The Finance (No 2) Act 2024 has been notified on 16th August 2024. The Finance Act sections 1 to 99 (Page 1 to 54) amends Income Tax Act, section 158 (Page 68 to 69) amends Prohibition of Benami Property Transactions Act and section 164 (Page 70 to 71) amends Black Money Act. The key amendments are summarised as follows:
Revision in Income Tax Rates under new regime for AY 2025-26: The Income Tax rates applicable under section 115BAC(1A)(ii) i.e. new regime, has been revised for determining the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person.
| Existing Slab Rates AY 2024-25 | Revised Slab Rates AY 2025-26 | |||||
| Sl. No | Total Income | Rate of Tax | Total Income | Rate of Tax | ||
| 1 | Up to Rs 3,00,000 | Nil | Up to Rs 3,00,000 | Nil | ||
| 2 | Rs 3,00,001 to 6,00,000 | 5% | Rs 3,00,001 to 7,00,000 | 5% | ||
| 3 | Rs 6,00,001 to 9,00,000 | 10% | Rs 7,00,001 to 10,00,000 | 10% | ||
| 4 | Rs 9,00,001 to 12,00,000 | 15% | Rs 10,00,001 to 12,00,000 | 15% | ||
| 5 | Rs 12,00,001 to 15,00,000 | 20% | Rs 12,00,001 to 15,00,000 | 20% | ||
| 6 | Above Rs 15,00,000 | 30% | Above Rs 15,00,000 | 30% | ||
The amount of income-tax computed in accordance with the provisions (including capital gains under section 111A, 112 and 112A), shall be increased by a surcharge at the applicable rates. (Effective from AY 2025-26)
Revision in Income tax Rates for Companies: In the case of a company other than a domestic company, the rate of tax has been reduced from 40% to 35%, on income, other than income chargeable at special rates specified in sections 110 to 115 of the Act. (Effective from AY 2025-26).
Increase in standard deduction and deduction from family pension for tax- payers in new tax regime: The existing section 16(ia) provides that a standard deduction of fifty thousand rupees or the amount of the salary, whichever is less, is allowed. The amended provisions increase the standard deduction to seventy five thousand rupees or the amount of the salary, whichever is less.
The existing section 57(iia) provides that in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen thousand rupees, whichever is less is allowed. The amended provisions increase the deduction to a sum equal to thirty-three and one-third per cent of such income or twenty five thousand rupees, whichever is less.
As a result of changes in slab rates (tax impact 10000) and amount of standard deduction (tax impact 7500), a salaried employee in the new tax regime stands to save up to Rs. 17,500/- in income tax. (Effective from 1st April 2025 i.e. AY 2025-26).
Increase in amount allowed as deduction to non-government employers and their employees for employer contribution to a Pension Scheme referred in section 80CCD: The existing section 36(1)(iva) provides that any sum paid by an employer by way of contribution towards a pension scheme, as referred to in section 80CCD of the Act, on account of an employee, shall be allowed as a deduction, to the extent it does not exceed ten per cent of the salary of the employee in the previous year. The limit of 10% has been increased to 14%.
Section 80CCD deals with deduction available to employee in respect of contributions to pension scheme notified by central government. it provides that where such contribution has been made by an employer (other than the Central Government or State Government), the employee shall be allowed a deduction for an amount not exceeding 10% of the employee’s salary. The limit of 10% has been increased to 14%, applicable in new tax regime. (Effective from 1st April 2025 i.e. AY 2025-26).
Tax incentives to International Financial Services Centre (IFSC): IFSC is a jurisdiction that provides financial services to non-residents and residents, to the extent permissible under the current regulations, in any currency except Indian Rupee. In order to promote the development of world-class financial infrastructure in India, several tax concessions have been provided to units located in IFSC, under the Act, over the past few years. The now amendments relate to section 10(4D)- Any income accrued or arisen to, or received by a specified fund; section 10(23EE)- Any specified income of Core Settlement Guarantee Fund; section 68- Cash Credits; and section 94B- Limitation on interest deduction in certain cases. (Effective from 1st April 2025 i.e. AY 2025-26).
