The Income Tax Act, 2025 and the Income Tax Rules, 2026 emphasise digital compliance, supporting technology-driven processes to improve efficiency and reduce manual intervention. Rule 332 provides the framework for electronic furnishing of forms, returns, statements, reports, orders, and certificates.
The Regulatory Framework
Rule 332 of the Income Tax Rules, 2026 empowers the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) to specify that any form, return, statement, report, order, or certificate shall be furnished electronically.
The electronic furnishing can be done in two ways:
- Under digital signature: Required where the return of income is required to be furnished under digital signature
- Through Electronic Verification Code (EVC): In cases not covered under digital signature
Digital Signature (DSC)
What is Digital Signature?
A digital signature is a secure electronic signature that uses a certificate-based digital ID to authenticate the identity of the signer. Digital Signature Certificates are issued by Certifying Authorities authorised by the Controller of Certifying Authorities.
When is Digital Signature Required?
Digital signature is mandatory for:
- Companies: All companies must file returns and forms using digital signature
- Persons required to file returns under digital signature: Any person whose return of income is required to be furnished under digital signature
- Specific forms: Where specified by the Principal Director General of Income-tax (Systems)
Advantages of Digital Signature
- Legal Validity: Digital signatures have the same legal validity as physical signatures
- Security: Encrypted signatures provide higher security
- Non-Repudiation: Provides proof of origin and integrity
- Convenience: Enables filing from anywhere
Electronic Verification Code (EVC)
What is Electronic Verification Code?
Electronic Verification Code is a one-time password or code generated for the purpose of electronic verification of the person furnishing the return or form. It serves as an alternative to digital signature for individuals and other taxpayers.
How EVC Works
The EVC is generated through the e-filing portal and can be obtained through:
- Pre-validated bank account: EVC generated through pre-validated bank account
- Pre-validated demat account: EVC generated through pre-validated demat account
- Aadhaar OTP: EVC generated through Aadhaar-based OTP
- Net banking: EVC generated through net banking
- Income Tax Department portal: EVC generated through the portal
When is EVC Permitted?
EVC is permitted in cases where digital signature is not required, including:
- Individuals: Individual taxpayers can use EVC for filing returns and forms
- Hindu Undivided Families: HUFs can use EVC
- Firms: Firms can use EVC unless digital signature is specifically required
- Other persons: Where digital signature is not mandated
Important Requirements
- Mobile Number: Valid mobile number linked to PAN
- Email ID: Valid email ID linked to PAN
- Bank Account: Pre-validated bank account for EVC generation
- Aadhaar: Aadhaar linked to PAN for OTP-based verification
Comparison: Digital Signature vs EVC
| Aspect | Digital Signature | Electronic Verification Code |
|---|---|---|
| Applicability | Companies and specified persons | Individuals and other taxpayers |
| Legal Status | Legally equivalent to physical signature | Verification code |
| Security | High (encrypted) | Moderate (OTP-based) |
| Validity | Certificate-based (valid for specified period) | One-time use |
| Cost | Paid (certificate issuance) | Free |
| Convenience | Requires DSC installation | Simple OTP or code generation |
| Non-Repudiation | Strong | Moderate |
Practical Implications
For Companies
Companies must obtain Digital Signature Certificates for authorised signatories. The DSC must be valid and registered with the e-filing portal. All returns, forms, and reports must be filed using DSC.
For Individuals
Individuals can use EVC for most filings. However, certain forms may require digital signature. Individuals should ensure their mobile number and email ID are updated with the Income Tax Department.
For Tax Professionals
Tax professionals must be familiar with both modes of electronic furnishing. They should advise clients on the appropriate mode based on the client's status and the specific form being filed.
Compliance Requirements
Authentication
Every notice or order communicated in electronic form is deemed to be authenticated if the name and office of the income-tax authority is printed on the email body or attachment, or displayed as part of the electronic record.
Acknowledgement
An acknowledgement number for submission of the form shall be generated electronically. This serves as proof of filing.
Expert Legal Guidance
Understanding the requirements for electronic furnishing of forms is essential for tax compliance. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping taxpayers and professionals navigate the electronic filing requirements and ensure timely and accurate submissions.