With the introduction of the new Income Tax Rules, 2026, reporting requirements relating to foreign remittances have become significantly stricter. One of the most important changes applicable from Tax Year 2026-27 is the insertion of Clause 43 in Tax Audit Form No. 26, which focuses on transactions disclosed in Part-D of Form 145.
This amendment is expected to increase departmental scrutiny over payments made to non-residents, particularly where taxpayers claim that such remittances are not chargeable to tax in India.
Under Rule 220(2) of the Income Tax Rules, 2026, any person making a payment to a non-resident that is claimed as not chargeable to tax under the Income-tax Act is required to furnish details in Part-D of Form 145.
The reporting format requires disclosure of the following particulars:
The newly inserted Clause 43 in Tax Audit Form No. 26 requires the Tax Auditor to examine and report details of remittances disclosed in Part-D of Form 145 during the relevant tax year.
In practical terms, the auditor is now expected to comment on:
This effectively means that entries made in Part-D will no longer remain a mere procedural disclosure. They will now undergo an additional layer of verification by the auditor and may subsequently be reviewed by the Income Tax Department.
In many cross-border transactions, foreign vendors insist on receiving payments without any withholding tax deduction. To avoid disputes with overseas parties or the process of obtaining a professional certification in Form 146, some taxpayers have historically adopted a practice of simply reporting the remittance in Part-D of Form 145 as “not chargeable to tax.”
Such an approach can now become highly risky.
A single incorrect classification in Part-D may trigger:
The new reporting framework clearly indicates that the Department intends to closely monitor foreign remittances where no tax has been deducted.
Clause 43 also places significant responsibility on tax auditors. Auditors will now be expected to independently evaluate whether the taxpayer’s claim of non-taxability is legally sustainable.
This may require examination of:
As a result, casual or aggressive reporting positions may become difficult to defend.
For transactions involving interpretational issues or doubtful taxability, the safer approach may be to furnish details in Part-C of Form 145 after obtaining certification in Form 146 from a qualified professional.
A proper Form 146 certification generally includes:
This creates a stronger compliance trail and reduces the risk of future disputes.
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