Finance Bill 2025 proposes removing the deadline for the notification of faceless schemes under sections 92CA, 144C, 253, and 255 of the Income-tax Act. Originally, these provisions required the Central Government to issue such notifications by March 31, 2025, due to challenges in implementation. The new amendment allows the government to issue directions even beyond this cut-off date if necessary. The aim is to further streamline tax administration, particularly in areas such as transfer pricing, dispute resolution, and appeals. This change will take effect from April 1, 2025, providing the government flexibility in notifying faceless schemes as needed.
Budget 2025: Removing date restrictions on framing the schemes in certain cases
The Central Government has undertaken a number of measures to make certain processes under the Act, electronic, by eliminating person to person interface between the taxpayer and the Department to the extent technologically feasible, and provide for optimal utilisation of resources and a team-based assessment with dynamic jurisdiction. A series of futuristic reforms have been introduced in the domain of Direct Tax administration for the benefit of taxpayers and economy.
2. In this regard, enabling provision for notifying faceless schemes under sections 92CA, 144C, 253 of the Act were introduced in the Act through TOLA with effect from 01.11.2020 and under section 255 of the Act, was inserted through Finance Act, 2021 with effect from 01.04.2021. Further, vide Finance Act, 2022, time limit for notification was extended to 31.03.2024 due to challenges in implementation. Further, vide Finance Act, 2024, time limit for notification was further extended to 31.03.2025 due to various challenges in the formation of the scheme under these sections.
3. In this regard, it is proposed that end date prescribed for notifying faceless schemes under sections 92CA, 144C, 253 and 255 of the Act may be omitted so as to provide that Central Government may issue directions beyond the cut-off date of 31st day of March, 2025, if required.
4. These amendments will take effect from the 1st day of April, 2025.
[Clauses 21, 42, 70 & 71]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 21 of the Bill seeks to amend section 92CA of the Income-tax Act relating to reference to Transfer Pricing Officer.
Sub-section (1) of the said section provides that where any person, being the assessee, has entered into an international transaction or specified domestic transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Principal Commissioner or Commissioner, refer the computation of the arm’s length price in relation to the said international transaction or specified domestic transaction under section 92C to the Transfer Pricing Officer.
It is proposed to insert a new first proviso to the said sub-section (1) so as to provide that no reference for computation of the arm’s length price in relation to an international transaction or a specified domestic transaction shall be made, if the Transfer Pricing Officer has declared that option exercised by the assessee in sub-section (3B) in relation to such transaction is valid for such previous year.
It is further proposed to insert a new second proviso to the said sub-section so as to provide that if any reference for an international transaction or a specified domestic transaction, in respect of a previous year for which the option is declared valid under the sub-section (3B), is made before or after such declaration by the Transfer Pricing Officer, the provisions of the said sub-section shall have the effect as if no reference is made for such transaction.
It is also proposed to insert a new sub-section (3B) in the said section so as to provide that the arm’s length price being determined in relation to the international transaction or the specified domestic transaction under sub-section (3) for any previous year shall apply to similar international transaction or specified domestic transaction for the two consecutive previous years immediately following such previous year, on fulfilment of the conditions, specified therein.
It is also proposed to insert a proviso to the said sub-section (3B) to provide that the provisions of this sub-section shall not apply to any proceedings under Chapter XIV-B.
It is also proposed to insert a new sub-section (4A) in the said section so as to provide that notwithstanding anything contained in sub-section (4), where the Transfer Pricing Officer has declared an option exercised by the assessee as valid option under sub-section (3B), he shall examine and determine the arm’s length price in relation to such similar transaction for two consecutive previous years immediately following such previous year, in the order referred to in sub-section (3) and on receipt of such order, the Assessing Officer shall proceed to recompute the total income of the assessee for the said two consecutive previous years as per the provisions of sub-section (21) of section 155.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent assessment years.
Sub-section (9) of the said section empowers that the Central Government, may, for the purpose of giving effect to the aforesaid scheme, direct that any of the provisions of the Income-tax Act shall not apply or shall apply with such exceptions, modifications and adaptations as specified.
Proviso to said sub-section provides that no direction shall be issued after the 31st March, 2025.
It is proposed to omit the said proviso.
This amendment will take effect from 1st April, 2025.
It is also proposed to insert a new sub-section (11) in the said section so as to provide that if any difficulty arises in giving effect to the provisions of sub-section (3B) and subsection (4A), the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty, which shall be laid before each House of Parliament and no such guideline shall be made after the expiration of two years from the 1st April, 2026.
It is also proposed to insert a new sub-section (12) in the said section so as to provide that every guideline issued by the Board under sub-section (11) shall be laid before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive session aforesaid, both houses agree in making any modification in such guideline or both Houses agree that the guideline, should not be issued, the guideline shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that guideline.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent assessment years.
Clause 21 of the Bill seeks to amend section 92CA of the Income-tax Act relating to reference to Transfer Pricing Officer.
