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Relief for TDS/TCS Defaults Due to Inoperative PAN: CBDT Circular No. 9/2025

Posted on by CA Meet Dhrangadhariya

PAN Inoperative? CBDT Gives Grace Period for TDS/TCS Relief

The Central Board of Direct Taxes (CBDT) has issued Circular No. 9/2025 dated 21st July 2025, providing partial modifications to its earlier circulars to offer relief to deductors and collectors facing demands due to TDS/TCS defaults caused by inoperative PANs. This move aims to address numerous grievances raised by taxpayers regarding demands for short-deductions or collections, even in cases where the PAN was later made operative.

This blog outlines the implications, relief measures, and compliance expectations stemming from the new circular.

Background

  • Circular No. 3/2023 (dated 28th March 2023) had specified that if PAN becomes inoperative (under Rule 114AAA of the Income-tax Rules, 1962), higher TDS/TCS rates under Section 206AA/206CC would apply from July 01, 2023 onwards, until the PAN is made operative.

  • Circular No. 6/2024 (dated 23rd April 2024) provided temporary relief for transactions done up to March 31, 2024, if the PAN was linked with Aadhaar by May 31, 2024.

However, many deductors/collectors have received notices for short deduction or collection, despite the PAN becoming operative later, leading to avoidable tax demands.

The Issue with Inoperative PAN:

As per Circular No. 3 of 2023, if a PAN is not linked with Aadhaar, it becomes inoperative from July 1, 2023.

Consequences include:

• No tax refunds while PAN is inoperative.
• No interest on refunds for the inoperative period.
• TDS/TCS must be deducted/collected at higher rates under sections 206AA/206CC of the Income-tax Act.

New Relief under Circular No. 9/2025

To mitigate hardships, CBDT has introduced two key relaxations for cases where PANs became operative due to Aadhaar linkage after the transaction dates:

No higher TDS/TCS liability will arise in the following two situations:

  1. Payments/Credits between April 1, 2024 and July 31, 2025

    ➤ Condition: PAN must be made operative on or before September 30, 2025.

  2. Payments/Credits on or after August 1, 2025

    ➤ Condition: PAN must be made operative within 2 months from the end of the month in which the amount was paid/credited.

In such cases, higher TDS/TCS under Section 206AA/206CC will not apply, and no default will be treated for the deductor/collector.

Summary Table:

Action Points:

• For deductors/collectors:

Review TDS/TCS statements, communicate with clients/vendors whose PAN was previously inoperative, and encourage prompt PAN–Aadhaar linkage.

• For taxpayers:

Check your PAN–Aadhaar linkage status immediately if there is any doubt.

Notes:

  • These reliefs are subject to PAN becoming operative through Aadhaar linkage, within the stipulated deadlines.
  • Other TDS/TCS provisions (under Chapter XVII-B or XVII-BB) must still be complied with.
  • This circular is a welcome move, ensuring that genuine cases are not penalized due to temporary PAN inoperativeness.

Final Thoughts

This circular reinforces the government’s intent to balance compliance with taxpayer convenience. While PAN-Aadhaar linkage remains mandatory, the latest relief provides much-needed protection for deductors/collectors from unjust demands, provided they meet the revised deadlines.

Download official circular from government by clicking here.

For assistance with PAN-Aadhaar linking or resolving TDS/TCS defaults, feel free to ask in comment section.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Required Documents for ITR compliances – FY 2024-25

Posted on by Sohil Panwala

Introduction

As financial year gets ended in the month of March, preparation for Income Tax Return (ITR) filing gets started where department and taxpayers both have to work upon various aspects. Department generally releases ITR forms during May or June and taxpayers compile the documents and rush towards their CAs for ITR compliances. Indian income tax law is considered to be one the most complex tax laws in the world and it is obvious that many complications will be faced by taxpayers for such ITR filing compliances.

To avoid unnecessary hustle, we have simplified the document compilation process for the taxpayers which can be very useful during ITR compliances. Documentary requirements for various ITR forms are different. It is best to discuss the summary of transactions carried out during the financial year with your CAs or advisors and they will suggest a proper ITR form to be filed based on the transactions carried out during the previous year.

Important Documents for ITR 1

Person required to file ITR 1 (Gross income upto ₹50 lac)

  1. Income from Salaries
  2. Income from House Property
  3. Income Other Sources
  4. Income from Long term capital gains (listed securities as per section 112A upto ₹1.25 lacs)

 

Required Documents for ITR 1

  1. PAN and Aadhaar number
  2. Form 16 from Employer
  3. AIS (Annual Information Statement) and TIS (Tax Information Statement)
  4. Interest Certificates for saving bank accounts
  5. Interest certificates and Account Statements for housing loan
  6. Profit and Loss statement for Demat Account (if any)

 

Note: Form 16 should be accompanied with Form 12BA for arriving the values of various perquisites which are included in the salary. Moreover, if there are more than 2 employers during a financial year or more than a single house property income then ITR 2 shall be applicable. Further, if any investments in foreign assest will be carried out during a financial year then also, ITR 2 will be applicable.

 

Important Documents for ITR 2

Person required to file ITR 2 (Gross income above ₹50 lac)

  1. Income from Salaries (more than 2 employers)
  2. Income from House Property (more than 1 house property)
  3. Income Other Sources
  4. Income from Capital gains (including crypto asset)

 

Required Documents for ITR 2

  1. PAN and Aadhaar number
  2. Form 16 from Employer
  3. AIS (Annual Information Statement) and TIS (Tax Information Statement)
  4. Interest Certificates for saving bank accounts
  5. Interest certificates and Account Statements for housing loan
  6. Profit and Loss statement for Demat Account (if any)
  7. Foreign Investment and Income statement
  8. Holding statement of Foreign Assets as on 31st December
  9. Profit and Loss statement of Crypto Assets
  10. Details of Capital Assests which are sold during previous year

 

 

Important Documents for ITR 3

Person required to file ITR 3

  1. All Income types as per ITR 2
  2. Income from Business and Profession

 

Required Documents for ITR 3

  1. PAN and Aadhaar number
  2. Form 16 from Employer
  3. AIS (Annual Information Statement) and TIS (Tax Information Statement)
  4. Interest Certificates for saving bank accounts
  5. Interest certificates and Account Statements for housing loan
  6. Profit and Loss statement for Demat Account (if any)
  7. Foreign Investment and Income statement
  8. Holding statement of Foreign Assets as on 31st December
  9. Profit and Loss statement of Crypto Assets
  10. Details of Capital Assests which are sold during previous year
  11. Financial Statements of the Business or Profession carried out during the previous year
  12. Capital account statement from the Firms in which partnership interest was available during previous year

 

 

Important Documents for ITR 4

Person required to file ITR 4

  1. All Income types as per ITR 1
  2. Income from Business and Profession – Presumptive Scheme benefit

 

Required Documents for ITR 4

  1. PAN and Aadhaar number
  2. Form 16 from Employer
  3. AIS (Annual Information Statement) and TIS (Tax Information Statement)
  4. Interest Certificates for saving bank accounts
  5. Interest certificates and Account Statements for housing loan
  6. Profit and Loss statement for Demat Account (if any)
  7. Financial Statements of the Business or Profession carried out during the previous year
  8. Capital account statement from the Firms in which partnership interest was available during previous year

 

 

Important Documents for Deductions

Taxpayers who are willing to opt old scheme of taxation shall be required to have following document while complying with ITR filing requirements.

