CBDT amends Income Tax Form 161 on 8 October: What changes for taxpayers seeking penalty waiver? Expert explains

The CBDT has revised Income Tax Form 161 through a notification dated 8 October. The amendment updates the rules governing applications for penalty waiver. What does the revised form mean for taxpayers, and what conditions should they meet?

The Central Board of Direct Taxes (CBDT) has amended Income-tax Form 161 through the Income-tax (Sixth Amendment) Rules, 2026, notified on 8 October 2026.

The notification, issued under Section 533 read with Section 440 of the Income-tax Act, 2025, states that Rule 231 has been amended by inserting the words “or waiver” after “imposition”.

It also states that “for FORM NO. 161, the following Form shall be substituted”, replacing the existing Form 161 with a revised version. The amendment updates the rule and form to add the waiver provisions. Here's what taxpayers need to know.

What has changed in Income Tax Form 161?

According to the IT Act 2025, “Form 161 is an application prescribed under section 440(2) for seeking immunity from imposition of penalty under section 439 and initiation of prosecution under sections 478 or 479, in cases of under-reporting or misreporting of income, after receipt of an assessment or reassessment order.”

Isha Sekhri, Founder, Isha Sekhri & Associates LLP, said the notification now amends Rule 231 of the Income-tax Rules, 2026 by inserting “or waiver” after “imposition”. It also substitutes Form No. 161 with a fully revised application for seeking a waiver of penalty.

Earlier, Rule 231 referred only to the “imposition” of a penalty. Now, with the addition of “or waiver”, taxpayers have an updated provision to seek a waiver of penalty.

She explained that this change reflects a fundamental shift in the taxpayer's right to seek relief. The revised wording in Rule 231 now explicitly includes “waiver,” which allows a taxpayer to seek relief even in cases where a penalty has already been imposed.

The substituted Form 161 is more comprehensive, requiring details of the penalty orders already passed and evidence of the payment of “additional income-tax,” which is a prerequisite for the waiver, Sekhri mentioned.