Section 263 Income Tax Act 2025 – Return of Income Guide

Section 263 of the Income Tax Act 2025 covers the provisions related to Income Tax Return (ITR).  Effective from 1 April 2026, it consolidates original, belated, revised, and updated returns (ITR-U) into a single unified section. Parallel provisions for ITR filing are covered under section 139 of the Income Tax Act, 1961.

The Income Tax Act 2025 comes into force from 1 April 2026 (Tax Year 2026-27). For Tax Year 2025-26 (FY 2025-26, AY 2026-27), returns due by July 2026 are still governed by the Income Tax Act 1961 and Section 139.

What is Section 263 of the Income Tax Act 2025?

Section 263 of the Income Tax Act 2025 governs the filing of Income Tax Returns (ITR) in India. It prescribes:

• Who is required to file a return of income
• The due dates for filing, depending on the category of the taxpayer
• The rules for belated returns, revised returns, and updated returns
• The process for handling defective returns
• The Board's power to prescribe forms and verification requirements

Equivalent Section in the Old Act: Section 139 (and 139D, 194P)

For practitioners and taxpayers familiar with the Income Tax Act 1961, here's the direct mapping:

Who must file a Return of Income under Section 263?

Section 263(1)(a) lists all categories of persons who are legally required to file a return of income. Notably, some of these persons must file regardless of whether they have income or a loss.

Mandatory Filers Regardless of Income or Loss

The following entities are required to file a return on or before the due date, even if they have no income or have incurred a loss:

• Companies (Indian and foreign)
• Firms (partnership firms and LLPs)
• Colleges, universities, and educational institutions referred to in Section 45(3)(a)
• Business trusts
• Investment funds as referred to in Section 224
• Persons who are required to submit a report referred to in Section 172 (transfer pricing)

Persons who must file based on the Income Threshold

Individuals, HUFs, AOPs, and BOIs should file their ITRs when their total taxable income, after applicable deductions and exemptions, exceeds the basic exemption limit. For Tax Year 2026-27, the basic exemption limit under the new tax regime is ₹4 lakh and Rs. 2.5 lakhs under the old regime(separate basic exemption limit apply for classes of senior citizens)

Similarly, a specified entity (trusts, charitable institutions, etc.) must file if its income before applying Section 11 exemptions exceeds the basic exemption limit.

Special Categories: NRIs, Foreign Asset Holders, Loss Carry-Forward

Beyond income-based thresholds, the following persons must also file a return under Section 263(1)(a):

• A person who has sustained a loss under 'Profits and Gains of Business or Profession' or 'Capital Gains' and wants to carry it forward
• A resident (other than RNOR) who is a beneficial owner of any asset outside India, or a signing authority of an account held outside India.
• A person who is a beneficiary of any asset located outside India
• Any other person as may be prescribed by the Board

ITR Due Dates Under Section 263 for Tax Year 2026-27

Section 263(1)(b) provides a Table of due dates based on the category of the taxpayer. These are dates in the financial year following the relevant tax year (i.e., April–March of the following year).

Finance Act 2026 Due Date Change: Non-Audit Businesses Move to 31 August

This change has been made in both the 2025 and 1961 Acts. For taxpayers who have business income, they are eligible to file ITR-3 and ITR-4, but are not subject to tax audit - the due date for ITR filing has been extended to 31st August, of the assessment year (or) the next tax year.

What Types of Returns Can Be Filed Under Section 263?

One of the biggest improvements in the Income Tax Act 2025 is that all return-filing provisions are unified under a single section (Section 263). Here's what each sub-section covers:

What happens if your ITR is treated as Defective? [Section 263(7)]

Under Section 263(7), a return of income is treated as defective if it is not in conformity with the prescribed conditions. Common causes of a defective return include:

• Filed in wrong ITR form (e.g., ITR-1 filed when ITR-3 is required)
• Tax liability paid but challan details not filled in
• Missing mandatory schedules or annexures
• Balance sheet or P&L not attached where required

When a return is found defective, the Assessing Officer must intimate the taxpayer and give them an opportunity to rectify the defect, usually within 15 days. If the defect is not rectified in time, the return may be treated as if it was never filed - which can have serious compliance consequences. However, the AO has discretion to treat the defective return as a valid return if the taxpayer provides a satisfactory explanation.

Can the Government Exempt You from Filing? [Section 263(3)]

Yes. Section 263(3) gives the Central Government the power to exempt any class of persons from the obligation to file a return, subject to conditions specified in the notification.

This is the legal basis for exemptions like the senior citizen exemption (previously under Section 194P) where a senior citizen with pension and interest income - whose bank has already deducted TDS - may be exempted from filing an ITR, provided conditions are met. Under the Income Tax Act 2025, this exemption pathway continues through Section 263(3).