Required Documents for claiming deductions under old scheme of taxation

  1. Invoice or Receipts to claim deductions under section 80C (such as LIC, PPF, NPS, Educational Fees etc)
  2. Health insurance invoice for claiming deduction under section 80D
  3. Interest certificates for claiming deductions under section 80E
  4. Donation receipts for claiming deductions under section 80G and 80GGC
  5. Invoice or Receipts for claiming any other deductions as per chapter VI of Income Tax Act, 1962

 

 

Conclusion

It is very important to figure out the proper ITR form to be required to file based on the transaction and nature of the activities carried out during the previous year. CAs or Advisors are the best person who will guide to determine the proper ITR form which should be filed based on the information made available to them. It is important to note that wrong selection of ITR will cause significant challenges where wrongly filed ITR would be considered as Defective ITR under section 139(9) of the Income Tax Act, 1962 and notice of the same would be issued to the taxpayers. Moreover, ITR should be filed within due dates mentioned under section 139(1) of the Income Tax Act, 1962 to carry forward the losses from business or capital gains for future years.

 

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Crackdown on Fraudulent ITR Claims: What Every Taxpayer Should Know

Posted on by CA Meet Dhrangadhariya

IT Department Launches Nationwide Crackdown on Bogus Tax Deductions

The Income Tax Department of India has launched an aggressive crackdown on fraudulent deduction claims in Income Tax Returns (ITRs). Powered by AI and advanced data analytics, this crackdown is now targeting suspicious claims under specific deduction sections—some of which have been commonly misused by both individuals and intermediaries.

Here’s what you need to know to stay safe and compliant.

What’s Triggering the Crackdown?

A sharp rise in false or exaggerated claims made under various sections of the Income Tax Act has prompted the government to act. Fraudulent practices—often facilitated by unverified intermediaries—are now being flagged by the Income Tax Department’s advanced detection tools.

The crackdown focuses on deductions claimed under the following sections:

Sections Under Scrutiny:

• Section 10(13A) – House Rent Allowance (HRA)
• Section 80GGC – Donations to political parties
• Section 80E – Interest on education loans
• Section 80D – Health insurance premiums
• Section 80EE – Interest on home loans for first-time buyers
• Section 80EEB – Interest on loans for electric vehicles
• Section 80G – Donations to registered charities and relief funds
• Section 80GGA – Donations for scientific research and rural development
• Section 80DDB – Medical treatment for specified critical illnesses

Many of these claims were found to be either inflated or entirely bogus—submitted with fake documents or no proof at all.

AI-Powered Monitoring & Real-Time Cross-Verification

The Income Tax Department is now leveraging AI and data analytics to automatically flag suspicious deduction patterns across thousands of returns. Real-time cross-verification has also been implemented to compare taxpayer claims with actual data from:

• Banks and financial institutions (for loan interest and repayments)
• Insurance companies (for policy premium verification)
• Employers (for rent and HRA)
• Recognized donation platforms and political party disclosures

If a claim doesn’t match backend data, the taxpayer may receive a notice or demand.

Examples of Fraudulent Practices Being Flagged

1. Fake HRA Claims (Section 10(13A)): Claiming rent deductions using fictitious landlords or PANs.
2. Bogus Political Donations (Section 80GGC): False declarations to inflate refund amounts.
3. Fake or Inflated Education Loan Interest (Section 80E): Claiming deductions for non-existent loans.
4. Unsubstantiated Medical Claims (Section 80DDB): Claims without medical certificates or treatment proof.
5. Misuse of Health Insurance (Section 80D): Deducting for lapsed or ineligible policies.
6. Invalid Home Loan or EV Loan Interest (Sections 80EE & 80EEB): Claiming interest deductions without ownership or valid financing.
7. Questionable NGO Donations (Section 80G, 80GGA): Submitting receipts from unapproved or blacklisted institutions.

Legal & Financial Consequences

The Department has already taken action in major cities like Mumbai, Delhi, Jaipur, and Ahmedabad. Hundreds of notices have been served, and several searches and surveys have been conducted under Sections 132 and 133A of the Income Tax Act.

Penalties for false deduction claims may include:

• Demand for repayment of refunds with interest and penalties
• Prosecution under Sections 276C (evasion) and 277 (false statements)
• Imprisonment, in extreme cases

What Taxpayers Should Do Immediately?

  • Recheck Your ITR: Ensure that all deductions claimed are accurate and fully supported by documentation.
  • Avoid Dubious Tax Advisors: Stay away from intermediaries who guarantee high refunds by misusing deduction sections.
  • File an Updated Return (ITR-U): If you realize an error, you can correct it voluntarily through the ITR-U mechanism to minimize penalties.
  • Preserve Proof: Maintain receipts, loan sanction letters, insurance policies, and donation certificates for at least 6 years.

Deadline to Act

You can file an Updated Return (ITR-U) for Financial Year 2023–24 up to March 31, 2026. This gives taxpayers a chance to rectify mistakes without attracting harsher consequences—but the longer the delay, the higher the interest and penalties.

Final Takeaway

The Income Tax Department’s message is clear: fraudulent deductions won’t go unnoticed. With technology closing the loopholes, it’s time for every taxpayer to clean up their returns and ensure compliance.

Transparency is not just good practice—it’s now a legal necessity.

Read the source of this post by clicking here.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Luxury Items under the ambit of TCS – Income Tax

Posted on by Hatim Bharmal

TCS on  luxury goods: Know the Rates, Rules & Applicability w.e.f April 22, 2025:

The Tax Collected at Source (TCS) provisions under the Income Tax Act, 1961, play a crucial role in ensuring tax compliance and transparency in high-value transactions. As per Section 206C, certain sellers are mandated to collect a specified percentage of tax from buyers at the time of sale of specified goods or receipt of sale consideration, provided the transaction exceeds prescribed thresholds.

