6.3. Withholding Tax and Capital Gains Tax

In a major victory for corporate cash flows, the Finance Act 2026 overhauls Section 56 and introduces a brand-new Section 56Ka to the Income Tax Act 2023. Previously, if a company failed to deduct or collect Tax Deducted at Source (TDS), the entire underlying business expense was disallowed, creating a massive tax liability. Under the new law, disallowance is abolished. Instead, the company is charged a modest monetary penalty (the shortfall amount plus a 50% additional charge), while the expense itself remains fully deductible. For capital gains, the net has widened to treat gold, silver, gems, and club memberships as capital assets, with individual gains on precious metals attracting a flat 5% tax.