Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Live. Part J of Chapter XV (Persons leaving India). Accelerated/protective assessment machinery.
Subject: Where it appears to the Assessing Officer that an individual may leave India during the current assessment year or shortly after its expiry, with no present intention of returning, the total income up to the probable date of departure may be charged to tax in that assessment year at once, the period being treated as a distinct previous year and the section 174(2)–(6) machinery applying.
Finance Act, 2026: No change. Chapter XV is untouched by the Finance Act, 2026; the section stands as amended up to the Finance Act, 2025.
A. SECTION COMMENTARY
1. An accelerated, protective charge
Section 174 is accelerated assessment machinery. The ordinary scheme of the Act taxes the income of a previous year in the following assessment year; but where a person may leave India with no present intention of returning, deferring assessment to the next year risks losing the revenue entirely. Section 174 therefore allows the Assessing Officer, on forming the requisite opinion, to charge to tax at once the income from the expiry of the last completed previous year up to the probable date of departure, treating that broken period as a distinct previous year. Sub-sections (2) to (6) supply the procedural machinery — notice, the period of assessment, and the application of the Act's provisions so far as may be.
2. A jurisdictional/procedural provision, untested on the merits
Section 174 is, in candour, protective machinery that is seldom litigated on its own terms. The trigger words — that the person 'may leave India' with 'no present intention of returning' — call for the formation of an opinion by the Assessing Officer on the material before him, and the resulting assessment is protective in character. Focused searching discloses no significant reported decision construing the section's trigger on the merits; in practice the contest, if any, is routed through the ordinary assessment, reassessment or recovery provisions. The honest treatise position is to present section 174 as untested protective machinery, cross-referenced to section 175 (which expressly borrows section 174(2)–(6)) and to the cognate 'broken-period on cessation' idea in section 176. No section 174 authority is asserted.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
174. (1) Notwithstanding anything contained in section 4, when it appears to the Assessing Officer that any individual may leave India during the current assessment year or shortly after its expiry and that he has no present intention of returning to India, the total income of such individual for the period from the expiry of the previous year for that assessment year up to the probable date of his departure from India shall be chargeable to tax in that assessment year.
(2) The total income of each completed previous year or part of any previous year included in such period shall be chargeable to tax at the rate or rates in force in that assessment year, and separate assessments shall be made in respect of each such completed previous year or part of any previous year.
(3) The Assessing Officer may estimate the income of such individual for such period or any part thereof, where it cannot be readily determined in the manner provided in this Act.
(4) For the purpose of making an assessment under sub-section (1), the Assessing Officer may serve a notice upon such individual requiring him to furnish within such time, not being less than seven days, as may be specified in the notice, a return in the same form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income for each completed previous year comprised in the period referred to in sub-section (1) and his estimated total income for any part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply as if the notice were a notice issued under clause (i) of sub-section (1) of section 142.
(5) The tax chargeable under this section shall be in addition to the tax, if any, chargeable under any other provision of this Act.
(6) Where the provisions of sub-section (1) are applicable, any notice issued by the Assessing Officer under clause (i) of sub-section (1) of section 142 or section 148 in respect of any tax chargeable under any other provision of this Act may, notwithstanding anything contained in clause (i) of sub-section (1) of section 142 or section 148, as the case may be, require the furnishing of the return by such individual within such period, not being less than seven days, as the Assessing Officer may think proper.
event or purpose Assessment of association of persons or body of individuals or artificial juridical person formed for a particular event or purpose.
C. AUTHORITIES
Candour rule. Section 174 is accelerated/protective machinery with no significant reported decision construing its trigger; it is cross-referenced to sections 175 and 176.
Cluster A — Nature of the provision (no direct authority)
Section 174 is jurisdictional/protective machinery. No reported decision turns on the construction of its trigger words; section 175 expressly applies section 174(2)–(6), and section 176 embodies the cognate broken-period idea on cessation of a business. No section 174 authority is invented.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Finance Act, 2026 amends no section of Chapter XV of the Income-tax Act, 1961 (its Part-A amendments touch ss.92CA, 139, 140B, 144B, 144C, 147A, 148, 150, 153, 153B, 220, 222, 234, 245, 245MA, 254 and 270A-276 only). Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.
