Rule 136 — Exercise or withdrawal of option for new tax regime. Made under s.199, s.200, s.201, s.202, s.203, s.204, s.263 of the Income-tax Act, 2025.
Rule 136 gives effect to Section 199, Section 200, Section 201, Section 202, Section 203, Section 204 and Section 263 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
The rule provides that the option to be exercised or withdrawn under the provisions listed in column B of its Table, by the person listed in column C, for any tax year, shall be in the return of income to be furnished under section 263(1) for that tax year.
The Table pairs six provisions with six classes of person: section 199(3) with a manufacturing domestic company; section 200(5) with a domestic company; section 201(2) with a new manufacturing domestic company; section 202(4) with an individual or Hindu undivided family, or an association of persons (other than a co-operative society) or a body of individuals, whether incorporated or not, or an artificial juridical person; section 203(5) with a resident co-operative society; and section 204(2) with a new manufacturing co-operative society.
Each of the six sections gives a person a choice about the regime under which it is taxed but does not say how the choice is to be communicated. The rule settles that in one line: it is made in the return of income furnished under section 263(1) for the year concerned, so the option and its withdrawal travel with the return rather than through a separate filing.
There is no separate form for the option and no separate date: the exercise or the withdrawal is part of the return of income under section 263(1) for the tax year in question, which means the return is the only place it can be recorded. The rule prescribes the vehicle only; the substantive conditions for the option, including whether it may be withdrawn at all and with what consequence, sit in the sections named in column B and not here. Column C matters, because the same rule serves six different provisions and each is matched with a specific class of person.
A resident co-operative society decides for the tax year 2026-27 to be taxed under section 203. Under the rule, it makes that choice in the return of income it furnishes under section 263(1) for the tax year 2026-27 — entry 5 of the Table pairs section 203(5) with a resident co-operative society — and not by a separate application to the Assessing Officer.
In the return of income itself, where the option under the relevant section is exercised or withdrawn for the tax year.
shall be in the return of income to be furnished under section 263(1) for such tax year