Form 161 Income Tax: New Penalty Waiver Application
October 14, 2026 · Taxation
CBDT Notification 134/2026 substitutes Form 161 income tax for section 440 penalty waiver under the Income-tax Act, 2025.
The Central Board of Direct Taxes (CBDT) has substituted Form 161 income tax through Notification No. 134/2026 (G.S.R. 871(E), F. No. 370142/33/2026-TPL) dated October 8, 2026. The Income-tax (Sixth Amendment) Rules, 2026 amend rule 231 and replace Form No. 161 for waiver of penalty under section 440(2) of the Income-tax Act, 2025. As of October 14, 2026, the substituted form is the route for waiver of a section 439 penalty and immunity from initiation of proceedings under section 478 or 479, after an assessment or reassessment order, if the statutory conditions are met.
The big change: misreporting cases under section 439(11) are no longer barred from relief. A waiver is now available on paying additional income-tax of 100% or 120% of the tax on under-reported income, against a misreporting penalty of 200%.
What Notification 134/2026 changed for Form 161
Issued under section 533 read with section 440 of the Income-tax Act, 2025, it came into force on publication in the Gazette of India (Extraordinary), which records the publication date as October 8, 2026 (CG-DL-E-08102026-276956).
First, in rule 231, after "imposition", the words "or waiver" are inserted. Rule 231 now reads that an application to the Assessing Officer for immunity from imposition or waiver of penalty under section 439, and from initiation of proceedings under section 478 or 479, shall be made in Form No. 161.
Second, Form No. 161 is substituted as "Application for seeking waiver of penalty under section 440(2) of the Income-tax Act, 2025". Part A covers name, Permanent Account Number, address, mobile and email. Part B covers Tax Year, order section, DIN, dates, demand due date, income assessed, under-reported income (Sl. No. 12), tax and interest, tax on under-reported income, additional income-tax in lieu of penalty, total payable for waiver, and challan details. Sl. No. 12 captures under-reported income, split into misreporting under section 439(11)(a) to (f), misreporting under section 439(11)(g), and under-reporting not in consequence of misreporting. Under the Income-tax Act, 1961, the equivalents were section 270AA, Form 68 and Rule 129.
Section 440 Income-tax Act 2025: when Form 161 penalty waiver is available
Section 440 (sub-sections (1) to (4) substituted by Act No. 4 of 2026 w.e.f. April 1, 2026) lets an assessee apply for waiver of a section 439 penalty and immunity from initiation of proceedings under section 478 or 479 if:
tax and interest payable as per the order of assessment under section 270(10) or reassessment under section 279 have been paid within the period specified in the notice of demand;
where penalty has been levied under section 439(11)(a) to (f), additional income-tax of 100% of the tax payable on under-reported income has been paid within that demand period, in lieu of such penalty;
where penalty has been levied under section 439(11)(g), additional income-tax of 120% of the tax payable on under-reported income has been paid within that demand period, in lieu of such penalty; and
no appeal has been filed against the order of assessment or reassessment and the levy of penalty referred to in those clauses.
Section 440(1) uses "where penalty has been levied", but the application runs off the assessment order and the Form captures no penalty order; how this applies where penalty is only initiated or proposed should be checked case by case.
Misreporting under section 439(11)
Section 439(11) lists: (a) misrepresentation or suppression of facts; (b) unrecorded investments; (c) expenditure claims not backed by evidence; (d) false entries; (e) unrecorded receipts; (f) unreported international or specified domestic transactions under Chapter X; (g) income referred to in section 195(1)(b). These are misreporting cases with a 200% penalty (section 439(10)), while ordinary under-reporting is 50% (section 439(9)). Under section 439(13A), income on which additional tax is paid under section 267(5)(ii) cannot be the basis for penalty.
Procedure
Under section 440(2), file within one month from the end of the month the order is received, in Form 161. Under section 440(3), after the conditions are met and the appeal period in section 358(3)(a) expires, the Assessing Officer shall grant waiver and immunity. Under section 440(4), no waiver or immunity under section 440(3) is granted if any proceeding has been initiated under Chapter XXII. The Assessing Officer must accept or reject within three months from the end of the month of receipt (section 440(5)), and cannot reject without a hearing (section 440(6)). The order is final (section 440(7)). If accepted, section 440(8) bars appeal under section 356 or 357 and revision under section 378 against the order in section 440(1)(a).
Key dates, rates and thresholds
Item
Position
Source
Notification
No. 134/2026, G.S.R. 871(E), October 8, 2026
CBDT
Effective
On Gazette publication, October 8, 2026 (CG-DL-E-08102026-276956)
Rule 1(2)
Filing window
Within one month from the end of the month the order is received
Section 440(2)
AO decision
Within three months from the end of the month of receipt
Section 440(5)
Penalty if no waiver
200% for misreporting; 50% for under-reporting
Sections 439(10), 439(9)
Additional tax (s.439(11)(a) to (f))
100% of tax on under-reported income
Section 440(1)(b)
Additional tax (s.439(11)(g))
120% of tax on under-reported income
Section 440(1)(c)
Total payable for waiver
Tax and interest plus additional income-tax (Form Sl. Nos. 13 + 15(iii)), within demand due date
Section 440(1); Form Note 3
1961 Act equivalent
Section 270AA, Form 68, Rule 129
Income-tax Act, 1961
What the substituted Form 161 captures
Sl. No. 14 asks for tax on under-reported income under section 439(12). Sl. No. 15 computes additional income-tax at 100% of 14(i) and 120% of 14(ii). Sl. No. 16 is total payable for waiver (13 + 15(iii)). Note 3 requires payment within the demand due date at Sl. No. 10. Amounts are in INR with Indian digit grouping (for example INR 12,50,000).
The verification undertakes not to appeal until the section 440(5) decision period (three months from the end of the month of receipt) ends; if accepted, section 440(8) bars appeal and revision; if rejected, appeal options should be reviewed immediately given the section 358(3)(a) limitation.
The Department's FAQs state Form 161 is filed only online on the e-Filing portal; taxpayers should check that the portal shows the substituted form before filing. Note the wording differences: FAQ Q1 says "immunity from imposition of penalty", the Gazette Form title says "waiver of penalty under section 440(2)", and Rule 231 now reads "immunity from imposition or waiver of penalty".
Practical impact
Companies, individuals, HUFs, LLPs, trusts and others should weigh the additional income-tax (100% or 120%, against a 200% misreporting penalty) and the loss of appeal rights against contesting the quantum and penalty. Partial payment does not qualify, and an appeal already filed blocks Form 161.
Key takeaways
Misreporting cases under section 439(11) are no longer barred from relief: a waiver is available on paying 100% or 120% additional tax, against a 200% penalty.
Rule 231 covers immunity from imposition or waiver of penalty under section 439 via Form No. 161 (1961 Act equivalents: section 270AA, Form 68, Rule 129).
File within one month from the end of the month the order is received; no appeal; AO decides within three months from the end of the month of receipt.
Form 161 is filed only online on the e-Filing portal; check that the portal shows the substituted form before filing.
Frequently asked questions
What is Form 161 income tax used for after Notification 134/2026?
It is the prescribed application under rule 231 and section 440(2) of the Income-tax Act, 2025 for waiver of a section 439 penalty and immunity from initiation of proceedings under section 478 or 479.
What is the Form 1