Taxability of consideration received from a resident for issue of shares exceeding face value: The existing section 56(2)(viib) provide that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares, if the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares exceeding fair market value shall be chargeable to income tax under the head “Income from other sources”. It has been decided to sun-set the provisions of this clause, it shall not apply from the assessment year 2025-26. (Effective from 1st April 2025 i.e. AY 2025-26)
Promotion of domestic cruise ship operations by non-residents: By inserting a new section 44BBC, a presumptive taxation regime has been put in place for a non-resident, which deems twenty per cent of the aggregate amount received/ receivable by, or paid/ payable to, the non-resident cruise-ship operator, on account of the carriage of passengers, as profits and gains of such cruise-ship operator from this business. (Effective from 1st April 2025 i.e. AY 2025-26)
Revision of rates of securities transaction tax: Presently, the rate of STT on sale of an option in securities is 0.0625 per cent of the option premium, while the rate of STT on sale of a future in securities is 0.0125 per cent of the price at which such “futures” are traded. The rate of STT on delivery trades in equity shares is 0.1 per cent on both purchase and sale transactions, while in the case of sale of an option in securities where option is exercised, the rate is 0.125% of the intrinsic price (i.e the difference between the settlement price and the strike price) and is payable by the purchaser. The rate of STT has been increased on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such “futures” are traded. (Effective from 1st October 2024)
Amendment of provisions related to Equalisation Levy: As per existing provisions, Equalization Levy (EL) of two per cent is applicable on the amount of consideration received/ receivable by an e-commerce operator from e-commerce supply or services. An “e-commerce operator” means a non- resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both. The amendment provides that equalisation levy shall not be applicable on or after the 1st day of August, 2024. (Effective from 1st August 2024)
Rationalisation and Simplification of taxation of Capital Gains:
- There will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains. For all listed securities, the holding period shall be 12 months and for all other assets, it shall be 24 months. The section 2(42A), definition of short term capital gain has been amended. The units of listed business trust will now be at par with listed equity shares at 12 months instead of earlier 36 months. The holding period for bonds, debentures, gold will reduce from 36 months to 24 months. For unlisted shares and immovable property it shall remain at 24 months. (Effective from 23rd July 2024)
- The rate for short-term capital gain under provisions of section 111A of the Act on STT paid equity shares, units of equity oriented mutual fund and unit of a business trust has been increased to 20% from the present rate of 15%. (Effective from 23rd July 2024)
- The rate of long-term capital gains is amended to be 12.5% in respect of all category of assets. However, for long-term capital gains under section 112A on STT paid equity shares, units of equity oriented fund and business trust, the exemption has been increased from 1.00 lakh to 1.25 lakh (aggregate). For listed bonds and debentures, the rate shall get reduced to 12.5%. Unlisted debentures and unlisted bonds are of the nature of debt instruments and any capital gains on them shall be taxed at applicable rate, whether short-term or long-term. (Effective from 23rd July 2024)
- The indexation presently available for property, gold and other unlisted assets, under second proviso to section 48 has been removed for calculation of any long-term capital gains. However, in the case of transfer of land or building, or both, acquired before July 23, 2024, by resident individual and HUF, if the tax liability computed at a tax rate of 20% after applying the indexation benefit is lower than the tax liability computed at 12.5% without applying the indexation benefit, the excess shall be ignored. (Effective from 23rd July 2024)
- To bring parity of taxation between residents and non-residents, the amendments to relevant sections has been made to align the rates of taxation. (Effective from 23rd July 2024)
Tax on distributed income of domestic company for buy-back of shares: It has been amended to provide that the sum paid by a domestic company for purchase of its own shares shall be treated as dividend in the hands of shareholders, who received payment from such buy-back of shares and shall be charged to income-tax at applicable rates. No deduction for expenses shall be available against such dividend income while determining the income from other sources. The cost of acquisition of the shares which have been bought back would generate a capital loss in the hands of the shareholder as these assets have been extinguished. (Effective from 1st October 2024)
Exclusion of certain transactions not regarded as transfer for Capital Gains: Section 47(iii) provides exclusion to certain transactions not regarded as transfer for the purposes of chargeability under ‘Capital Gains’ under section 45. The first proviso to the said clause makes an exception to the clause in respect of specified ESOPs. Section 47(iii) and its proviso, has been substituted to provide that capital gain shall not apply, to any transfer of a capital asset, under a gift or will or an irrevocable trust, by an individual or a Hindu undivided family. (Effective from 1st April 2025 i.e. AY 2025-26)
