Blog
Income Tax

Form 71 Under the Income-tax Act, 2025: A Simple and Updated Guide

Learn what Form 71 under the Income-tax Act, 2025 means, who must file it, due dates, audit requirements, and how it affects tax exemption claims for specified funds operating through offshore banking units.

—·2 min read
Form 71Income-tax Act 2025Rule 142IFSCoffshore banking unitspecified fundtax exemptionForm 70income tax Indiaaudit report

Form 71 Under the Income-tax Act, 2025: A Simple and Updated Guide

India’s new Income-tax framework has introduced several revised compliance requirements, and one of the most discussed among financial professionals is Form 71. Many taxpayers mistakenly believe it is a regular tax return or a general reporting form. In reality, Form 71 serves a very specific purpose under the Income-tax Act, 2025.

Form 71 is an accountant’s audit verification report used for calculating exempt income earned by specified funds operating through the investment division of an offshore banking unit. It is prescribed under Rule 142 of the Income-tax Rules, 2026.

What Is Form 71?

Form 71 is not meant for salaried individuals, small businesses, LLPs, or ordinary companies. It applies only to specified funds that claim exemptions under Section 11 read with Schedule VI of the Income-tax Act, 2025. The form is filed electronically by an accountant who audits the accounts of the eligible investment division.

The purpose of the form is to verify exempt income and ensure compliance with the conditions required for tax benefits available to offshore investment divisions operating within International Financial Services Centres (IFSCs).

Who Needs to File Form 71?

The filing responsibility lies with the accountant conducting the audit of the eligible investment division. The report must be submitted digitally before the specified due date.

The eligible investment division must also maintain:

  • Separate books of accounts
  • Audit reports
  • Bank statements
  • Inward remittance records
  • Contract notes for securities transactions
  • Custodian statements

These documents are necessary to support the exemption claim.

Due Date and Compliance

Under Rule 142, Form 71 must be filed before the “specified date,” which is generally one month before the due date for filing the return under Section 263(1)(c). Missing the deadline may result in the loss of exemption benefits available under the Act.

Another important point is the connection between Form 70 and Form 71. Form 70 is the annual exempt income statement, while Form 71 acts as the supporting audit verification report. Both are essential for claiming exemption benefits.

Important Clarification

The new Form 71 under the Income-tax Rules, 2026 should not be confused with the older Form 71 used under the Income-tax Rules, 1962 for TDS credit mismatch issues. Under the updated framework, that earlier form has been replaced by Form 102.

Conclusion

Form 71 is a specialized compliance document designed specifically for specified funds operating through offshore banking investment divisions. It plays a critical role in verifying exempt income and ensuring compliance with the Income-tax Act, 2025 and Rule 142 of the Income-tax Rules, 2026. Since non-compliance may lead to the denial of tax exemptions, affected entities should ensure accurate audits, proper documentation, and timely filing.

For regular taxpayers, Form 71 has no applicability, but for IFSC-related specified funds, it remains an essential part of the tax compliance process.