Form 161 revised: how to seek waiver of under-reporting penalty under section 440(2) of the Income-tax Act, 2025

On 8 October 2026 the Central Board of Direct Taxes (CBDT) published Notification No. 134/2026 (G.S.R. 871(E)), the Income-tax (Sixth Amendment) Rules, 2026. It substitutes Form No. 161 with a new version titled "Application for seeking waiver of penalty under section 440(2) of the Income-tax Act, 2025". The amendment took effect on the date of its publication in the Gazette, so the revised form is the one to use from 8 October 2026 onwards.

The notification is made under section 533 read with section 440 of the Income-tax Act, 2025 (30 of 2025), and carries file number F. No. 370142/33/2026-TPL. The full text is on the Income Tax Department website. This guide walks through what the form asks for, how its arithmetic works on a sample assessment, and the five errors most likely to cost you the waiver.

What the Section Says

Section 440 of the Income-tax Act, 2025 lets a taxpayer whose assessment or reassessment order shows under-reported income apply for waiver of the penalty under section 439, provided the amounts in section 440(1) are paid and no appeal is pursued. Form No. 161 is the application under section 440(2), and rule 231 of the Income-tax Rules, 2026 is the procedural rule behind it.

Notification 134/2026 makes two changes. Clause 2(a) inserts the words "or waiver" after "imposition" in rule 231, so the rule now expressly covers waiver applications. Clause 2(b) replaces Form No. 161 in full. The Income-tax Rules, 2026 themselves were first published on 20 March 2026 (G.S.R. 198(E)) and last amended before this on 22 September 2026 (G.S.R. 830(E)).

The revised form is split into two parts plus a verification. The table below maps each block to what it asks for.

The core of the form is serial number 15, "Additional income-tax payable (in lieu of penalty)". It has two rates:

• 100% of the tax on under-reported income arising from misreporting under section 439(11)(a) to (f) (item 14(i)); and
• 120% of the tax on under-reported income arising from misreporting under section 439(11)(g) (item 14(ii)).

Item 12(B), under-reported income not in consequence of misreporting, does not feed into serial number 15 at all. Serial number 16 then adds item 13 (tax and interest on assessed income) to item 15(iii) (total additional income-tax) to give the "total amount payable for waiver of penalty", with a cross-reference to section 440(1).

Note 3 to the form is the deadline that matters: the total in serial number 16 must be paid within the due date for payment shown in the notice of demand, which you enter at serial number 10. Note 4 says some fields will be pre-filled "to the extent possible", and Note 5 says all amounts are in rupees unless stated otherwise.

Worked Example

The figures below are illustrative. They show how the form's arithmetic runs; your own numbers must come from the computation sheet served with your notice of demand, which serial number 13 tells you to refer to.

Assume Ms R, a salaried taxpayer, receives an assessment order with these figures:

• Income assessed (serial 11): Rs 18,40,000
• Under-reported income from misreporting under section 439(11)(a) to (f) (serial 12(A)(i)): Rs 2,00,000
• Under-reported income from misreporting under section 439(11)(g) (serial 12(A)(ii)): Rs 50,000
• Under-reported income not in consequence of misreporting (serial 12(B)): Rs 90,000
• Tax and interest payable on assessed income, per the computation sheet (serial 13): Rs 2,10,000
• Tax on under-reported income under section 439(12), per the computation sheet: Rs 62,400 on item 12(A)(i) and Rs 15,600 on item 12(A)(ii)

Filling serial numbers 14 to 16 then works as follows.

So Ms R must deposit Rs 2,91,120 by the due date in her notice of demand, record each challan in serial number 17, and only then file Form 161. The Rs 90,000 shown at item 12(B) adds nothing to serial number 15; its tax is already part of the Rs 2,10,000 at serial number 13.

The split between the two misreporting buckets changes the bill sharply. The next table holds the tax on under-reported income constant at Rs 50,000 and moves it between categories.

A Rs 10,000 gap between the first two rows on the same Rs 50,000 of tax shows why you should check how the assessing officer has classified each addition before you pay. If you want to re-run your own figures for the tax year, the income tax calculator and the old vs new regime calculator help you test the base liability, and the TDS calculator helps reconcile credits the order may have missed.

Common Mistakes

1. Paying after the demand due date. Note 3 ties the payment to the due date in the notice of demand (serial number 10), not to the date you file Form 161. If your notice of demand shows a due date of 10 December 2026, that date is the outer limit for the whole serial 16 amount, even if you file the form later.

2. Filing an appeal "just in case". The verification requires you to declare that no appeal has been filed against the order and to undertake that none will be filed before the period in section 440(5) expires. Filing both an appeal and a Form 161 on the same order contradicts that declaration. Decide on one route, ideally with the order's DIN (serial number 7) and the Income-tax Act, 2025 text on India Code in front of you.

3. Paying only the additional income-tax. Serial number 16 is item 13 plus item 15(iii). In the worked example, paying only Rs 81,120 would leave Rs 2,10,000 of the Rs 2,91,120 unpaid, and the application would not match section 440(1).

4. Treating every addition as 100%. Item 15 applies 120% to tax on income in the section 439(11)(g) bucket. On Rs 15,600 of tax, that is Rs 18,720, not Rs 15,600, a shortfall of Rs 3,120 if you apply the wrong rate.

5. Relying blindly on pre-filled fields. Note 4 says pre-filling happens only "to the extent possible". Cross-check the DIN, the date of service (serial 9) and each challan's BSR code, deposit date and serial number (serial 17) against your bank and the self-assessment tax or demand challans before you verify. A name must also be given in full, without abbreviation, under Note 1.

For background on the return and year concepts the form relies on, see our glossary entries on the ITR and the assessment year; note that Form 161 itself asks for the "tax year" at serial number 5.

FAQ

What is Form 161 under the Income-tax Rules, 2026?

Form No. 161, prescribed under rule 231, is the application for waiver of penalty under section 440(2) of the Income-tax Act, 2025. CBDT substituted it with a revised version through Notification No. 134/2026 dated 8 October 2026.

When does the revised Form 161 apply?

Rule 1(2) of the Income-tax (Sixth Amendment) Rules, 2026 says they come into force on the date of publication in the Official Gazette. The notification is dated 8 October 2026, so the substituted form applies from then.

How much extra tax do I pay instead of the penalty?

Serial number 15 sets 100% of the tax on under-reported income from misreporting under section 439(11)(a) to (f), and 120% of the tax on under-reported income from misreporting under section 439(11)(g). In our example, Rs 62,400 and Rs 15,600 of tax produced Rs 81,120 of additional income-tax.

Do I pay additional income-tax on under-reported income that is not misreporting?

Not under serial number 15. Item 12(B) is reported, but serial number 15 only takes 100% of item 14(i) and 120% of item 14(ii). The tax on the 12(B) amount sits within the tax and interest on assessed income at serial number 13.

By when must the money be paid?

Note 3 to the form requires the total in serial number 16 to be paid within the due date for payment as per the notice of demand, which you enter at serial number 10. Each payment is listed at serial number 17 with its BSR code, date, challan serial number and amount.

Can I file an appeal and a waiver application together?

No. The verification in Form 161 states that no appeal has been filed against the order and undertakes that no appeal will be filed before the period specified in section 440(5) expires.

Where can I read the official notification?

The notification PDF is on the Income Tax Department's portal at incometax.gov.in, under file number F. No. 370142/33/2026-TPL, signed by Prerna, Under Secretary, CBDT.

This article explains a CBDT notification for general information. It is not tax advice; confirm the figures in your own assessment order and notice of demand before paying or filing.