Amendment of Section 55 regarding cost of acquisition for sale of unlisted equity shares under offer for sale in IPO: Section 112A relates to tax long-term capital gains on transfer of equity shares on which STT is paid at the time of acquisition and transfer. As per section 55(2)(ac) the cost of acquisition, for an asset referred to in section 112A is higher of (a) Actual cost of acquisition; and (b) Lower of Fair Market Value (FMV) of shares as of 31st January 2018 and Full value of consideration received upon sale. Section 55(2)(ac) Explanation has been amended, to specifically provide that in a case where the capital asset is an equity share in a company which is not listed on a recognised stock exchange, but listed on such exchange subsequent to the date of transfer, where such transfer is in respect of sale of unlisted equity shares under an offer for sale to the public included in an initial public offer, “fair market value” would mean an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the financial year 2017-18 bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the first day of April, 2001, whichever is later. (Effective retrospectively from AY 2018-19)
Rationalisation of Tax Deducted at Source rates:
Ease in claiming credit for TCS collected/TDS deducted by salaried employees: Section 192 deals with deduction of tax at source on salary income. It provides for consideration of income under any other head and tax deducted thereon to be taken into account for the purposes of making the deduction. It has been amended to include any tax deducted or collected to be taken into account for the purposes of making the deduction under section 192. (Effective from 1st October 2024)
Alignment of interest rates for late payment to Government account of TCS: Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcoholic liquor, forest produce, scrap etc. It provides that persons who fail to collect tax or after collecting, fail to deposit the same shall be liable to pay simple interest at the rate of one percent for every month or part thereof. To align the rate of simple interest, at par with that charged for TDS, it has been amended to specify that simple interest for non-payment of tax collected at source to be one and one-half per cent for every month or part thereof on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid. (Effective from 1st April 2025)
Claiming credit for TCS of minor in the hands of parent: At present there is no provision in the Act for allowing credit of TCS to any other person (e.g. parent) other than the collectee. For funds remitted under the Liberalized Remittance Scheme in the name of minor, there is no provision for the parent to claim the same in their tax return. Section 206C has been amended to provide that credit shall be given to such person or any other person eligible for credit and the Board to notify the rules. (Effective from 1st January 2025)
TDS on payment of salary, remuneration, interest, bonus or commission by partnership firm to partners: A new section 194T has been inserted to bring payments such as salary, remuneration, commission, bonus and interest to any account (including capital account) of the partner of the firm under the purview of TDS for aggregate amounts more than Rs 20,000 in the financial year. Applicable TDS rate will be 10%. (Effective from 1st April 2025 i.e. AY 2025-26)
TCS under sub-section (1F) of section 206C on notified goods: Section 206C provide for the collection of tax at source on business of trading in alcoholic liquor, forest produce, scrap etc. Sub section (1F) provides that every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent. of the sale consideration as income-tax. It has been amended to provide levy of TCS on any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government in this behalf. (Effective from 1st January 2025)
Amendment of provisions of TDS on sale of immovable property: Section 194-IA provides for deduction of tax on payment of consideration for transfer of certain immovable property other than agricultural land. The applicable rate is one per cent of such sum or the stamp duty value of such property, whichever is higher. No deduction of tax shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both less than fifty lakh rupees. It has been amended to provide that where there is more than one transferor or transferee in respect of an immovable property, then such consideration shall be the aggregate of the amounts paid or payable for transfer of such immovable property. (Effective 1st October 2024)
Tax Deduction at source on Floating Rate Savings (Taxable) Bonds (FRSB) 2020: The provisions of section 193 have been amended to allow for deduction of tax at source at the time of payment of interest exceeding ten thousand rupees on the Floating Rate Savings Bonds (FRSB) 2020 (Taxable) and any security of the Central Government or State Government, as the Central Government may, by notification in the Official Gazette, specify in this behalf. (Effective from 1st October 2024)
Inclusion of taxes withheld outside India for purposes of calculating total income: Section 198 has been amended to provide that all sums deducted and income tax paid outside India by way of deduction, in respect of which an assessee is allowed a credit against the tax payable under the Act, are for the purpose of computing the income of the assessee, deemed to be income received. (Effective from 1st April 2025 i.e. AY 2025-26)