CHAPTER XV — LIABILITY IN SPECIAL CASES
Section 174 — Assessment of Persons Leaving India
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Live. Part J of Chapter XV (Persons leaving India). Accelerated/protective assessment machinery.
Subject: Where it appears to the Assessing Officer that an individual may leave India during the current assessment year or shortly after its expiry, with no present intention of returning, the total income up to the probable date of departure may be charged to tax in that assessment year at once, the period being treated as a distinct previous year and the section 174(2)–(6) machinery applying.
Finance Act, 2026: No change. Chapter XV is untouched by the Finance Act, 2026; the section stands as amended up to the Finance Act, 2025.
A. SECTION COMMENTARY
1. An accelerated, protective charge
Section 174 is accelerated assessment machinery. The ordinary scheme of the Act taxes the income of a previous year in the following assessment year; but where a person may leave India with no present intention of returning, deferring assessment to the next year risks losing the revenue entirely. Section 174 therefore allows the Assessing Officer, on forming the requisite opinion, to charge to tax at once the income from the expiry of the last completed previous year up to the probable date of departure, treating that broken period as a distinct previous year. Sub-sections (2) to (6) supply the procedural machinery — notice, the period of assessment, and the application of the Act's provisions so far as may be.
2. A jurisdictional/procedural provision, untested on the merits
Section 174 is, in candour, protective machinery that is seldom litigated on its own terms. The trigger words — that the person 'may leave India' with 'no present intention of returning' — call for the formation of an opinion by the Assessing Officer on the material before him, and the resulting assessment is protective in character. Focused searching discloses no significant reported decision construing the section's trigger on the merits; in practice the contest, if any, is routed through the ordinary assessment, reassessment or recovery provisions. The honest treatise position is to present section 174 as untested protective machinery, cross-referenced to section 175 (which expressly borrows section 174(2)–(6)) and to the cognate 'broken-period on cessation' idea in section 176. No section 174 authority is asserted.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
174. (1) Notwithstanding anything contained in section 4, when it appears to the Assessing Officer that any individual may leave India during the current assessment year or shortly after its expiry and that he has no present intention of returning to India, the total income of such individual for the period from the expiry of the previous year for that assessment year up to the probable date of his departure from India shall be chargeable to tax in that assessment year.
(2) The total income of each completed previous year or part of any previous year included in such period shall be chargeable to tax at the rate or rates in force in that assessment year, and separate assessments shall be made in respect of each such completed previous year or part of any previous year.
(3) The Assessing Officer may estimate the income of such individual for such period or any part thereof, where it cannot be readily determined in the manner provided in this Act.
(4) For the purpose of making an assessment under sub-section (1), the Assessing Officer may serve a notice upon such individual requiring him to furnish within such time, not being less than seven days, as may be specified in the notice, a return in the same form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income for each completed previous year comprised in the period referred to in sub-section (1) and his estimated total income for any part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply as if the notice were a notice issued under clause (i) of sub-section (1) of section 142.
(5) The tax chargeable under this section shall be in addition to the tax, if any, chargeable under any other provision of this Act.
(6) Where the provisions of sub-section (1) are applicable, any notice issued by the Assessing Officer under clause (i) of sub-section (1) of section 142 or section 148 in respect of any tax chargeable under any other provision of this Act may, notwithstanding anything contained in clause (i) of sub-section (1) of section 142 or section 148, as the case may be, require the furnishing of the return by such individual within such period, not being less than seven days, as the Assessing Officer may think proper.
event or purpose Assessment of association of persons or body of individuals or artificial juridical person formed for a particular event or purpose.
C. AUTHORITIES
Candour rule. Section 174 is accelerated/protective machinery with no significant reported decision construing its trigger; it is cross-referenced to sections 175 and 176.
Cluster A — Nature of the provision (no direct authority)
Section 174 is jurisdictional/protective machinery. No reported decision turns on the construction of its trigger words; section 175 expressly applies section 174(2)–(6), and section 176 embodies the cognate broken-period idea on cessation of a business. No section 174 authority is invented.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Finance Act, 2026 amends no section of Chapter XV of the Income-tax Act, 1961 (its Part-A amendments touch ss.92CA, 139, 140B, 144B, 144C, 147A, 148, 150, 153, 153B, 220, 222, 234, 245, 245MA, 254 and 270A-276 only). Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.