Amendment in the section 206C which specifies the transactions on which TCS is applicable:

  • Finance Act 2024 (No. 2) has amended the provisions of section 206 (1F) to expand the scope of applicability of TCS provision to include other goods under the ambit of TCS in addition to existing applicability on sale of Car for value exceeding 10 lakh rupees.
  • Vide notification no 36/2025/F. No. 370142/11/2025-TPL dated 22-04-2025 Central government has notifed the following goods of the value exceeding 10 lakh rupees for collection of tax at source at 1% :
Sr. No. Nature of goods
1 any wrist watch
2 any art piece such as antiques, painting, sculpture
3 any collectibles such as coin, stamp
4 any yacht, rowing boat, canoe, helicopter
5 any pair of sunglasses
6 any bag such as handbag, purse
7 any pair of shoes
8 any sportswear and equipment such as golf kit, ski-wear
9 any home theatre system
10 any horse for horse racing in race clubs and horse for polo
  • The above amendment affects the ultra High Net Worth Individuals and traders or distributers of the above mentioned goods as TCS @ 1% will be collected by trader or distributer in addition to amount of goods so as to track the high value transaction by the Income Tax department.

 

TCS on Goods and Services: The Basics

The table outlines two scenarios for TCS collection on goods and services  including the criteria, applicable rates, sections of the Income Tax Act, and who it applies to. Let’s dive into the details:
 
A. TCS on Specified Goods:
No. Description of Goods TCS Rate Important Points to be considered
1 Alcoholic Liquor for human consumption 1% – No TCS is collected if goods are procured for the purpose of manufacturing, processing or producing articles or things or for the purposes of generation of power.

-Srap means waste and scrap from the manufacture or mechanical working of materials which is not usable as such.

– Applicable to seller if its turnover from business exceeds 1 crore in previous year.
2 Tendu leaves 5%
3 Timber obtained under a forest lease 2%
4 Timber obtained by any mode other than under a forest lease 2%
5 Any other forest produces not being timber or tendu leaves 2%
6 Scrap 1%
7 Minerals, being coal or lignite or iron ore 1%
8 Motor Vehicle 1% -Applicable if value of Car exceeds 10 lakhs

-Not applicable in case of sale of goods by Manufacturer to distributor
9 Luxury Goods – as mentioned in above para of article 1%

*Note – Applicability of TCS on sale of goods other than mentioned above for more than 50lakh during the year as mentioned  u/s. 206(1H)  has been omitted w.e.f. 1st April 2025.

 

B. TCS on specified services
Sr. No. Description of Service TCS Rate Important points to be considered
1. Remittance by Authorised dealer under LRS Scheme for medical and educational purpose 5% -Applicable if remittance amount exceeds 10 lakhs during the financial year.

 

-No TCS on remittance if loan is taken for educational purpose.

 
2. Remittance by Authorised dealer under LRS Scheme for other purpose 20% -Applicable if remittance amount exceeds 10 lakhs during the financial year.

 
3. Seller of Overseas Tour programme package

5%

20%

 If overseas tour package in less than 10 lakh – 5%

– If overseas tour package exceeds 10 lakh – 20%

 
4. Service of Granting right or lease or license in any parking lot or toll plaza or mine or quarry to any person other than PSU 2% -mining and quarrying shall not include mining and quarrying of mineral oil (petroleum and natural gas)

 

Compliances Required for TCS Provisions

• Collect TCS at the Prescribed Time – TCS must be collected at the earlier of debiting the buyer’s account or receipt of payment.

• Timely Deposit of TCS – TCS collected must be deposited with the government by the 7th day of the following month (or by 30th April for collections in March)

• File Quarterly Returns – Sellers are required to file quarterly TCS returns using Form 27EQ within the specified deadlines (15th day of the following Quarterly (or by 15th May for Jan-March Quarter).

•Issue TCS Certificates – After filing returns, a TCS certificate (Form 27D) must be issued to the buyer within 15 days from filling of TCS Return, serving as proof for the buyer to claim tax credit.

Consequences for Not Collecting TCS under the Income Tax Act

• Penalty under Section 271CA – If a seller fails to collect TCS, a penalty equal to the amount of tax not collected may be imposed by the Joint Commissioner. However, if the seller can prove there was a reasonable cause for the failure, the penalty may be waived under Section 273B.

• Interest Liability – In addition to penalties, interest at 1% per month or part thereof is charged from the date the tax was collectible until it is actually collected and deposited with the government.

• Additional Penalties – Non-deposit or delayed deposit of TCS, as well as late filing of TCS returns, can attract further penalties and fines, including ₹100 per day for delayed return filing.

Conclusion

TCS provisions under the Income Tax Act, 1961, play a vital role in widening the tax base and promoting transparency in high-value transactions. Understanding the applicability, adhering to the prescribed compliances, and being aware of the consequences of non-compliance are essential for every business and professional dealing in specified goods and services. Timely collection, deposit, and reporting of TCS not only ensure legal compliance but also help avoid hefty penalties and interest liabilities.

By staying informed and proactive, you can ensure smooth transactions while fulfilling your tax responsibilities. Have questions about TCS Provisions? Drop them in the comments below, and let’s discuss!

Check out TCS Section 206C of the Income Tax Act, 1961.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

TDS on House Rent Payments: Know the Rates, Rules & Applicability

Posted on by CA Meet Dhrangadhariya

TDS on House Rent Payments: Know the Rates, Rules & Applicability w.e.f April 1, 2025:

Tax Deducted at Source (TDS) is a mechanism in India where tax is deducted at the source of income, ensuring that the government collects tax on income as it is earned. When it comes to house rent, specific TDS rules apply under the Income Tax Act, particularly for individuals, Hindu Undivided Family (HUF), companies, and firms. In this blog, we’ll break down the TDS rates and criteria for house rent for Financial Year 2025-26, as outlined in the table below, helping you understand your obligations as a tenant or landlord.




TDS on House Rent: The Basics


The table outlines two key scenarios for TDS deduction on house rent, including the criteria, applicable rates, sections of the Income Tax Act, and who it applies to. Let’s dive into the details:




A. TDS on Rent Paid to a Resident Indians:












No.
House Rent Criteria
TDS Rate
Section
Tenant Applicability




1
Rent is more than ₹2.40 lacs per annum
10%
194-I
– Company


– Firm


– Individual/HUF with business turnover more than ₹1 crore


– Individual/HUF with professional gross receipts more than ₹50 lacs





2
Rent is more than ₹50,000 per month
2%
194-IB
– Individual/HUF with business turnover less than ₹1 crore


– Individual/HUF with professional gross receipts less than ₹50 lacs











Scenario 1: Rent Exceeding ₹2.40 Lacs Per Annum


• Criteria: If the annual rent paid exceeds ₹2,40,000, TDS must be deducted.


