Clauses 29, 30 and 56 of the Finance Bill, 2026 propose corrective and clarificatory amendments to the Income-tax Act, 2025 in relation to:
- Taxation of unsold house property held as stock-in-trade
- Deduction of interest on borrowed capital for self-occupied house property
- Scope of transactions in which quoting of Permanent Account Number (PAN) may be mandated
These amendments are intended to align the 2025 Act with the corresponding provisions of the Income-tax Act, 1961, and to remove drafting gaps that could otherwise lead to interpretational disputes.
All such amendments take effect from 1 April 2026, i.e., tax year 2026-27 onwards.
Clause 29: Annual Value of Unsold Property Held as Stock-in-Trade
Existing Provision
Section 21(5) of the Income-tax Act, 2025 deals with property held as stock-in-trade by builders or developers. Where such property is:
Not let out wholly or partly during the tax year,
its annual value is taken as nil for a limited period after completion of construction.
However, the wording of section 21(5) referred to the benefit as being available “up to two years”, which created ambiguity regarding the exact duration of relief.
What Does Clause 29 Change?
Clause 29 amends section 21(5) to clearly provide that:
- The annual value of such property shall be treated as nil for two years,
- Reckoned from the end of the financial year in which the completion certificate is obtained from the competent authority.
This wording brings section 21(5) in line with the corresponding provision of the Income-tax Act, 1961.
Implications
- Removes ambiguity regarding the duration of the nil annual value benefit
- Provides certainty and predictability for real estate developers holding unsold inventory
- Confirms that the relief period is a fixed two-year window, not a variable or discretionary one
Clause 30: Interest Deduction on Self-Occupied House Property
Existing Provision
Section 22(2) of the Income-tax Act, 2025 provides for deduction of interest on borrowed capital in respect of self-occupied house property, subject to an aggregate ceiling of ₹2 lakh.
However, unlike the corresponding provision under the Income-tax Act, 1961, section 22(2) did not expressly clarify whether this ₹2 lakh ceiling included prior-period (pre-construction) interest.
What Does Clause 30 Change?
Clause 30 amends section 22(2) to clarify that:
- The ₹2 lakh aggregate limit for interest deduction
- Shall be inclusive of prior-period interest payable on borrowed capital for acquisition or construction of the property.
This aligns section 22(2) with section 24 of the Income-tax Act, 1961.
Implications
- Eliminates the possibility of claiming prior-period interest over and above the ₹2 lakh cap
- Ensures uniform treatment of housing loan interest across taxpayers
- Provides clarity for taxpayers where construction spans multiple years
Clause 56: Expansion of CBDT’s Power to Prescribe PAN Quoting
Existing Provision
Section 262(10)(c) of the Income-tax Act, 2025 empowers the Central Board of Direct Taxes (CBDT) to prescribe categories of documents pertaining to business or profession in which PAN must be quoted.
The provision did not expressly empower the CBDT to mandate PAN quoting in non-business or non-professional transactions.
What Does Clause 56 Change?
Clause 56 amends section 262(10)(c) to enable the CBDT to:
- Prescribe documents or transactions,
- Even where they do not relate to business or profession,
- In which quoting of PAN shall be mandatory.
This amendment aligns the provision with section 139A(5)(c) of the Income-tax Act, 1961.
Implications
- Expands the rule-making power of CBDT, not the statutory obligation itself
- Enables PAN-based reporting for specified non-business transactions, once rules are notified
- Strengthens traceability and information reporting in the tax system
What These Amendments Do and Do Not Do
What they do
- Correct drafting inconsistencies in the Income-tax Act, 2025
- Align house property and PAN provisions with the 1961 Act
- Reduce scope for litigation arising from ambiguity
What they do not do
- ❌ Do not introduce new tax burdens
- ❌ Do not enhance deduction limits or tax benefits
- ❌ Do not automatically mandate PAN quoting without further rules
Effective Date
✔ Applicable from 1 April 2026. Applies to tax year 2026-27 and subsequent tax years.
Conclusion
Clauses 29, 30 and 56 of the Finance Bill, 2026 introduce technical but significant clarifications to the Income-tax Act, 2025. By fixing ambiguities in house property taxation and aligning PAN-related powers with the earlier law, the amendments promote certainty, consistency, and smoother administration of the tax framework.
These changes are best viewed as legislative housekeeping measures, aimed at preserving continuity with the Income-tax Act, 1961 rather than altering substantive tax policy.
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