Arrest and Detention Removed as Modes of Income-tax Recovery: Rule 225 Amended

Rule 225 of the Income-tax Rules, 2026 sets out how a Tax Recovery Officer recovers unpaid tax: issuing a certificate, attaching property, selling it and appointing receivers. Under the old law, this procedure was in the Second Schedule to the Income-tax Act, 1961, which also allowed a defaulter to be arrested and kept in civil prison. The new amendment removes that option completely, retrospectively from the start of the new rules.

What exactly changed in Rule 225

Rule 4 of the amendment rules, which makes these changes, is deemed to have come into force on 1 April 2026, the date the Income-tax Rules, 2026 started.

Recovery modes that remain

• Attachment and sale of the defaulter's movable property
• Attachment and sale of immovable property
• Appointment of a receiver to manage the defaulter's property
• Other recovery measures under the Act, such as recovery from persons who owe money to the defaulter (for example, bank attachment)

What it means for taxpayers with pending demands

• A demand that is not paid or stayed can still be recovered by attaching bank accounts, receivables and property.
• Check every outstanding demand on the e-filing portal under Pending Actions, and file a response if you disagree with it.
• Where an appeal is pending, apply for a stay of demand, usually on payment of a part of the disputed amount, to avoid coercive recovery.
• Keep your contact details on the portal current so recovery notices reach you in time.

Other changes in the same notification

The notification also extends the deadline for existing valuers and income-tax practitioners to update their registration to 31 March 2027, replaces Forms 169 and 171, and changes Rule 176(3) from "by affixing digital signature" to "by way of an electronic communication". See our update on the valuer and practitioner registration deadline.

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