• TDS Rate: The applicable TDS rate is 10%.


• Section: This falls under Section 194-I of the Income Tax Act, which deals with TDS on rent payments.




• Applicability: This rule applies to:


a) Companies and firms, regardless of their income.


b) Individuals or HUFs who have a business turnover exceeding ₹1 crore in a financial year.


c) Individuals or HUFs with professional gross receipts exceeding ₹50 lacs in a financial year.




• Example: Suppose a company rents office space and pays ₹3,00,000 annually. Since the rent exceeds ₹2.40 lacs, the company must deduct 10% TDS, which amounts to ₹30,000, and pay the remaining ₹2,70,000 to the landlord. The deducted TDS must be deposited to the government, and the landlord can claim credit for this amount while filing their income tax return.




Scenario 2: Rent Exceeding ₹50,000 Per Month


• Criteria: If the monthly rent exceeds ₹50,000, TDS is applicable.


• TDS Rate: The TDS rate in this case is 2%.


• Section: This is covered under Section 194-IB of the Income Tax Act.




• Applicability: This rule applies to:


a) Individuals or HUFs with business turnover less than ₹1 crore.


b) Individuals or HUFs with professional gross receipts less than ₹50 lacs.




• Example: An individual pays ₹60,000 per month as rent for their apartment, totaling ₹7,20,000 annually. Since the monthly rent exceeds ₹50,000, they must deduct 2% TDS, which is ₹1,200 per month (₹14,400 annually). The remaining ₹58,800 is paid to the landlord each month. The tenant must deposit the TDS to the government and issue a TDS certificate (Form 16C) to the landlord.




Key Points to Understand


1) Threshold Limits: The ₹2.40 lacs per annum threshold (Section 194-I) is an annual limit, while the ₹50,000 per month threshold (Section 194-IB) is a monthly limit. Ensure you calculate the rent correctly to determine which section applies.


2) Who Deducts TDS? Under Section 194-I, companies, firms, and high-income individuals/HUFs are responsible for deducting TDS. Under Section 194-IB, individuals/HUFs with lower incomes (below the specified thresholds) are responsible, making it easier for the government to track rent payments by smaller taxpayers.


3) TDS Deposit and Compliance: The deducted TDS must be deposited to the government by the 7th of the following month (or by April 30th for TDS deducted in March). Additionally, tenants must issue TDS certificates to landlords—Form 16A for Section 194-I and Form 16C for Section 194-IB.


4) No TAN Requirement for Section 194-IB: Unlike Section 194-I, where a Tax Deduction Account Number (TAN) is required to deduct and deposit TDS, individuals under Section 194-IB can use their PAN to deduct and deposit TDS, simplifying the process for smaller taxpayers.




B. TDS on Rent Paid to Non-Resident Indians (NRIs)


When remitting rental payments to a Non-Resident Indian (NRI), Tax Deducted at Source (TDS) must be withheld at a rate of 30%, in addition to the applicable surcharge and a 4% cess. This TDS deduction is mandatory regardless of the rental amount, as there is no prescribed threshold for rent payments to NRIs. However, an NRI may apply for a certificate of nil or reduced TDS deduction if their taxable income in India falls below the basic exemption limit, subject to the provisions of the Income Tax Act.


What Happens If You Miss TDS?




TDS on house rent ensures that rental income is taxed at the source, reducing tax evasion. For tenants, deducting TDS is a legal obligation, and non-compliance can lead to penalties. For landlords, the TDS deducted can be claimed as a credit when filing their income tax returns, ensuring they aren’t taxed twice on the same income.


• Penalties: Non-deduction or late deduction may attract interest (1% per month) and fines equal to the TDS amount.

• Disallowance of Expenses: The rent paid may not be deductible as a business expense for the tenant.


Practical Tips for Tenants and Landlords


    

  • 

    Tenants: Always check the rent amount and your income status to determine if TDS applies. Use online tools or consult a tax professional to calculate and deposit TDS correctly. Keep records of rent payments and TDS certificates issued.
    

    • 

  • 

    Landlords: Ensure your tenants are aware of their TDS obligations. Provide your PAN to the tenant for TDS deduction and verify that the TDS amount is credited to your account when filing your returns.
    

    • 



Conclusion


Understanding TDS on house rent is crucial for both tenants and landlords in India. Whether you’re a company paying high rent or an individual renting a modest apartment, knowing the applicable TDS rates and sections can help you stay compliant with tax laws. The table above provides a clear snapshot of the rules, but if you’re unsure about your specific situation, it’s always a good idea to consult a tax expert.


By staying informed and proactive, you can ensure smooth rent transactions while fulfilling your tax responsibilities. Have questions about TDS on rent? Drop them in the comments below, and let’s discuss!




Check out TDS Section 194-I & 194I-B of the Income Tax Act, 1961.




Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.





		
		
	


	





	

		
Decoding the Direct Tax Landscape: Budget 2025 Insights
			

				Posted on  by Hatim Bharmal			

			


	
			

			
	

		
The Union Budget 2025 brings a fresh wave of reforms to India’s direct tax framework, aiming to balance economic growth with taxpayer relief. With a focus on simplification, compliance, and incentivizing investments, the latest proposals introduce key changes in tax slabs, deductions, corporate taxation, and digital compliance. Whether you’re an individual taxpayer, a business owner, or a financial professional, understanding these shifts is crucial for strategic tax planning. In this blog, we break down the most significant direct tax updates, their implications, and what they mean for you.


 


1. Rates of Income Tax


    

  • 

    (a) For Individual, HUF, association of persons, body of individuals, artificial juridical person.
    