Excluding sums paid under section 194J from section 194C (Payments to Contractors): Section 194C of the Act provides for TDS on payments to contractors at the rate of 1% when the payment is being made or credit is being given to an individual or HUF and 2% in other cases. Section 194J of the Act relates to TDS on fees for professional or technical services wherein the applicable TDS rates are 2% or 10% depending on the nature of payment being made. It has been amended to explicitly state that any sum referred to in section 194J does not constitute “work” for the purposes of TDS under section 194C. (Effective from 1st October 2024)
Reducing time limitation for orders deeming any person to be assessee in default: Section 201 and section 206C of the Act provides for the consequences when a person does not deduct/ collect, or does not pay, or after so deducting/ collecting fails to pay, the whole or any part of the tax, as required by or under the Act. Section 201 has been amended and new section 206C(7A) has been inserted to provide that no order shall be made deeming any person to be assessee in default for failure to deduct/ collect the whole or any part of the tax from any person, at any time after the expiry of six years from the end of the financial year in which payment is made or credit is given or tax was collectible or two years from the end of the financial year in which the correction statement is delivered, whichever is later. (Effective from 1st April 2025)
Widening ambit of section 200A of the Act for processing of statements other than those filed by deductor: Section 200A of the Act provides for the manner in which statement of tax deduction at source or a correction statement made by a person deducting any sum under section 200 shall be processed. The amendment widen the ambit of section 200A of the Act to state that in respect of statements which have been made by any other person, not being a deductor, the Board may make a scheme for processing of such statements. (Effective from 1st April 2025)
Extending the scope for lower deduction / collection certificate of tax at source: Section 197 provides that payments on which tax is required to be deducted, are eligible for certificate for deduction at lower rate. Further, section 206C(9) provides that sums on which tax is required to be collected, are eligible for collection of tax at lower rate.
Section 194Q, requires every person being a buyer, who pays to a resident, being the seller, for the purchase of any goods value exceeding fifty lakh rupees in any previous year, to deduct tax at the rate of 0.1% of such sum exceeding fifty lakh rupees. Further, section 206C(1H), requires every person being a seller, other than exceptions given therein, to collect tax at the rate of 0.1% of such consideration exceeding fifty lakh rupees. Section 197 and 206C(9) has been amended to bring section 194Q and 206C(1H) under its ambit, to provide an option to seek a lower deduction certificate. (Effective from 1st October 2024)
Notification of certain persons or class of persons as exempt from TCS: Section 206C has been amended to provide that no collection of tax shall be made or that collection of tax shall be made at such lower rate in respect of specified transaction, from such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as may be notified by the Central Government. (Effective from 1st October 2024)
Time limit to file correction statement in respect of TDS/ TCS statements: Section 200(3) and 206C(3) requires that a deductor/ collector after paying the tax, shall prepare statements detailing the TDS deducted /collected and furnish it within the prescribed time to the prescribed authority. The provisions states that a person may also deliver a correction statement for rectification of any mistake or to add, delete or update the information furnished. The amendment provides that no correction statement shall be delivered after the expiry of six years from the end of the financial year in which the statement referred to in section 200(3) and 206C(3) are delivered. (Effective from 1st April 2025)
Penalty for failure to furnish TDS/ TCS statements: Section 271H relates to penalty for failure to file Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) returns/ statements within the due date. The due date to file a belated return along with fees and interest presently is 31st December of the same assessment year. The amendment provide that no penalty shall be levied if the person proves that after paying TDS/ TCS along with fees and interest, he has filed the TDS/TCS statement before the expiry of period of one month from the time prescribed for furnishing such statement. (Effective from 1st April 2025)
Increase in limit of remuneration to working partners of a firm allowed as deduction: Section 40 of the Act provides for disallowance of any payment of remuneration to working partners, in so far as the amount of such payment to all partners during the previous year exceeds the limit. The limit of remuneration has been increased to be computed as under:
(Effective from 1st April 2025 i.e. AY 2025-26)
Reporting of income from letting out of house property under ‘Income from House Property: Section 28 has been amended to provide that any income from letting out of a residential house or a part of the house by the owner shall not be chargeable under the head “Profits and gains of business or profession” and shall be chargeable under the head “Income from house property”. (Effective from 1st April 2025 i.e. AY 2025-26)
Rationalisation of the provisions of Charitable Trusts and Institutions:
