Section 286 of the Income-tax Act, 2025 — Time Limit for Completion of Assessment, Reassessment and Recomputation

In plain language

What Section 286 actually does

Section 286 is the "clock" of the assessment machinery. It tells the Income-tax Department how much time it has to finish an assessment, reassessment or recomputation once a proceeding has started. If the Assessing Officer misses the deadline in Section 286, the order becomes time-barred and legally invalid — the taxpayer cannot be asked to pay the demand raised by such a late order. Section 286 is the Income-tax Act, 2025 successor to the old Sections 153 and 153B of the Income-tax Act, 1961, and it applies from tax year 2026-27 (i.e. from 1 April 2026) onwards.

• It is a limitation (deadline) provision, not a charging section. It does not create tax; it only fixes outer time limits for passing orders.
• It works as a "no order after" rule. The section lists proceedings in a Table and says no order shall be made after the period specified against each.
• The dominant deadline is one year (12 months). The 2025 Act sharply compresses timelines compared with the older 3-year windows under the 1961 regime.

Who it applies to

Section 286 applies to every taxpayer whose case is under any of these proceedings — individuals, HUFs, firms, LLPs, companies and trusts alike. In practice it protects the assessee by guaranteeing that scrutiny cannot drag on indefinitely, and it disciplines the Department to act within a fixed calendar.

• Regular scrutiny assessment (order under Section 270/271 after a Section 268 notice).
• Best-judgment and updated-return assessments (e.g. returns filed under Section 263).
• Reassessment / income-escaping assessment initiated by a notice under Section 280 and completed under Section 279.
• Fresh assessments after remand — where an appellate or revision authority sets aside an order and sends it back.
• Orders giving effect to appeal, revision or court decisions.

The key time limits (the Table)

Section 286(1) contains a Table. Column B describes the proceeding; the matching entry gives the outer limit. The most important limits are:

• Regular assessment (Sections 270/271): 12 months from the end of the financial year in which the return or the notice/updated return context arises.
• Reassessment order under Section 279: 12 months from the end of the financial year in which the Section 280 notice was served.
• Fresh assessment after set-aside/remand (giving effect to orders under Sections 359/363/377/378, or a revived assessment under Section 292): 12 months from the end of the year in which the order is received.
• Orders merely giving effect to appellate/revision findings: 6 months (extendable to 9 months where verification or a hearing is needed).
• Modification/rectification-type orders (e.g. under Section 166 or 377): as short as 2 months.

Extensions and excluded periods

Two mechanisms lengthen the effective deadline:

• Transfer-pricing extension: Where the case is referred to the Transfer Pricing Officer under Section 166(1) to determine the arm's-length price, the limit is extended by an additional 12 months.
• Excluded periods: Certain "dead" time does not count against the clock — including periods when proceedings are stayed by a court, time taken for a reference to the Valuation Officer, an audit/inventory-valuation direction, a GAAR (impermissible avoidance) reference, exchange of information with foreign tax authorities, and time consumed in settlement/Section 375 processing (capped, e.g. 60 days).

The 60-day floor and other safeguards

• 60-day minimum: If, after removing an excluded period, less than 60 days remain, the balance is automatically stretched to 60 days. The same protection applies where a TPO extension under Section 166(8) squeezes the AO's remaining time.
• Settlement abatement: If a settlement proceeding abates, the AO gets a minimum 1-year window to complete the assessment.

Practical implications

• A late order is void. If the AO passes the assessment/reassessment after the Section 286 deadline, the taxpayer can challenge it purely on limitation and get it quashed, regardless of the merits.
• Faster closure. Because the norm is 12 months, taxpayers should expect scrutiny and reassessment to conclude within roughly a year, not the multi-year drag common under the 1961 Act.
• Keep track of trigger dates. The clock usually starts from the end of the financial year in which the notice was served or the order was received — note that date, because it lets you compute your own limitation and spot an out-of-time order.