    • 

  • •  Section 115BAC (1A) – New scheme – Default Scheme
    • 







Sr. No
Total income
Rate of tax




1.
Upto Rs. 4,00,000
Nil




2.
From Rs. 4,00,001 to Rs. 8,00,000
5%




3.
From Rs. 8,00,001 to Rs. 12,00,000
10%




4.
From Rs. 12,00,001 to Rs. 16,00,000
15%




5.
From Rs. 16,00,001 to Rs. 20,00,000
20%




6.
From Rs. 20,00,001 to Rs. 24,00,000
25%




7.
Above Rs. 24,00,000
30%






    

  • •  No Deduction are available under the New Tax Regime except the following:

      

    • (i) Standard Deduction of Rs. 75,000/- u/s. 16(ia)
      • 

    • (ii) Family Pension of 25,000 or 1/3 of total pension, whichever is less u/s 57(iia)
      • 

    • (iii) Contribution to NPS u/s. 80CCD(2) – 14% of salary
      • 

    • (iv) Deposit in Agniveer Corpus Fund u/s. 80CCH(2)
      • 

    • (v) Deduction for Employment of New Employees u/s. 80JJAA
      • 

    

    • 

  • • An individual, HUF, AOP, BOI or artificial judicial person can opt for old scheme on or before due date of filing income tax return as per section 139(1) of the Act. (i.e. 31st July and 31st October)
    • 







Sr. No
Total income
Rate of tax




1.
Upto Rs. 2,50,000
Nil




2.
From Rs. 2,50,001 to Rs. 5,00,000
5%




3.
From Rs. 5,00,001 to Rs. 10,00,000
10%




4.
Above Rs. 10,00,000
30%






    

  • • For resident senior citizen, who is of the age of 60years or more but less than 80 years – Nil rate of Tax upto 3,00,000.
    • 

  • • For resident senior citizen, who is of the age of 80years or more – Nil rate of Tax upto 5,00,000
    • 

  • • Above tax amount shall be further increased by surcharge at the rate of –
    • 







Income level
% of Surcharge
Remarks




Above 50 lakh to 1 cr
10%
Including all special tax rate income i.e. STCG and LTCG


Including all special tax rate income i.e. STCG and LTCG





Above 1 cr – 2 cr
15%




Above 2 cr to 5 cr
25%
Excluding Dividend Income, STCG and LTCG – i.e. surcharge is restricted upto 15%


On total income above 2 Cr.





Above 5 cr


(Not applicable to New Scheme)

37%


(For New scheme surcharge is restricted upto 25% on total income above 2 Cr.)







* Marginal relief shall be provided in case of surcharge


    

  • • Rabate u/s. 87A – Allowed to Resident Individuals only
    • 







Particulars
Old Scheme
New Scheme (Default)




Rebate Amount (Maximum)
Rs. 12,500
Rs. 60,000




Threshold limit of Total Income
Less than 5,00,000
Less than 12,00,000




Rebate for Special Tax income
Allowed against STCG and LTCG (Except 112A)
Not Allowed against STCG and LTCG






 


    

  • 

    (b) For Partnership Firms/LLP
    

    • 

  • • Tax Rate – 30% + Surcharge & Education Cess of 4% equivalent to 31.2%
    • 

  • • Surcharge of 12% if total income exceeds 1 cr.
    • 



 


    

  • 

    (c) For Companies
    

    • 







Section
Conditions
Rate of Tax (including Health and Education cess)
Surcharge on tax




Income >1 cr < 10 cr
Income > 10cr




115BA
Turnover for F.Y. 2023-24 does not exceed 400 cr
26%
7%
12%




115BA
Turnover for F.Y. 2023-24 exceed 400 cr
31.2%
7%
12%




115BAA
No deductions or additional depreciation is allowed except 80JJA or 80M
25.17%
–
–




115BAB
New manufacturing Domestic Companies. No deductions or additional depreciation is allowed except 80JJA or 80M
17.16%
–
–




Foreign Companies
Other than foreign companies chargeable at special rates
35%
2%
5%




MAT
Not applicable for companies who opted 115BAA and 115BAB
15.60%
7%
12%






 


2. Annual value of the self-occupied property simplified


    

  • • Under section 23 of the Act, owner of the house property can take Annual value of 2 House properties to be Nil due to reason that owner cannot occupy the house property for employment or business carried out at any other place.
    • 

  • • Now it is amended so as to provide that the annual value of the property consisting of a house, or any part thereof shall be taken as nil, if the owner occupies it for his own residence or cannot actually occupy it due to any reason. The provision of sub-section (4) of section 23 of the Act which allows this benefit only in respect of two of such houses shall continue to apply as earlier.
    • 



 


3. Bringing clarity in income on redemption of Unit Linked Insurance Policy (ULIP)


    

  • •  Exemption u/s. 10(10D) on sum received under life policy including bonus on such policy is not applicable if amount of premium or aggregate amount of premium payable during the term of such policy or policies exceeds Rs. 2,50,000/-
    • 

  • •  It is now proposed to amend provisions related to ULIP so as to provide that ULIP to which exemption does not apply will be treated as capital asset u/s 2(14). And it will be included in definition of equity oriented fund.
    • 



 


4.Deduction under section 80CCD for contributions made to NPS Vatsalya


    

  • • Deduction is now available to contribution made to NPS on account of minor. The amount will be charged to tax when withdrawn in case where deposit was made in account of minor. No Tax when withdrawn due to death of the minor.
    • 

  • • Clause 12BA of section 10 inserted to provide partial withdrawal upto 25% of the amount contributed shall not be included in the total income of the parent/guardian. NPS Vatsalya Scheme also allows for partial withdrawal from the minor’s account to address certain contingency situations like education, treatment of specified illnesses and disability (of more than 75%) of the minor.
    • 



 


5. Extending the time-limit to file the updated return u/s. 139 (8A)






Sr. No.
Period from the end of relevant assessment year
Additional tax % of total tax and interest paid




1.
Upto 12 months
25%




2.
From 12 months upto 24 months
50%




3.
From 24 months upto 36 months
60%




4.
From 36 months upto 48 months
70%






*No updated return can be filed where any notice u/s. 148A has been issued after 36 months from the end of the relevant assessment year


 


6.Amendment in TDS Provisions


    

  • •  All the proposed amendment in the TDS sections are depicted in the below table:
    • 







Sr. No.
Section
Current Threshold
Proposed Threshold
Rate of TDS




1.
193 – Interest on securities


Nil




Rs. 10,000/-




10%






2.
194A – Interest other than Interest on securities
(i) Rs. 50,000/- for senior citizen;


(ii) Rs. 40,000/- in case of others when payer is bank, cooperative society and post office


(iii) Rs. 5,000/- in other cases

(i) Rs. 1,00,000/- for senior citizen;


(ii) Rs. 50,000/- in case of others when payer is bank, cooperative society and post office


(iii) Rs. 10,000/- in other cases



10%






3.
194 – Dividend for an individual shareholder


Rs. 5,000/-




Rs. 10,000/-




10%






4.
194K – Income in respect of units of a mutual fund or specified company or undertaking


Rs. 5,000/-




Rs. 10,000/-




10%






5.
194B – Winnings from lottery, crossword puzzle, etc.
Aggregate of amounts exceeding Rs. 10,000/- during the financial year
Rs. 10,000/- in respect of a single transaction


30%






6.
194BB – Winnings from horse race




7.
194D – Insurance commission


Rs. 15,000/-




Rs. 20,000/-




2%






8.
194G – Income by way of commission, prize etc. on lottery tickets


Rs. 15,000/-




Rs. 20,000/-




2%






9.
194H – Commission or brokerage


Rs. 15,000/-




Rs. 20,000/-




2%






10.
194-I Rent


Rs. 2,40,000/- during the financial year




Rs. 50,000/- per month or part of a month




(i)2% – Plant & Machinery.


