CURRENT AFFAIRS | MARCH 27, 2026
CLAT GK + TAXATION LAW & FISCAL FEDERALISM
What Happened?
The new Income Tax Rules 2026, framed under the Income Tax Act 2025, take effect from April 1, 2026. The rules introduce sweeping changes including form renumbering, revised PAN quoting thresholds, and simplified compliance procedures.
Major Changes
1. Form 130 Replaces Form 16
The familiar Form 16 (TDS certificate for salary) is being replaced by Form 130 with three parts: Part A (employer/employee details, PAN, TAN), Part B (salary summary, exemptions, deductions), and Part C (detailed tax computation, relief, TDS/TCS adjustments). It will be generated through the TRACES portal and cannot be issued manually.
2. Other Form Renumbering
- Form 49A (PAN application) becomes Form 93
- Form 12BB (investment declaration) becomes Form 124
- Form 16A (non-salary TDS) becomes Form 131
- Form 26AS (annual tax statement) becomes Form 168
- Form 24Q (quarterly TDS statement) becomes Form 138
3. Revised PAN Quoting Thresholds
- Cash deposits/withdrawals: PAN required if total in a financial year reaches Rs 10 lakh+ (earlier: Rs 50,000/day)
- Motor vehicles: PAN mandatory if price exceeds Rs 5 lakh (earlier: all vehicles)
- Hotel/restaurant payments: PAN required if payment exceeds Rs 1 lakh (up from Rs 50,000)
- Immovable property: PAN required if transaction exceeds Rs 20 lakh (up from Rs 10 lakh)
4. Other Notable Changes
- Rules simplified from 511 to 333
- Digital Rupee (CBDC) included as prescribed electronic payment mode
- 4 new tech cities (Bengaluru, Pune, Hyderabad, Ahmedabad) added to 50% HRA exemption category
- PAN application now requires additional proof of DoB beyond Aadhaar
Constitutional & Legal Framework
- Article 265 — “No tax shall be levied or collected except by authority of law” — the foundational principle of parliamentary control over taxation
- Article 246 + Seventh Schedule — Distributes legislative competence on taxation between Union List (e.g., income tax), State List (e.g., land revenue), and Concurrent List
- Article 280 — Finance Commission recommends distribution of net tax proceeds between Centre and States (fiscal federalism)
- Article 112 — Annual Financial Statement; Consolidated Fund of India
- Income Tax Act 2025 — Replaces the Income Tax Act 1961; simplifies the tax code while retaining core principles
CLAT Angle — Why This Matters
- Article 265 Questions: Any tax must have statutory authority — if a tax is levied without proper legislation, it can be challenged. This is a fundamental CLAT constitutional law topic
- Fiscal Federalism: The distribution of taxing powers under the Seventh Schedule (Union, State, Concurrent Lists) is a core CLAT topic
- Finance Commission: Article 280 and the role of successive Finance Commissions in revenue sharing — frequently tested in CLAT GK
- Digital Economy: CBDC’s recognition as a legal payment mode reflects India’s push toward digital governance — watch for CLAT questions on digital currency regulation
Key Facts at a Glance
| Effective Date | April 1, 2026 |
| Parent Act | Income Tax Act 2025 (replaces IT Act 1961) |
| Form 16 becomes | Form 130 |
| Form 26AS becomes | Form 168 |
| Rules Reduced | 511 to 333 |
| PAN for Vehicles | Above Rs 5 lakh |
| PAN for Cash | Rs 10 lakh+ per year |
Mnemonic — “TAX FORMS”
Two-sixty-five — no tax without law
April 1, 2026 — effective date
X-Form 16 = New Form 130
Finance Commission — Article 280
One-thirty replaces sixteen (130 replaces 16)
Rules: 511 down to 333
Motor vehicles: Rs 5 lakh PAN threshold
Seventh Schedule — taxation powers
Practice Quiz
Practice Quiz — 10 CLAT-Style Questions
Click an option to reveal the answer and explanation.
