The Central Board of Direct Taxes (CBDT) has amended Form No. 7 to include fields for both Assessment Year and Block Period, effective from September 1, 2025. This change is being made to accommodate the reintroduction of the block assessment scheme for individuals and entities whose undisclosed income is discovered during a search and seizure operation.

What the Amendment Means

The amendment signifies that entities required to file using Form No. 7 (such as trusts and political parties) may now need to declare their income under two distinct timeframes, depending on the nature of their income. This change streamlines the assessment process for those subject to a search, ensuring that both their regular income and any undisclosed income found can be properly reported and assessed.

What is Form No. 7?

Form No. 7 (also known as ITR-7) is a specific Income Tax Return form used by a variety of non-commercial entities that claim tax exemptions. It is primarily for:

  • Charitable or religious trusts and institutions
  • Political parties
  • Scientific research institutions
  • News agencies
  • Universities, colleges, hospitals, and other educational or medical institutions

These entities use this form to report their income, donations received, and the utilization of their funds to maintain their tax-exempt status under the Income-tax Act, 1961.

Assessment Year vs. Block Period

The key to understanding this amendment lies in the difference between these two terms:

  • Assessment Year (AY): This is the standard 12-month period, from April 1 to March 31, that immediately follows a financial year. It’s the year in which the income earned in the preceding financial year is assessed and taxed. For example, income earned in the financial year 2024-25 is assessed in the assessment year 2025-26.
  • Block Period: This is a specific timeframe used exclusively for assessing undisclosed income discovered during a search and seizure operation conducted by the Income Tax Department. It typically covers the six assessment years preceding the financial year in which the search was initiated, plus the period from the start of that financial year up to the search date. This special procedure allows the department to consolidate and assess all undisclosed income over a single, extended period.

Implications of the Change

Previously, different assessment procedures would apply to an assessee’s regular and undisclosed income. With the re-introduction of the block assessment scheme, the CBDT is updating Form No. 7 to reflect this change. Entities now have dedicated fields to report their normal, disclosed income for a specific Assessment Year and, if a search has been conducted, to also report any undisclosed income for the relevant Block Period. This move aims to improve the efficiency of tax assessments and ensure transparency in cases involving search and seizure.