(ii) 10% -Land, Building and Furniture.






11.
194J – Fee for professional or technical services


Rs. 30,000/-




Rs. 50,000/-


(i)10% – Professional Fees


(ii)2% – Technical Fees


(iii) 2% – Royalty in case sale/distribution/exhibition of cinematographic


(iv)10% – All other Royalty


(v) 2% – Payee is in business of call centre





12.
194LA – Income by way of enhanced compensation


Rs. 2,50,000/-




5,00,000/-




10%






13.
Section 194LBC -Income in respect of investment in securitization trust


–




–




10%


(Old Rate 25% for Individual, HUF and 30% for others)






13.
206C – TCS


(i)Timber or any other forest produce (not being tendu leaves) obtained under a forest lease


(ii) Timber obtained by any mode other than under a forest lease



–




–




2%






14.
206 (1H) – TCS on sale consideration exceeding 50 lakh


0.1%




Omitted


Section omitted w.e.f. 1st April 2025




15.
206C(1G) – TCS Amount remitted for education and medical Treatment


7,00,000




10,00,000




5%






16.
206C(1G) – TCS Amount remitted for repayment of education loan taken from abroad from specified Financial institute


7,00,000




Omitted




Applicability omitted w.e.f. 1st April 2025








 


7.Removal of higher TDS/TCS for non-filers of return of income


    

  • •  Currently, Section 206AB and 206CCA of the Act requires higher deductions or collections of TDS or TCS respectively in case of deductee or collectee are non-filer of Income Tax return.
    • 

  • •  To reduce compliance burden for the deductor/collector, it is proposed to omit section 206AB of the Act and section 206CCA of the Act.
    • 



 


8. Obligation to furnish information in respect of crypto-asset


    

  • • It is proposed to insert new section 285BAA with effect from 01.04.2026, to obligate reporting entity i.e. platform providing trading in cryptocurrency or any digital currency, to furnish information in respect of transactions in such crypto asset in statement, for such period, within such time, in such form and manner as may be prescribed.
    • 

  • • This will ensure that information related to cryptocurrency and virtual digital currency will be reported to the AIS statement of the person who have transacted in such cryptocurrency and virtual digital currency.
    • 



 


9. Rationalisation of taxation of capital gains on transfer of capital assets by non-residents


    

  • • The provisions of Section 115AD of the Act provides that where the total income of a specified fund or Foreign Institutional Investor includes income by way of long term capital gains, if any, tax shall be calculated at 10%. Long Term capital referred in section 112A is taxed at 12.5% irrespective of resident or non-resident.
    • 

  • • Therefore, it is proposed to amend the provisions of section 115AD to provide that income-tax on the income by way of long-term capital gains on transfer of securities not referred to in section 112A, if any, included in the total income, shall be calculated at the rate of 12.5%
    • 



 


10.Amendment related to Charitable Trust


    

  • • It is proposed to amend Explanation to sub-section (4) of section 12AB so as to provide that the situations where the application for registration of trust or institution is not complete, shall not be treated as specified violation for the purpose of the said sub-section. As even minor default in the application may lead to cancellation of registration of trust or institution resulting in tax on accreted income.
    • 

  • • Further 12AB is amended to increase the validity of registration of trust from 5 years to 10 years where trust has made an application under sub clause (i) to (v) of the clause (ac) of section 12A(1) and total income of such trust without giving effect of section 11 and 12 does not exceed 5 crores during each of the two previous years preceding the previous year in which application is made.
    • 

  • • Section 13 (3) amended to excludes application of income of trust or institution if such income or property of trust or institution is used or applied directly or indirectly to any person – whose contribution to trust or institution exceeds 1 lakh or aggregate contribution exceeds 10 lakhs during the financial year. Amendment also removes relatives or concern in which such person has substantial interest from the said section.
    • 



 


11.Amendment of Definition of ‘Capital Asset’


    

  • • Section 2(14) of the Act defines capital Asset which is amended to include any security held by investment funds referred to in Section 115UB (Alternative Investment Funds) which has invested in such security in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be treated as capital asset only so that any income arising from transfer of such security would be in the nature of capital gain.
    • 



 


12.Harmonisation of Significant Economic Presence applicability with Business Connection


    

  • • It is proposed to amend Explanation 2A to Section 9 so that transactions or activities of a non-resident in India which are confined to the purchase of goods in India for the purpose of export shall not constitute significant economic presence of such non-resident in India. This will bring parity to Clause (i) of section 9(1) which states that no income shall be deemed accrue or arise in India to non -resident from operations confined to purchase of goods in India for the purpose of export.
    • 



 


13. Rationalisation of provisions related to carry forward of losses in case of amalgamation


    

  • • As per section 72A and 72AA of the Act provides carry forward and set off of accumulated loss and unabsorbed depreciation allowance in case of amalgamation or reorganisation for 8 assessments years immediately succeeding the assessment year for which the loss was first computed.
    • 

  • • This leads into evergreening of loss of the predecessor entity resulting from successive amalgamation to take benefit of 8 years of carry forward and set off of business loss or depreciation allowance.
    • 

  • • It is now proposed to amend section 72A and section 72AA of the Act to provide that any loss forming part of the accumulated loss of the predecessor entity, which is deemed to be the loss of the successor entity, shall be eligible to be carried forward for not more than eight assessment years immediately succeeding the assessment year for which such loss was first computed for original predecessor entity.
    • 



 


14. Exemption to withdrawals by Individuals from National Savings Scheme from taxation


    

  • • Section 80CCA amended to provide exemption to the withdrawals made by individuals from these deposits for which deduction was allowed, on or after 29th day of August 2024. This exemption is provided to the deposits, with the interest accrued thereon, made before 01.04.1992.
    • 



 


15.Incentives to International Financial Services Centre (IFSC)


    

  • • Section 9A – It is proposed to rationalize the condition under Clause (c) of subsection (3), determining aggregate participation or investment on 1st April and 1st October of the previous year. If the condition is not met on either date, the fund will have four months to comply. Additionally, the deadline for IFSC based fund managers to commence operations is extended to 31st March 2030, continuing the benefits under Subsection (8A).
    • 

  • • To avoid deemed dividend u/s. 2(22)(e) for borrowings by the corporate treasury centre in IFSC from its group entities – It is proposed to amend clause (22) of section 2 to provide that any advance or loan between two group entities, where one of the group entity is a “Finance company” or a “Finance unit” in IFSC set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services and the ‘parent entity’ or ‘principal entity’ of such ‘group entity’ is listed on stock exchange in a country or territory outside India, other than the country or territory outside India as may be specified by the Board in this behalf, shall not be treated as ‘dividend’. The conditions for a ‘group entity’, ‘principle entity’ and the ‘parent entity’ shall be prescribed
    • 

  • • Section 10 – Clause 4(E) – Benefit extended to FPI in addition to banking unit of IFSC. It is proposed to amend clause (4E) of section 10 to provide that the income of a non-resident on account of transfer of non-deliverable forward contracts or offshore derivative instruments or over the-counter derivatives, or distribution of income on offshore derivative instruments, entered into with Foreign Portfolio Investors being an IFSC unit shall also not be included in the total income subject to certain conditions as may be prescribed.
    • 

  • • Section 10 – Clause 23FE – Benefits extended to SWP or Pension Funds – Section provides exemption in the nature of dividend, interest and long-term capital gains on investment made in India. It is now proposed to amend that long term gains (irrespective of deemed short term capital gain as per section 50AA) shall not be included in the total income of a SWP or Pension Fund. Further date of investment under the said clause extended from 31st Day of March 2025 to 31st Day of March 2030.
    • 

  • • Section 10 – Clause 10D – Exemption on sum received from Life Insurance policy. – It is amended to provide that proceeds received on life insurance policy issued by IFSC insurance intermediary office shall be exempted without the condition related to the maximum premium payable on such policy as mentioned in the clause. (i.e. 2.5 lakh for Unit linked insurance and 5 lakh for other insurance.)
    • 

  • • Section 10 – Clause 4H – Extended Capital Gain or Dividend Exemption to Ship leasing units in IFSC – It is proposed to amend clause to provide exemptions to non-residents or units of IFSC engaged in ship leasing on capital tax on transfer of equity shares of domestic companies being units of IFSC and dividends paid by such company being unit of IFSC.
    • 

  • • Section 47 (viiad) – provides exemption on transfer of asset being share or unit or interest held in the original fund in consideration for the share or unit of interest in the resultant fund located in IFSC and granted a certificate Category I, II, III AIF. It is now amended to include ETF and retail schemes within the definition of Resultant Fund.
    • 

  • • The sunset dates for commencement of operations of IFSC units for several tax concessions, or relocation of funds to IFSC, in clause (d) of sub-section (2) of section 80LA, clause (4D), clause (4F), clause (4H) of section 10 and clause (viiad) of section 47, is proposed to be extended to 31st day of March, 2030.
    • 



 


16.Rationalisation in taxation of Business trusts


    

  • • As per Section 115UA Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InVIT) enjoys pass through status in respect of interest, dividend and rental income. Therefore, income of REIT and InVIT shall be charged at maximum marginal rate subject to provisions of section 111A and section 112. 
    • 

  • • Reference of section 112A was not available in the existing provision. Which is now proposed to be amended to include reference to section 111A, 112A and 112 of the Act.
    • 



 


17. Rationalisation of transfer pricing provisions for carrying out multi-year arm’s length price determination


    

  • • It is proposed to amend section 92CA of the Act to provide that the ALP determined in relation to an international transaction or a specified domestic transaction for any previous year shall apply to the similar transaction for the two consecutive previous years immediately following such previous year.
    • 

  • • For this purpose, assesse shall required to exercise such option within the time as may be prescribed and Transfer pricing officer may order within 1 month from the end of the month in such option is exercised, declare whether such option is valid or not.
    • 

  • • The option cannot be exercised if any proceedings is related to search cases.
    • 



 


18. Scheme of presumptive taxation for non-resident providing services for electronics manufacturing facility


    

  • • It is proposed to insert a new section 44BBD, which deems twenty-five per cent (25%) of the aggregate amount received/ receivable by, or paid/ payable to, the non-resident, on account of providing services or technology to the resident company under a scheme notified by the Central Government, as profits and gains of such non-resident.
    • 



 


19. Extension of benefits of tonnage tax scheme to inland vessels


    

  • • To promote inland water transportation in the country and to attract investments in the sector, it is proposed to extend the benefits of tonnage tax scheme to Inland Vessels registered under Inland Vessels Act, 2021. Accordingly inland vessels have been included in the section 115VD for being eligible to be a qualified ship. Further, inland vessels have been defined in section 115V of the Act in the same manner as provided in the Inland Vessels Act, 2021. Other corresponding amendments have been made to extend the tonnage tax scheme to inland vessels.
    • 



 


20. Other Administrative Amendments


    

  • • Extension of timeline for tax benefits to start-ups – The existing provisions of Section 80-IAC of the Act, inter alia, provide for a deduction of an amount equal to hundred percent of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of ten years, beginning from the year of incorporation, at the option of the assessee. It is proposed to amend the above section so as to extend the benefit for another period of five years, i.e. the benefit will be available to eligible start-ups incorporated before 01.04.2030.
    • 

  • • Amendments proposed in provisions of Block assessment for search and requisition cases under Chapter XIV-B

      

    • It is proposed to insert the term “virtual digital asset” to the definition of “undisclosed income” in section 158B.
      • 

    • Clause (i) of Section 158BB (1) will replace “total income disclosed” with undisclosed income.
      • 

    • Clause (iv) will clarify that income for a previous year, if the return due date hasn’t passed before the search, will be taxed under normal provisions.
      • 

    • As per section 158BE – the time limit for completing a block assessment is proposed to be made as 12 months ending from the quarter in which last authorisations for search or requisition has been executed.
      • 

    

    • 

  • • It is proposed to amend the Section 144BA, section 153, section 153B, section 158BE, section 158BFA, section 263, section 264 and Rule 68B of Schedule-II of the Act,of the Act so as to exclude the period commencing on the date on which stay was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner.
    • 

  • • Certain penalties to be imposed by the Assessing Officer

      

    • Sections 271C, 271CA, 271D, 271DA, 271DB and 271E of the Act, inter-alia, provide that penalty under these sections shall be imposed by the Joint Commissioner. Though, assessment in such cases were being made by the Assessing Officer, penalty under these sections were being imposed by the Joint Commissioner.
      • 

    • In order to rationalize the process, it is proposed to amend sections 271C, 271CA, 271D, 271DA, 271DB and 271E of the Act so that penalties under these sections shall be levied by the Assessing Officer in place of Joint Commissioner, subject to the provisions of sub-section (2) of section 274 of the Act. Thus, Assessing Officer shall take the prior approval of Joint Commissioner for the passing of penalty order, where penalty amount exceeds Rs. 10,000 or 20,000 if AO is ACIT/DCIT as specified in sub-section (2) of section 274 of the Act.
      • 

