7 Rules That Got Rewritten Between Budget 2024 and April 2026

Budget 2024 to April 2026 saw the biggest NRI tax reset in over a decade. Some changes saved NRIs money. Others quietly added zeros to the bill. None of them got explained well by your bank or your CA.

Here's the 7 changes that move money. Each one is cited to the actual Section, Form, or CBDT instruction so you can verify it yourself.

Section 112A capped equity LTCG at 12.5% flat with a ₹1.25 lakh exemption. The 20%-with-indexation option died for NRI property under the broader Budget 2024 restructure. Section 148's reassessment window shrunk to 3 years (5 years if escaped income above ₹50 lakh). Section 151A made Section 148 notices faceless-only, the Supreme Court confirmed it in July 2025.

Form 41 went live on 1 April 2026 under the new Income-tax Act 2025. It replaces Form 10F entirely for DTAA claims filed on or after that date. Schedule FA got a ₹20 lakh safe harbour for movable foreign assets via CBDT's September 2025 instruction. Section 119(2)(b) condonation runs up to 6 financial years for genuine hardship.

Some are wins. Some are losses. We'll walk through each one with the actual math.

Budget 2024 unified the long-term capital gains rate at 12.5% flat across asset classes. Section 112 (property) and Section 112A (listed equity/equity MFs) were both amended by Finance (No.2) Act 2024 — the older 10% rate and the 20%-with-indexation alternative are gone. For NRIs, this hits Indian equity, equity mutual funds, and property.

Equity NRI gains over ₹1.25 lakh per year now tax at 12.5%. The earlier 10% rate is history. On a ₹10 lakh equity gain, the tax went from ₹87,500 to ₹1,09,375. Roughly ₹22,000 more per year per ₹10 lakh of gain.

For Indian property, the bigger change is companion: indexation got removed in the same budget. NRIs don't even get the carve-out residents got. We cover the property math in Change #2 below.

Mutual fund redemptions follow the same flat 12.5% rule. Equity-oriented schemes held over 12 months tax at 12.5%. Debt mutual funds bought after April 2023 tax at slab rates without LTCG benefit at all, which is harsher for high-tax-bracket NRIs.

The compounding effect: every recurring redemption, every property exit, every dividend reinvest sale pulls 12.5% off the gain regardless of how long you held the asset.

Indexation used to let you adjust the original cost of a property for inflation using the Cost Inflation Index before computing the gain. Budget 2024 removed that for any sale on or after 23 July 2024.

For NRIs, this is the single most expensive change in the playbook. A property bought in 2018 for ₹80 lakh and sold in 2026 for ₹1.2 crore now taxes the full ₹40 lakh gain at 12.5%. Tax: ₹5 lakh.

Under the old rule with indexation, the indexed cost would've been around ₹1.1 crore. Taxable gain ₹10 lakh. Tax at 20%: ₹2 lakh.

That's a 2.5× tax increase on a single sale. Multiply across the typical NRI's portfolio of 1-2 inherited or rental properties, and the lifetime hit lands in seven figures fast.

Residents got a transitional carve-out. For property acquired before 23 July 2024 they can pick the old or new method, whichever's lower. NRIs got nothing. Section 197 Form 13 became more important. Without it, buyers withhold 12.5% TDS on the full sale value, not the gain, and your refund waits 9-12 months.

Pre-Finance Act 2024, the Income Tax Department could reopen NRI ITRs going back 10 years. Section 148 reassessment was the legal hook. The 10-year window meant every NRI carried a decade of tax exposure.

Finance Act 2024 cut that down. The Section 148 reassessment window is now 3 years for most cases, and 5 years if the escaped income exceeds ₹50 lakh. Anything older than that is time-barred.

For NRIs, this means AY 2018-19 and earlier are off the hook for fresh notices. If you got a 148 notice for those years, it's probably invalid on time-bar grounds.

The catch: the 5-year window for ₹50 lakh+ escaped income still covers most property-sale TDS over-deduction cases (since gross sale values often clear ₹50 lakh easily). Section 148 isn't dead for big-ticket cases. It's just been disciplined.

Practical impact: don't lose sleep over old AYs. Do file your 2026-27 return cleanly. And if you got a 148 notice, check the issue date and whether it falls within the new window before responding.

In 2024-25, the Telangana High Court ruled that Section 148 notices issued directly by a Jurisdictional Assessing Officer, bypassing the National Faceless Assessment Centre, are void. The Supreme Court dismissed the Revenue's SLP in July 2025, locking the position.

What this means: under Section 151A (the faceless reassessment notification mandate; Section 144B governs faceless scrutiny assessments separately), every Section 148 notice has to be issued through NFAC. If yours wasn't, it's legally invalid.

Practically, around 30-40% of Section 148 notices issued before September 2024 had this defect. Many got issued by JAOs who hadn't migrated to the faceless workflow.

If you've got a Section 148 notice in hand, the first thing to verify is whether NFAC issued it. The notice header tells you. If it says JAO of any specific city directly, the notice is challengeable on faceless-mandate grounds.

We cover the notice triage in detail in our Section 148 reform post. The 30-second summary: don't reply blindly, check the issuer first.

Form 41 went live on the income tax e-filing portal on 1 April 2026. It's the new DTAA-claim form for NRIs under the Income-tax Act 2025. From that date, Form 41 replaces Form 10F entirely for any new DTAA claim filing.

The legal hook also shifted. Section 90(5) of the 1961 Act and Rule 21AB no longer govern the form. Section 159(8) of the Income-tax Act 2025 plus Rule 75 of the new Rules 2026 are the governing references now.

The content is largely the same six fields: name, status, country of tax residence, TIN, period of validity, address. New mandatory addition: an Indian communication address. This was optional under Form 10F.

