CBDT’s Non-Implementation of Budget 2026 Proposal on Reducing Pre-Deposit for Stay of Demand

Background: Budget 2026–27 Promise vs Current Ground Reality

The Union Budget 2026–27 announced a major relief measure aimed at easing cash flow pressure on assessees facing disputed income-tax demands. The Hon’ble Finance Minister, in paragraph 113 of the Budget Speech, proposed that for obtaining a stay of disputed demand at the first appellate stage, the standard payment requirement would be brought down from 20% to 10%, and this 10% would apply only to the core tax demand (excluding interest and other components under the notice issued under Section 156).

However, despite this clear policy declaration, the Central Board of Direct Taxes (CBDT) has not yet issued any revised Office Memorandum or Circular to give administrative effect to this proposal. As a result, the previous regime—mandating a 20% payment of the disputed demand—continues to operate through the CBDT Office Memorandum dated 31.07.2017.

This disconnect between the Budget announcement and existing instructions has led to avoidable hardship for assessees and has prompted a formal representation to the Hon’ble Chairman, CBDT, seeking urgent implementation of the reduced 10% pre-deposit norm.

Evolution of CBDT’s Stay of Demand Policy

Instruction No. 1914 (1996): Discretionary Framework

Historically, stay of demand and recovery procedures were governed by Instruction No. 1914 dated 21.03.1996.

Key features included:

  • No fixed percentage of disputed demand was prescribed as a pre-condition for stay.
  • Considerable discretion rested with the Assessing Officer to decide:
    • Whether to grant stay
    • On what terms
    • Subject to which conditions
  • The approach was case-specific and did not provide a uniform monetary benchmark for granting stay.

While this flexibility allowed tailored relief, it also resulted in:

  • Inconsistent practices across different jurisdictions
  • Lack of predictability for assessees planning their finances during litigation

2016 Office Memorandum: Standardisation at 15%

To streamline the process, CBDT issued Office Memorandum F. No. 404/72/93-ITCC dated 29.02.2016, partially modifying Instruction No. 1914.

Under this 2016 framework:

  • A standard 15% of the disputed demand was specified as the typical amount to be paid for obtaining stay where:
    • The assessee had filed an appeal before the first appellate authority.
  • This percentage operated as a general rule, subject to:
    • Enhancement in exceptional cases
    • Reduction where strong prima facie case or financial hardship was demonstrated

This brought a level of uniformity and clarity, while still retaining some room for administrative judgment.

2017 Office Memorandum: Enhancement to 20%

Subsequently, CBDT issued Office Memorandum F. No. 404/72/93-ITCC dated 31.07.2017, which superseded the 2016 percentage and enhanced the standard pre-deposit threshold.

Salient aspects:

  • The standard recovery requirement was increased from 15% to 20% of the disputed demand.
  • This 20% benchmark became the norm for:
    • Granting stay of demand at the first appellate stage
    • Deciding on adjustments of refunds and other recovery actions

This 2017 Office Memorandum continues to be the operative instruction even after the Union Budget 2026–27 announcement, since no subsequent modification has been formally notified.

Budget 2026–27 Announcement: Reduction to 10% of Core Tax Demand

Policy Intent of the Budget Proposal

In paragraph 113 of the Union Budget Speech 2026–27, the Hon’ble Finance Minister explicitly proposed: