is the biggest mistake donors should avoid?

Claiming a large deduction without verifying documentation and institution details.

Final Professional Guidance

A donation begins with generosity, but a tax benefit is protected through compliance.

For donors:

Proper documentation ensures that their genuine contribution receives the benefit intended under the Income-tax law.

For NGOs:

Accurate reporting is not merely a statutory requirement; it is a responsibility towards every donor who supports their mission.

The best practice is simple:

Verify before donating.
Reconcile before filing.
Preserve before assessment.

A transparent donation system is created when generosity is supported by accountability.

Compliance does not reduce the spirit of charity; it strengthens trust between donors, institutions and the tax system.

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Form 10BE & Form 10BD (Forms 114 & 113): Complete Guide for Donors and NGOs (FY 2025–26 & FY 2026–27)

 By CA Surekha Ahuja

Donation Certificates, 80G Deduction, NGO Compliance, Due Dates and Practical Solutions

A Donation Is More Than a Receipt

A donation represents trust.

A donor trusts a charitable institution to use the contribution for a meaningful purpose. At the same time, the donor expects that the tax benefit available under the Income-tax law is properly supported.

A common question asked by taxpayers is:

"I have made a donation and received a receipt. Can I claim the deduction in my Income-tax Return?"

The answer is:

Not always.

A donation receipt confirms that the institution has received the contribution. However, for claiming deduction under the Income-tax law, the donor should also ensure that the prescribed reporting and certification requirements are completed.

For eligible institutions:

• Form 10BD is the statement filed with the Income-tax Department reporting donations received.
• Form 10BE is the certificate issued to the donor supporting the deduction claim.

Under the Income-tax Act, 2025, the corresponding forms are:

• Form 113 replacing Form 10BD; and
• Form 114 replacing Form 10BE.

The objective remains unchanged:

The institution reports the donation. The donor receives the certificate required to support the tax deduction.

This guide explains the practical compliance requirements for donors, NGOs, trusts, institutions and tax professionals for FY 2025–26 and FY 2026–27 onwards.

Quick Summary: What You Need to Know

If you are	What you should do
Individual donor	Obtain Form 10BE/Form 114 and preserve payment proof.
Company/HUF donor	Ensure the donation claim is supported by proper documentation and reconciliation.
NGO/Trust/Institution	File Form 10BD/Form 113 and issue Form 10BE/Form 114 within the prescribed time.
Tax professional	Reconcile donation records, certificates and return disclosures before filing.

Form 10BE and Form 10BD: The Basic Difference

Many donors and institutions confuse these two forms.

The easiest way to remember:

Form 10BD goes to the Income-tax Department.

Form 10BE goes to the donor.

Particular	Form 10BE	Form 10BD
Meaning	Donation certificate	Statement of donations received
Purpose	Supports donor's deduction claim	Reports donations to the Income-tax Department
Prepared by	NGO/Trust/Institution	NGO/Trust/Institution
Filed with Department	No	Yes
Issued to donor	Yes	No
Responsibility	Donee institution	Donee institution

Forms 113 and 114 Under Income-tax Act, 2025

The Income-tax Act, 2025 introduces a new structure and renumbering of provisions and forms.

For FY 2026–27 onwards:

Existing Form	Corresponding Form under Income-tax Act, 2025	Purpose
Form 10BD	Form 113	Statement of donations received by the institution
Form 10BE	Form 114	Certificate issued to the donor

For practical understanding, taxpayers may continue to search for Form 10BE and Form 10BD, as these terms remain widely used. However, professionals and institutions should refer to the applicable forms prescribed for the relevant financial year.

CA Surekha's Practical Insight

During transition periods, the biggest compliance risk is not the law itself but using an outdated form or process. Institutions should always verify the applicable form before filing for the relevant financial year.

Who Has to Comply?

The responsibility is primarily on the donee institution.

Responsibilities of NGOs / Trusts / Institutions

They must:

✓ Maintain complete donor records.
✓ File Form 10BD/Form 113 with donor-wise details.
✓ Issue Form 10BE/Form 114 to eligible donors.
✓ Maintain supporting documents.

Responsibilities of Donors

They must:

✓ Donate to eligible institutions.
✓ Provide correct PAN and personal details.
✓ Obtain Form 10BE/Form 114.
✓ Preserve payment proof.
✓ Claim deduction correctly in the Income-tax Return.

A donor does not file Form 10BE, Form 10BD, Form 113 or Form 114.

Who Is Required to File Form 10BD / Form 113?

The reporting obligation applies to eligible institutions receiving donations that qualify for deduction claims.