It is proposed to insert a new sub-section (3B) in the said section so as to provide that the arm’s length price being determined in relation to the international transaction or the specified domestic transaction under sub-section (3) for any previous year shall apply to similar international transaction or the specified domestic transaction for two consecutive previous years immediately following such previous year, on fulfilment of the conditions, specified therein. Clause (b) of the said sub-section empowers the Board to make rules on such option or options which are to be exercised. Clause (c) of the said sub-section empowers the Board to make rules providing the conditions subject to which option or options exercised by the assessee will be declared by the Transfer Pricing Officer as valid option.
Clause 42 of the Bill seeks to amend section 144C of the Income-tax Act relating to reference to dispute resolution panel.
The said section, inter alia, empowers the Central Government to notify a faceless scheme for the purposes of issuance of directions by the dispute resolution panel, to impart greater efficiency, transparency and accountability.
Sub-section (14C) of the said section empowers that the Central Government, may, for the purpose of giving effect to the aforesaid scheme, direct that any of the provisions of the Income-tax Act shall not apply or shall apply with such exceptions, modifications and adaptations as specified.
Proviso to said sub-section provides that no direction shall be issued after the 31st March, 2025.
It is proposed to omit the said proviso.
This amendment will take effect from 1st April, 2025.
Clause 70 of the Bill seeks to amend section 253 of the Income-tax Act relating to appeals to the Appellate Tribunal.
The said section, inter alia, empowers the Central Government to notify a faceless scheme for the purposes of appeal to the Appellate Tribunal so as to impart greater efficiency, transparency and accountability.
Sub-section (9) of the said section empowers that the Central Government, may, for the purpose of giving effect to the aforesaid scheme, direct that any of the provisions of the Income-tax Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified.
Proviso to sub-section (9) provides that no direction shall be issued after the 31st March, 2025.
It is proposed to omit the said proviso.
This amendment will give effect from 1st April, 2025.
Clause 71 of the Bill seeks to amend section 255 of the Income-tax Act relating to the procedure of Appellate Tribunal.
The said section, inter alia, empowers the Central Government to notify a faceless scheme for the purposes of disposal of appeals by the Appellate Tribunal to impart greater efficiency, transparency and accountability.
Sub-section (8) of the said section empowers that the Central Government, may, for the purpose of giving effect to the aforesaid scheme, direct that any of the provisions of the Income-tax Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified.
Proviso to sub-section (8) provides that no direction shall be issued after the 31st March, 2025.
It is proposed to omit the said proviso.
This amendment will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
21. Amendment of section 92CA.
In section 92CA of the Income-tax Act,
(a) with effect from the 1st April, 2026,––
(i) in sub-section (1), the following provisos shall be inserted, namely:––
“Provided that no reference for computation of the arm’s length price in relation to an international transaction or a specified domestic transaction shall be made, if the Transfer Pricing Officer has declared that option exercised by the assessee in sub-section (3B) in relation to such transaction is valid for such previous year:
Provided further that if any reference for an international transaction or a specified domestic transaction, in respect of a previous year, for which the option is declared valid under sub-section (3B) is made before or after such declaration by the Transfer Pricing Officer, the provisions of this sub-section shall have the effect as if no reference is made for such transaction.”;
(ii) after sub-section (3A), the following sub-section shall be inserted, namely:––
“(3B) The arm’s length price, being determined in relation to the international transaction or the specified domestic transaction under sub-section (3) for any previous year shall apply to similar international transaction or specified domestic transaction for the two consecutive previous years immediately following such previous year, on fulfilment of the following conditions, namely:––
(a) the assesee exercises an option or options to the above effect for the said two consecutive previous years;
(b) such option or options are exercised in such form, manner and within such period as prescribed; and,
(c) the Transfer Pricing Officer shall, within one month from the end of the month in which such option or options are exercised, by an order in writing, declare that such option or options are valid subject to the conditions, as prescribed:
Provided that the provisions of this subsection shall not apply to any proceedings under Chapter XIV-B.”;
(iii) after sub-section (4), the following sub-section shall be inserted, namely:––
“(4A) Notwithstanding anything contained in sub-section (4), where the Transfer Pricing Officer has declared an option exercised by the assessee as valid option under sub-section (3B), he shall examine and determine the arm’s length price in relation to such similar transaction for two consecutive previous years immediately following such previous year, in the order referred to in sub-section (3) and on receipt of such order, the Assessing Officer shall proceed to recompute the total income of the assessee for the said two consecutive previous years as per the provisions of sub-section (21) of section 155.”;
(b) in sub-section (9), the proviso shall be omitted;
(c) after sub-section (10), the following sub-sections shall be inserted with effect from the 1st April, 2026, namely:––
“(11) If any difficulty arises in giving effect to the provisions of sub-sections (3B) and (4A), the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing such difficulty:
Provided that no such guideline shall be made after the expiration of two years from the 1st April, 2026.
(12) Every guideline issued by the Board under sub-section (11) shall be laid before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive session aforesaid, both houses agree in making any modification in such guideline or both Houses agree that the guideline, should not be issued, the guideline shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that guideline.”.
42. Amendment of section 144C.
In section 144C of the Income-tax Act, in sub-section (14C), the proviso shall be omitted.
70. Amendment of section 253.
In section 253 of the Income-tax Act, in sub-section (9), the proviso shall be omitted.
71. Amendment of section 255.
In section 255 of the Income-tax Act, in sub-section (8), the proviso shall be omitted.