- Merger of trusts under first regime with second regime: The Act puts in place two main regimes for trusts or funds or institutions to claim exemption. The first is contained in the provisions of section 10(23C) and the second is contained in the provisions of sections 11 to 13. The first regime is to be sunset and trusts, funds or institutions be transited to the second regime in a gradual manner. Applications seeking approval or provisional approval under section 10(23C), and filed on or after 1st October, 2024, shall not be considered. Approved trusts, funds or institutions would continue to get the benefit of exemption till the validity of the said approvals. They would be eligible to apply for registration, subsequently, under the second regime. Certain eligible modes of investment, under the first regime shall be protected in the second regime. (Effective from 1st October 2024)
- Condonation of delay in filing application for registration by trusts or institutions: A trust or institution desirous of seeking registration under section 12AB is required to apply within timelines specified section 12A(1)(ac). PCIT/ CIT have been empowered to condone the delay in filing application and treat such application as filed within time. (Effective from 1st October 2024)
- Rationalisation of timelines for funds or institutions to file applications seeking approval under section 80G: The first proviso to section 80G(5) provides timelines for filing application for approval. The second proviso lays down the procedure for processing the same. These have been amended to rationalise the timelines for filing applications for approval. (Effective from 1st October 2024)
- Rationalisation of timelines for disposing applications made by trusts or funds or institutions, seeking registration for exemption under section 12AB or approval under section 80G: Applications seeking registration under section 12AB, and seeking approval under section 80G(2)(a), are required to be processed within a period of six months from the end of the month in which the application was received. The timelines have been rationalised to six months from the end of the quarter in which the application was received. (Effective from 1st October 2024)
- Merger of trusts under the exemption regime with other trusts: When a trust or institution which is approved / registered under the first or second regime, as the case may be merges with another approved / registered entity under either regime, it may attract the provisions, relating to tax on accreted income in certain circumstances. A new section 12AC is inserted to prescribe conditions under which the said merger shall not attract these provisions. (Effective from 1st April 2025)
- Inclusion of reference of section 10(23EA), 10(23ED) and 10(46B) in section 11(7): The amendment enable trusts under the second regime to claim exemption under these clauses of section 10. (Effective from 1st April 2025)
Introduction of block assessment provisions in cases of search under section 132 and requisition under section 132A: The main objectives for the introduction of block assessment are early finalization of search assessments, coordinated investigation and reduction in multiplicity (yearly basis) of proceedings. The ‘block period’ shall consist of previous years relevant to six assessment years preceding the previous year. There will be one consolidated assessment for the block period. The tax shall be charged at sixty per cent for the block period, as per section 113 of the Act. Penalty on the undisclosed income of the block period shall be levied at fifty per cent of the tax payable on such income. The time-limit for completion of block assessment of the searched assessee shall be twelve months. (Effective from 1st September 2024)
Rationalisation of provisions relating to assessment and reassessment: The existing provisions of section 148 provide the procedure for issuance of notice to initiate assessment or reassessment or re-computation under section 147 of the Act. The provisions also provide details of what constitutes ‘information’ for the purposes of issuance of notice. Section 148A provide the procedure to be followed by AO, including conducting inquiry, providing an opportunity of being heard to the assessee, and passing an order prior to reopening of a case. Section 149 provide the time limits for issuance of notice and computation of the period of limitation under various circumstances. Section 151 mandates to obtain sanction from the specified authority, for issuance of notice. The provisions for assessment and reassessment have been rationalised by amending section 148, 148A, 149, 151 and 152 of the Act. (Effective from 1st September 2024)
Rationalisation of provisions relating to period of limitation for imposing penalties: Section 275 of the Act provides for the period of limitation for imposing penalties. For calculation of the number of days for imposition of penalties, the reference to the date of receipt of order by the Principal Chief Commissioner or Chief Commissioner has been omitted. (Effective from 1st October 2024)
Amendment in provisions relating to set off and withholding of refunds: Section 245 empowers AO to adjust the refund against any tax demand that is outstanding from the taxpayer. Further, where refund becomes due but the assessment or reassessment proceeding is pending in his case, AO may, with the approval of the PCIT or CIT withhold the refund till the date on which such assessment or reassessment is completed. The period of withholding the refund ‘up to the date of assessment’ is inadequate as the demand itself becomes due after thirty days of the date of assessment, so the period of withholding the refund has been extended up to sixty days from the date on which such assessment or reassessment is made. (Effective from 1st October 2024)