These may include:

• charitable trusts;
• institutions approved under section 80G;
• universities and educational institutions eligible under the Income-tax law;
• research institutions eligible under section 35; and
• other approved entities covered by the applicable provisions.

Before issuing certificates, institutions should ensure that their approval or registration remains valid.

Due Date for Filing and Issuing Certificates

The institution is generally required to complete both compliance steps:

1. Filing the donation statement; and
2. Issuing the donation certificate to donors.

The general due date is:

31 May following the end of the relevant financial year.

Financial Year	Due Date
FY 2025–26	31 May 2026
FY 2026–27	31 May 2027*

*Subject to any extension or notification issued by the Government.

CA Surekha's Practical Insight

NGOs should not treat 31 May as the starting point of compliance. The reconciliation process should ideally begin immediately after the financial year closes. Most errors arise due to incomplete donor details collected during the year.

Practical Compliance Guide for NGOs

A systematic approach can prevent most compliance issues.

Step 1: Maintain Proper Donor Records

Every institution should maintain:

• donor name;
• PAN;
• address;
• date of donation;
• amount donated;
• mode of payment;
• receipt number; and
• bank reference.

The quality of Form 10BD/Form 113 depends entirely on the quality of donor data maintained during the year.

Step 2: Verify Donor Details

Before issuing certificates, verify:

✓ Correct spelling of donor name.
✓ Correct PAN.
✓ Correct donation amount.
✓ Correct financial year.
✓ Correct payment details.

A small spelling mistake or wrong PAN can create unnecessary difficulty for the donor.

Step 3: Reconcile Before Filing

Before filing Form 10BD/Form 113:

Compare:

• donation register;
• books of account;
• bank statements;
• donation receipts; and
• donor details.

Special attention should be given to:

• March donations;
• large-value donations;
• donations received near year-end; and
• donations where donor information is incomplete.

Step 4: File Statement and Issue Certificates

After reconciliation:

• file Form 10BD/Form 113 within the due date;
• issue Form 10BE/Form 114 to donors;
• retain acknowledgement and supporting records.

Practical Compliance Guide for Donors

For donors, compliance is simple but important.

Before Making Donation

✔ Verify that the institution is eligible to issue donation certificates.
✔ Provide your name exactly as per PAN records.
✔ Provide correct PAN details.

At the Time of Donation

Prefer payment modes that create a clear trail:

• bank transfer;
• UPI;
• cheque; or
• other traceable banking channels.

Obtain: donation receipt; and Form 10BE/Form 114.

While Filing Income-tax Return

Remember:

• Do not upload Form 10BE/Form 114 with the ITR.
• Enter donation details in the relevant schedule.
• Preserve documents for future reference.

Practical Example

Situation:

Mr A donated ₹1,00,000 to an approved charitable institution during FY 2025–26.

The institution issued a donation receipt immediately. However, while filing Form 10BD, the PAN was entered incorrectly.

Result: Mr A may have made a genuine donation, but the mismatch can create unnecessary questions while processing or assessing the deduction claim.

Solution: Verify details before filing:

• donor name;
• PAN;
• donation amount; and
• payment records.

A two-minute verification can prevent months of follow-up.

Is a Manual Form 10BE Valid?

A manually prepared Form 10BE may be acceptable where permitted, provided the information is accurate and matches the reported details.

The important requirement is consistency between:

1. Form 10BE/Form 114 issued to donor;
2. Form 10BD/Form 113 filed by the institution; and
3. Actual payment records.

The format matters less than accuracy and reconciliation.

Common Mistakes by NGOs and Donors

Common Mistake	Impact	Better Practice
Incorrect PAN	Certificate mismatch	Verify PAN before issuing
Wrong donation amount	Deduction issue	Reconcile with bank records
Delay in filing	Late fee and penalty exposure	Complete compliance early
Missing Form 10BE	Donor difficulty	Issue certificates promptly
Incorrect financial year	Wrong reporting	Verify donation date

Key Takeaways

✓ Form 10BD/Form 113 is filed by the institution, not the donor.
✓ Form 10BE/Form 114 is issued to the donor by the institution.
✓ Donation receipts alone may not be sufficient for claiming deduction.
✓ Accurate PAN, amount and donor details are critical.
✓ Proper compliance protects both NGOs and donors.

Continued in Part 2

Part 2 will cover:

• Claiming donation deduction in the Income-tax Return.
• Penalties and consequences.
• What happens if Form 10BE and Form 10BD do not match.
• Correction mechanism.
• Detailed FAQs.
• Donor and NGO compliance checklists.
• Final professional guidance.