This article brings together four diverse yet insightful topics for readers, mixing eye-openers with knowledge-enhancers in the field of taxation. From the much-discussed claim that NOIDA is now tax-free and what it really means, to the Income Tax Department’s next-level use of AI tools to detect evasion, it highlights developments every taxpayer should be aware of. It also explains the often-heard but less understood concept of Cost Inflation Index (CII) and its computation, while finally uncovering the ways in which the Department is cracking down on bogus claims. Together, these pieces aim to enrich awareness and provide practical insights for taxpayers and professionals alike.
A. Tax Updates & Insights: NOIDA Tax-Free News
NOIDA is tax-free!!!
The CBDT issued a notification on 17 July 2025 to grant tax exemption under sec. 10(46A) to NOIDA [New Okhla Industrial Development Authority].
What does it mean?
–> Noida does not have to pay taxes if it earns following income
1. Rent from properties.
2. Government subsidies & grants.
3. Service fees & charge on public services.
Are there any conditions attached?
–> Yes, it is conditional exemption applicable only on aforesaid income if they are of non-commercial nature. Second condition states that this exemption won’t apply if Noida fails to maintain separate books of exempt and non-exempt income.
What is the applicability?
–> With effect from income earned during AY 2024-2025 [FY 2023-2024].
What are the benefits?
–> For NOIDA
More investment towards infrastructure development as it is going to save on taxes now.
–> For businesses
Chances of faster project approval as this exemption brings space for development and it can be implemented through businesses only.
Better logistics & resources.
Their own burden of tax remains unaffected.
–> For residents
Hope for better roads & services as Noida may invest more in development now.
Thus, benefit is not given to commercial income. Let’s wait and see how this benefits unfold and help in development of Noida…
The foundation of this exemption was set in Finance Bill 2023 indicating more room for infrastructure development.
B. AI in Tax Scrutiny
Income Tax department is very rigid in catching every tax evasion planned by taxpayers.
Last month a news popped up that a font helped in highlighting a fraudulent tax evasion.
Yes, you read it right, a FONT. The font was Calibri.
Background of the case- A taxpayer of Hyderabad purchased a land long back and sold it recently for Rs.1.4 Cr and he claimed indexed cost of acquisition of Rs.73 Lakhs and indexed cost of improvement of Rs.68.7 Lakhs. Consequently, his LTCG was around Rs.24,774.
His ITR was selected for scrutiny and he submitted the documents in the reply. The taxpayer claimed cost of indexation for long back years 2002 to 2008 and he submitted photocopies of the invoices for expenses on improvement of the property.
We know that Income Tax department is using AI for detailed analysis of ITR. The AI font forensics highlighted a potential case of fraud in this case and the reason was that the invoices pertaining to indexed cost of improvement of year 2002 of Rs.7.68 Lakhs was prepared in Calibri Font.
The catch is- Calibri Font was introduced in 2004 and made public in 2007.
How can it appear on any document prepared in 2002!!
His ITR was sent for further scrutiny including a notice seeking explanation. It was the time when he knew that his fraudulent cost of improvement was caught. So he corrected his ITR and paid the dues.
Be careful with fraudulent claims as the department is tracking it down in every possible way.
C. CII Explained
Decoding Cost Inflation Index (CII)
Why we only see increase of 10-14 points in CII.
Before this, let us understand what is this Cost Inflation Index!
Answer- It is a parameter to adjust the effect of inflation on purchase price of asset while computing Capital Gains.
How is this Index calculated!
Answer- It is 75% of the average rise in the Consumer Price Index (CPI) of the immediately preceding Financial year
Average change in CPI for FY 2023-2024 was 5.4%
CII for FY 2023-2024 was 348
So, CII for FY 2024-2025 was 348 + [348 * (5.4 * 75%)] = 363
Average change in CPI for FY 2023-2024 was 4.6%
CII for FY 2023-2024 was 363
Accordingly, CII for FY 2025-2026 is 363 + [363 * (4.6 * 75%)] = 376
Thus, you don’t have to wait for the CII if you know the way to compute it.
D. Crackdown on Bogus Claims
Don’t fall for bogus claims of House rent, donation certificates, Medical insurance and expenses, interest on loans for education, e-vehicle etc etc …
Any false claim will land you into income tax notice and penalty.
For these bogus claims tracked, the department has given an opportunity to correct the false claims through updated return.
Income Tax Department Cracks Down on Bogus Claims of Deductions & Exemptions
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