Rationalisation of the time-limit for filing appeals to the Income Tax Appellate Tribunal (ITAT): Section 253 lays down the provisions for filing an appeal with ITAT. The appeals are to be filed ‘within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the PCIT/CIT, as the case may be’. In the new Faceless Appeal dispensation, the orders are upload on a day-to-day basis and so tracking of limitation for filing appeal becomes difficult. The amendment has been made to provide that the appeal before the ITAT may be filed within two months from the end of the month in which the order sought to be appealed against is communicated. (Effective from 1st October 2024)
Amendment to definition of Specified Mutual Fund under section 50AA: Section 50AA of the Act provides for special taxation regime of deemed short term capital gains taxation for Market Linked Debentures and Specified Mutual Funds. The gains in such cases is taxed as Short-term Capital Gain irrespective of period of holding. The definition of “Specified Mutual Fund” under clause (ii) of Explanation of section 50AA has been amended to mean a mutual fund:
(a) a Mutual Fund by whatever name called, which invests more than sixty five per cent of its total proceeds in debt and money market instruments; or
(b) a fund which invests sixty five per cent or more of its total proceeds in units of a fund referred to in sub-clause (a). (Effective from 1st April 2026 i.e. AY 2026-27)
Preventing misuse of deductions of expenses claimed by life insurance business: The profits and gains of life insurance business is the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation, and excluding from it such surplus or deficit included therein which was made in any earlier inter-valuation period. Rule 2 of First Schedule has been amended to provide that any expenditure which is not admissible under the provisions of section 37 in computing the profits and gains of a business shall be included to (i.e. added back to) the profits and gains of the life insurance business. (Effective from 1st April 2025 i.e. AY 2025-26)
Adjusting liability under Black Money Act, 2015 against seized assets: Section 132B provides that any existing liability under the Income-tax Act, 1961, the Wealth-tax Act, 1957, the Expenditure-tax Act, 1987, the Gift-tax Act, 1958 and the Interest-tax Act, 1974, and the amount of liability determined on completion of the assessment or reassessment in consequence of search or requisition, may be recovered from the taxpayer out of the seized assets. The amendment insert the reference of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 in the section 132B so as to recover the existing liabilities under the act, out of seized assets. (Effective from 1st October 2024)
Disallowance of settlement amounts being paid to settle contraventions: Section 37 of the Act provides for allowability of expenditure incurred wholly and exclusively for the purpose of business or profession. Explanation 1 of section 37(1) provides that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. It) has been amended to provide that “expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law” shall include any expenditure incurred by an assessee to settle proceedings initiated in relation to a contravention under any law for the time being in force. (Effective from 1st April 2025 i.e. AY 2025-26)
Direct Tax Vivad se Vishwas Scheme, 2024: Direct Tax Vivad se Vishwas Scheme, 2024 has been introduced with the objective of providing a mechanism of settlement of disputed issues, thereby reducing litigation without much cost to the exchequer. (Effective from date to be notified by Central Government)
Amendments in section 276B for rationalisation of penalty provisions: Section 276B of the Act provides for prosecution in case of failure to pay tax. If a person fails to pay, the tax deducted at source by him as required by or under the provisions of Chapter XVII-B, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. The amendment provide for exemption from prosecution, if the payment of tax deducted in respect of a quarter has been made at any time on or before the time prescribed for filing the statement of such quarter under section 200(3) of the Act. (Effective from 1st October 2024)
Submission of statement by liaison office of non-resident in India: Section 285 provide that a non-resident having a liaison office in India, is required to prepare and deliver a statement in respect of its activities in a financial year within sixty days from the end of such financial year. A new section 271GC has been inserted to provide that failure to furnish statement may attract a penalty of one thousand rupees for every day for which the failure continues, if the period of failure does not exceed three months, and one lakh rupees in any other case. (Effective from 1st April 2025)
Determination of Arms Length Price (ALP) in respect of specified domestic transactions (SDTs) in proceedings before Transfer Pricing Officer (TPO): Section 92CA provides that the Assessing Officer(AO), if he considers it necessary, may refer the matter of determination of ALP in respect of an international transaction or SDT to the TPO. Further section 92E require taxpayer to file an audit report in the prescribed form before AO containing details of all international transactions or SDT undertaken by the taxpayer during the year. If, during the course of proceeding, an international transaction comes to the notice of the TPO, which has not been referred to him by the AO and/or audit report has not been filed, the TPO can proceed to determine the ALP in its respect as well. The amendments relates to SDTs, and it enable the TPO to deal with SDTs which have not been referred to him by the AO and/or in whose respect audit report has not been filed. (Effective from 1st April 2025 i.e. in relation to AY 2025-26)
