Monthly Tax Bulletin: February 2026

Key highlights:

Direct taxes:

• The SC holds that TRC is not a sufficient condition to claim tax treaty benefits; substance over form being the key deciding factor.
• OECD - Side by Side Package under Pillar Two.
• The CBDT requests that identified taxpayers voluntarily rectify errors under its NUDGE initiative.

Transfer pricing:

• The ITAT holds that the resident AE cannot be treated as a third party under Section 92B(2).
• The ITAT invalidates the adjustment recommended by the TPO, having no jurisdiction over the assessee, before passing of the order u/s.127.

FEMA:

• The RBI notifies the Foreign Exchange Management (Guarantees) Regulations, 2026.
• The RBI issues the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026.

Indirect taxes:

• The SC clarifies that the refund of the appellate pre-deposit is governed under Section 107(6) and not by general refund provisions under Section 54.
• The SC rules that functional participation in operation is essential for an item to qualify as a ‘part’ of a machine; mere support is not adequate.
• The SC admits the Revenue’s SLP against the Bombay HC’s ruling on the levy of interest and penalty on the IGST under advance authorisation.
• The U.S. and India announce an interim trade agreement.
• The India–EU Free Trade Agreement was concluded at the 16th India–EU Summit.
• The CBIC operationalises the revised deferred duty payment framework for the AEO.

Monthly Tax Bulletin - February 2026

The February 2026 edition of the Grant Thornton Bharat Monthly Tax Bulletin provides a concise summary of key developments in direct taxes, FEMA, transfer pricing, and indirect taxes for January 2025.

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