Section 174: Assessment of Persons Leaving India
Section 174 of the Income-tax Act, 1961 permits an accelerated assessment where an individual is expected to leave India without a present intention of returning. The corresponding provision for the new tax-year regime is Section 317 of the Income-tax Act, 2025.
What is the purpose of Section 174?
Normally, income tax is assessed after the relevant income period. Section 174 creates a special mechanism where the Assessing Officer (AO) has reason to believe that an individual may depart India during the current assessment year or shortly afterwards and has no present intention of returning. The provision allows income for the relevant period up to the probable departure date to be brought to tax earlier.
It is a rule about the timing and procedure of assessment, not a general departure tax on every traveller or every person becoming a non-resident.
When can an accelerated assessment be made?
- The taxpayer must be an individual.
- It must appear to the AO that the individual may leave India in the specified period.
- The circumstances must indicate that the individual has no present intention of returning.
- The AO may then assess the income for the statutorily specified period up to the probable departure date, following the applicable procedure.
Section 174 of the Income-tax Act, 1961: Subsection-wise explanation
Section 174(1): Income taxable before departure
Despite the ordinary charge provisions in Section 4, income from the expiry of the previous year relevant to the current assessment year until the probable departure date may be charged in that assessment year if the departure conditions are satisfied.
Section 174(2): Separate assessments and applicable rates
Each completed previous year or part of a previous year within the specified period is assessed separately, using the rates in force for the assessment year as prescribed by the provision.
Section 174(3): Estimation of income
Where income cannot readily be determined under the ordinary provisions, the AO may estimate income for the relevant period or part of it. Such an estimate should be based on the available facts and records.
Section 174(4): Notice requiring a return
The AO may serve a notice requiring a return in the form and verification manner applicable to a return under Section 142(1)(i). The time allowed in that notice must be not less than seven days. The return must include income for completed periods and estimated income for any relevant incomplete period.
Section 174(5): Tax under other provisions
Tax chargeable under this special section is additional to any tax chargeable under another applicable provision of the 1961 Act. This does not authorise duplicate taxation of the same income contrary to the Act.
Section 174(6): Shortened period for certain other notices
Where subsection (1) applies, notices under Section 142(1)(i) or Section 148 relating to other tax liabilities may require a return within a period fixed by the AO, again not less than seven days.
Section 317 of the Income-tax Act, 2025
Section 317 retains the special assessment mechanism, but uses the tax year terminology. Its specified period begins on the first day of the current tax year and ends on the probable departure date. It provides for separate assessments, estimation where income is not readily ascertainable, and a notice requiring a return with at least seven days to respond.
Under Section 317(4), the return notice refers to Section 268(1). Section 317(5) deals with accelerated notices under Sections 268(1) or 280, while Section 317(6) preserves the rule concerning tax chargeable under other provisions. The order of the final two provisions differs from the 1961 Act.
| Subject | 1961 Act | 2025 Act |
|---|---|---|
| Special assessment | Section 174 | Section 317 |
| Period terminology | Previous year / assessment year | Tax year |
| Return notice | Section 142(1)(i) | Section 268(1) |
| Other notices | Sections 142(1)(i) or 148 | Sections 268(1) or 280 |
| Minimum notice period | Seven days | Seven days |
Illustrative example
Suppose an individual plans to leave India permanently in November and the AO has grounds to believe that the individual does not intend to return. If the statutory conditions are met, the AO may initiate a special assessment for the applicable period up to the expected departure date. If business or professional income for an incomplete period cannot be calculated precisely, the AO may estimate it using the records available. The example does not mean that every emigration or overseas assignment triggers Section 174 or Section 317.
Practical compliance considerations
- Keep records of salary, business receipts, capital gains and other taxable income through the expected departure date.
- Preserve travel plans and documents relevant to whether there is a present intention to return.
- Respond promptly to any formal AO notice; a special notice can allow as little as seven days.
- Review residential status, treaty benefits, withholding credits and advance-tax payments separately; they are governed by their own provisions.
- Where a notice is disputed, obtain professional advice on the facts, jurisdiction, deadlines and available remedies.
Frequently asked questions
Does Section 174 apply to everyone leaving India?
No. It is directed at individuals who appear likely to depart during the specified time without a present intention of returning, subject to the AO's statutory assessment process.
Can the AO assess income that is not yet finally known?
Yes. Section 174(3), and Section 317(3) under the 2025 Act, permit estimation where income for the relevant period cannot readily be determined.
What is the minimum time to file a return under the special notice?
The statutory minimum is seven days. The actual due date is the one validly specified in the notice, subject to applicable law.
Which provision applies from April 2026?
Section 317 of the Income-tax Act, 2025 applies to the new regime from 1 April 2026, subject to transitional rules for earlier tax periods and pending matters.
Official statutory references
- Income Tax Department: Section 174, Income-tax Act, 1961
- Official consolidated Income-tax Act, 1961 (PDF)
- Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026 (PDF)
- Income Tax e-Filing Portal
Updated 27 October 2026. This article is general legal information and does not replace advice based on individual facts.