Mechanics: log into incometax.gov.in, navigate to e-File → Income Tax Forms → Form 41. The form expects a fresh TRC for the period you're claiming treaty relief. Output is a single acknowledgment number you'll cite in your ITR-2.

The catch: Form 41 doesn't apply retroactively. Filings made before 1 April 2026 stand under Form 10F + Section 90(5). Anything from 1 April 2026 onward uses Form 41 + Section 159(8). For most NRIs, the next ITR-2 filing (for AY 2027-28, due July 2027) will be the first one fully under the new form.

CBDT's September 2025 instruction raised the safe harbour threshold under the Black Money Act 2015 from ₹5 lakh to ₹20 lakh for movable foreign assets. This affects every NRI eyeing a return to India and every RNOR currently in transition.

Under Schedule FA, you have to disclose foreign bank accounts, securities, and similar movable assets when filing as an Indian resident. If the undisclosed movable assets sit below the ₹20 lakh safe harbour, Section 42 of the Black Money Act (₹10 lakh per-year flat penalty plus criminal liability) does not trigger automatically.

The threshold increase is genuine relief. NRIs who returned with $20-25K sitting in a foreign brokerage account were previously above the threshold. Now they're inside the buffer for movable assets. The original ₹5L bar dated to 2016. Inflation alone justified the bump.

Catch: the safe harbour applies to movable assets only. Foreign immovable property (homes, land) sits outside this carve-out. If you own a Dubai apartment, that gets disclosed in full regardless of value.

For new and returning NRIs, this changes the asset rebalancing math. Movable foreign holdings under ₹20 lakh that you forgot to disclose? Less bad than they used to be. Above ₹20 lakh, Schedule FA disclosure remains mandatory and the ₹10 lakh per-year penalty stays on the table.

Section 119(2)(b) lets the CBDT condone delays in filing for genuine hardship. NRIs use it to recover excess TDS for past years they never filed. The relief window runs up to 6 financial years from the end of the relevant assessment year, in line with CBDT's standard practice on bona fide refund claims.

In practice, this means an NRI in FY 2026-27 can pursue recovery for FY 2020-21 onwards, anything older is time-barred. Earlier sloppy filings (8-10 year-old claims) routinely got rejected at the PCIT level for being out of standard window.

CBDT's recent instructions also tightened the application requirements. They now expect a year-wise computation worksheet, the original TRC for each year, a Form 10F acknowledgment for each year, and a neutral cover letter explaining the hardship. Sloppy applications get rejected faster than before.

For NRIs sitting on multi-year unrecovered TDS, the message is clear: file now, not next year. Each financial year that passes pushes one year out of reach.

The documentation rigour rewards good prep. In our 50+ Section 119(2)(b) case sample, applications with year-wise worksheets and matched TRC dates clear at PCIT in 3-4 months. Applications missing prep clear in 7-10 months or get rejected outright.

Five actions every NRI should take in the first quarter of FY 2026-27.

**File Form 41 for any DTAA claim from 1 April 2026 onward.** Form 10F no longer applies for new filings. The legal hook is now Section 159(8) of the Income-tax Act 2025 plus Rule 75. Same six fields, plus a mandatory Indian communication address.

**Pull a fresh 26AS / AIS reconciliation now.** The unified reporting catches more income than ever. If your bank reports ₹2 lakh of FD interest and you didn't claim DTAA, the AIS shows the gap immediately.

**File Section 119(2)(b) for past-year recoveries this year.** The 6-year window from end of relevant AY is the working horizon. Every quarter of delay shrinks the recoverable window. NRIs sitting on ₹50K-5L of unrecovered TDS for 4-6 prior years should engage now.

**For property sales planned in 2026-27, file Form 13 under Section 197 8 weeks before closure.** The 12.5% flat LTCG plus default Section 195 TDS on full sale value can lock 15-20% of your sale proceeds in refund-pending limbo for 9-12 months.

**If you got a Section 148 notice, check whether NFAC issued it.** Many pre-September-2024 notices are challengeable on faceless-mandate grounds. Don't reply until you've verified the issuer.

To check your specific situation, Upload your 26AS at /ais-analyzer. We'll run the math year-by-year and quote a recovery estimate within 24 hours. Or Book free CA appointment first to walk through the changes for your portfolio.

Q: Does the LTCG 12.5% flat rate apply to NRO mutual fund redemptions?

A: Yes. Equity-oriented schemes held over 12 months tax at 12.5% flat. Debt funds bought after April 2023 tax at slab rates regardless of holding period.

Q: I sold property in May 2024 (before 23 July). Which rule applies?

A: The old rule (20% with indexation, or 10% without indexation, whichever is lower for residents). The new flat 12.5% applies only to sales on or after 23 July 2024.

Q: My Section 148 notice is dated August 2024. Can I challenge it on faceless grounds?

A: Possibly. Check whether NFAC issued it or a Jurisdictional AO. If it's a JAO-issued notice and you can prove the JAO bypass, the Telangana HC ruling plus the SC SLP dismissal supports a challenge.

Q: I'm a new NRI filing my first year. Do I file Form 41 or Form 10F?

A: Form 41, if you're filing on or after 1 April 2026. Form 10F is closed for new filings under the Income-tax Act 2025 transition. Anything filed before 1 April 2026 used Form 10F and remains valid.

Q: Can I still recover TDS from FY 2019-20 under Section 119(2)(b)?

A: The 6-year window from end of relevant AY brings AY 2020-21 (for FY 2019-20 income) just inside reach in FY 2026-27. Don't delay further, by FY 2027-28 it falls outside the standard window.

Q: Did Schedule FA disclosure thresholds change for foreign property?

A: No. The ₹20 lakh safe harbour applies only to movable assets. Foreign homes, land, and similar immovable assets continue to require full disclosure regardless of value.