The Finance Bill 2024 proposes to amend Section 43D of the Income-tax Act by removing references to the National Housing Bank (NHB). Previously, Section 43D specified tax provisions for income related to bad or doubtful debts, including those guided by the NHB for housing finance companies. However, following the Finance (No. 2) Act, 2019, which transferred regulatory powers for Housing Finance Companies (HFCs) to the Reserve Bank of India (RBI), the NHB’s role has diminished. Consequently, the proposed amendment will remove clause (b) of Section 43D and related explanations, as these are now redundant due to existing provisions for non-banking financial companies (NBFCs) under RBI oversight. This change is set to take effect from April 1, 2025, and will apply to the assessment year 2025-2026 and subsequent years, aligning tax provisions with current regulatory frameworks.
Budget 2024: Removing reference to National Housing Board in Section 43D of the Act
Section 43D of the Act provides for special provision in case of income of public financial institutions, public companies involved in housing finance, scheduled banks, co-operative banks other than primary agricultural credit societies, primary co-operative agricultural and rural development banks, State financial corporations, State industrial investment corporations and notified non-banking financial companies.
2. Clause (b) of section 43D of the Act states that in the case of a public company involved in housing finance, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank (NHB) in relation to such debts shall be chargeable to tax in the previous year in which it is credited by the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that company, whichever is earlier. Explanation to the said section also contains references to NHB.
3. However, the Finance (No. 2) Act, 2019 (23 of 2019) has amended the National Housing Bank Act, 1987, conferring powers for regulation of Housing Finance Companies (HFCs) with Reserve Bank of India (RBI). Consequently, HFCs have come under the purview of the RBI as a category of Non-Banking Financial Companies (NBFCs). In the Act, separate provisions already exist in section 43D with respect to NBFCs.
4. Hence, it is proposed to remove reference to National Housing Bank by omitting clause (b) of section 43D of the Act and clause (a) and (b) of Explanation to section 43D of the Act.
5. The amendment will take effect from the 1st day of April, 2025 and shall accordingly apply in relation to assessment year 2025-2026 and subsequent assessment years.
[Clause 15]
Extract of Clause 15 of Finance Bill 2024
Clause 15 of the Bill seeks to amend section 43D of the Income-tax Act relating to special provision in case of income of public financial institutions, public companies, etc.
The said section provides that the income by way of interest credited in relation to certain categories of bad or doubtful debts shall be chargeable to tax in the previous year in which it is credited to the profit and loss account or, as the case may be, in which it is actually received, whichever is earlier.
It is proposed to amend the marginal heading to omit the expression “public companies,” and “or the public company” from body of the said section.
It is further proposed to omit clause (b) of the said section and clauses (a) and (b) of the Explanation thereof.
These amendments will take effect from 1st April, 2025 and will, accordingly, apply in relation to the assessment year 2025-2026 and subsequent years.
Amendment of section 43D.
In section 43D of the Income-tax Act, with effect from the 1st day of April, 2025,—
(i) in the marginal heading, the words “public companies,” shall be omitted;
(ii) clause (b) shall be omitted;
(iii) in the long line, the words “or the public company” shall be omitted;
(iv) in the Explanation, clauses (a) and (b) shall be omitted.