Discontinuation of the provisions allowing quoting of Aadhaar Enrolment ID in place of Aadhaar number: Section 139AA mandate, that every person who is eligible to obtain Aadhaar number shall, quote Aadhaar number in the application form for allotment of Permanent Account Number (PAN) and in the return of income. The proviso to section 139AA(1) provides that where the person does not possess the Aadhaar Number, the Enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be quoted. The amendment state that proviso to quote enrolment ID of Aadhaar application form shall not apply from the 1st day of October, 2024. (Effective from 1st October 2024)
Amendments in sections 245Q and 245R related to Advance Rulings: Authority for Advance Rulings (AAR) under Income Tax ceased to operate from September 01, 2021. Central Government constituted a Board for Advance Rulings (BAR), under the provisions of sections 245N to 245W. Section 245Q provides that an applicant may withdraw an application within thirty days from the date on which such application is made. The amendment relates to section 245Q to allow application for withdrawal by the 31st of October, 2024 for the transferred applications before BAR (from AAR) in cases where order has not been passed. (Effective from 1st October 2024)
Powers of the Commissioner (Appeals): The provisions of section 251 specify the powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals). The amendment provides that the cases where assessment order was passed as best judgement case under section 144, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment. Consequentially section 153(3) has been amended to provide the time limit for disposal of cases which are set aside by the Commissioner (Appeals). (Effective from 1st October 2024)
Amendment of section 271FAA to comply with the Automatic Exchange of Information (AEOI) framework: While reviewing India’s CRS legislative framework under the Automatic Exchange of Information (AEOI) framework, the Global Forum on Transparency and Exchange of Information for Tax purposes has formed a view that the penal sanction available under section 271FAA for inaccuracies would not automatically extend to all cases where due diligence was not correctly done if the information did not lead to incorrect reporting. The amendment provides that that penalty under the said section shall be attracted in any of the following circumstances–
(i) furnishing inaccurate information in the statement;
(ii) failure to comply with due diligence requirement in the statement. (Effective from 1st October 2024)
Amendment to include the reference of Black Money Act, 2015 for the purposes of obtaining a tax clearance certificate: Section 230 specify that, no person who is domiciled in India, shall leave India, unless he obtains a certificate from the income-tax authorities stating that he has no liabilities under Income-tax Act, 1961, or the Wealth-tax Act, 1957, or the Gift-tax Act, 1958, or the Expenditure-tax Act, 1987, or he makes satisfactory arrangements for the payment of all or any of such taxes which are or may become payable by that person. The amendment insert the reference of liabilities under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 in section 230(1A), for the purposes of obtaining a tax clearance certificate. (Effective from 1st October 2024)
Amendments to the Prohibition of Benami Property Transactions Act (PBPT), 1988:
- Amendment of Section 24 of the PBPT Act: Section 24 relates to notice and attachment of property involved in Benami transaction. The amendments insert sub-section (2A) to provide a maximum time limit of three months from the end of the month in which notice is issued, for the benamidar or the beneficial owner to file their explanations or submissions. The amendments to sub-section (3) and (4) provide for a timeline of four months from the end of the month in which notice is issued, for the Initiating Officer to provisionally attach the property or to pass an order for continuing the provisional attachment or revoking the provisional attachment or deciding not to attach the property, as the case may be. The amendments to sub-section (5) provide for a timeline of one month from the end of the month in which the attachment order has been passed, to draw up a statement of the case and refer it to the Adjudicating Authority.
- Insertion of Section 55A in the PBPT Act: As per section 53(2), the offence of benami transaction is punishable with a penalty of rigorous imprisonment for minimum one year to maximum seven years along with fine extending to 25% of the fair market value of the benami property. This penalty is the same for a benamidar or a beneficial owner or any person who abets or induces any person to enter into a benami transaction. A new section 55A has been inserted, to provide that the Initiating Officer may, with a view to obtaining the evidence of the benamidar or any other person, other than the beneficial owner, tender to such person immunity from penalty for any offence under section 53, on condition of his making a full and true disclosure of the whole circumstances relating to the benami transaction. (Effective from 1st October 2024).
Amendments in section 42 and 43 of the Black Money Act, 2015 relating to penalty for failure to disclose foreign income and asset in the ITR: The amendment provide that sections 42 and 43 of the Black Money Act shall not apply in respect of an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed twenty lakh rupees. (Effective from 1st October 2024)
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Disclaimer: The contents of this article are for informational purposes only. The user may refer to the notification issued by Central Government on Tax matters for specific interpretation and compliances related to a particular subject matter)
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