    

    • 

  • • Provisions related to notifying faceless scheme under section 92CA (Transfer Pricing Proceedings), 144C (Dispute Resolution proceedings) 253 and 255 (Appellate Proceedings) are omitted so as to provide that Central Government may issue directions beyond the cut-off date of 31st day of March, 2025, if required.
    • 

  • • It is proposed to amend the section 270AA, which inter alia provides the procedure of granting the immunity by the AO from imposition of penalty and prosecution, to process the application within 3 months from the end of month in which application is received instead of current 1 month time.
    • 

  • • It proposed to amend section 275 of the Act to provide that any order imposing a penalty under Chapter XXI shall not be passed after the expiry of six months from the end of the quarter in which the connected proceedings are completed, or the order of appeal is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision is passed, or the notice for imposition of penalty is issued, as the case maybe.
    • 

  • • Section 276BB of the Act is amended to provide that the prosecution shall not be instituted against a person covered under the said section, if the payment of the tax collected at source has been made to the credit of the Central Government at any time on or before the time prescribed for filing the quarterly statement respect of such payment.
    • 



 


Conclusion:


To conclude, the direct tax proposals in Budget 2025 introduce a mix of structural changes and rationalization measures aimed at fostering compliance, simplifying tax administration, and promoting economic growth. With revised tax slabs, enhanced deductions under the new tax regime, and targeted incentives for businesses, the government continues to refine the tax landscape to balance revenue mobilization with taxpayer relief. Additionally, amendments in capital gains taxation, IFSC incentives, and rationalization of exemptions reflect a strategic push towards modernization and global competitiveness. As these provisions take effect, individuals and businesses must assess their financial planning strategies to align with the evolving tax framework. Staying informed and proactive will be key to optimizing tax efficiency in the coming fiscal year.


 


Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.



		
		
	


	





	

		
Advisory on HSN Validations in Table 12 of GSTR-1
			

				Posted on  by CA Meet Dhrangadhariya			

			


	
			

			
	

		
Advisory on HSN Validations in Table 12 of GSTR-1


The Goods and Services Tax (GST) authorities have issued an advisory detailing the implementation of Phase-3 for reporting Harmonized System of Nomenclature (HSN) codes in Table 12 of GSTR-1 and GSTR-1A, effective from the February 2025 return period. This phase introduces significant changes to enhance the accuracy and consistency of HSN code reporting for taxpayers.


Key Changes in Phase-3:


1. Mandatory Selection from Dropdown:


• Taxpayers with Aggregate Annual Turnover (AATO) up to ₹5 crore: Required to report 4-digit HSN codes for goods and services.


• Taxpayers with AATO exceeding ₹5 crore: Required to report 6-digit HSN codes for goods and services.






Turnover
HSN Digits




Upto 5 crores
Mandatory 4-digit HSN codes




More than 5 crores
Mandatory 6-digit HSN codes






Manual entry of HSN codes is now restricted. Taxpayers must select the appropriate HSN code from a predefined dropdown list. Upon selection, a customized description from the HSN master will auto-populate in a new field labeled “Description as per HSN Code.”


2. Validation of Supply Values:


• The system will validate the values of Business-to-Business (B2B) and Business-to-Consumer (B2C) supplies reported in various tables against the values in Table 12.


• Initially, these validations will operate in a warning mode, allowing taxpayers to file GSTR-1 even if discrepancies are detected. However, if B2B supplies are reported in other tables, the B2B tab in Table 12 cannot be left empty.






In Table-12 validation with regards to value of the supplies have also been introduced.


1) These validations will validate the value of B2B supplies shown in different Tables viz: 4A, 4B, 6B, 6C, 8 (recipient registered), 9A, 9B (registered), 9C (registered), 15 (recipient registered), 15A (recipient registered) with the value of B2B supplies shown in table-12.


2) Similarly, validations will validate the value of B2C supplies shown in different tables viz: 5A, 6A, 7A, 7B, 8 (recipient unregistered), 9A (export), 9A (B2CL), 9B (unregistered), 9C (unregistered), 10, 15 (recipient unregistered), 15A (recipient unregistered) with the value of B2C supplies shown in Table-12.


3) In case of amendments, only the differential value will be taken for the purpose of validation.







3. Enhancements in Table 12:


• Segregation of Supplies: Table 12 is now divided into two tabs: “B2B Supplies” and “B2C Supplies.” Taxpayers must enter HSN summary details separately under each tab.


• Downloadable HSN Code List: A new “Download HSN Codes List” button allows taxpayers to download an Excel file containing the updated list of HSN and SAC codes along with their descriptions.


• Searchable “Product Name as in My Master”: This feature enables taxpayers to search and select descriptions from their HSN master. Upon selection, the corresponding HSN code, description, Unit Quantity Code (UQC), and quantity will auto-populate. This functionality is optional.


Conclusion:


These changes aim to streamline the HSN reporting process, reduce errors, and ensure compliance with GST regulations. Taxpayers are advised to familiarize themselves with these updates and adjust their reporting processes accordingly to ensure a smooth transition.


For a detailed understanding, refer to the official advisory issued by the GST authorities by clicking here.



		
		
	


	





	

		
Understanding Notice under Section 142(1) of the Income Tax Act
			

				Posted on  by CA Meet Dhrangadhariya			

			


	
			

			
	

		
Understanding Notice under Section 142(1) of the Income Tax Act


The Income Tax Act, 1961, is a comprehensive legislation that governs the taxation of income in India. One of the key provisions of this Act is Section 142, which deals with the assessment of income tax. Specifically, Section 142(1) empowers the Assessing Officer to issue a notice to the taxpayer, requiring them to file their income tax return.


What is a Notice under Section 142(1)?


A notice under Section 142(1) is a formal communication issued by the Assessing Officer to the taxpayer, requiring them to file their income tax return. This notice is typically issued when the taxpayer has not filed their income tax return or has not furnished the required documents or information.


Why is a Notice under Section 142(1) issued?


A notice under Section 142(1) is issued for several reasons, including:


1. Non-filing of income tax return: If the taxpayer has not filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to require them to file their return.

2. Non-furnishing of documents or information: If the taxpayer has not furnished the required documents or information, the Assessing Officer may issue a notice under Section 142(1) to require them to furnish the same.

3. Discrepancies in income tax return: If there are discrepancies in the income tax return filed by the taxpayer, the Assessing Officer may issue a notice under Section 142(1) to require them to explain the discrepancies.


What to do if you receive a Notice under Section 142(1)?


If you receive a notice under Section 142(1), it is essential to take immediate action to avoid any penalties or consequences. Here are some steps you can take:


1. Respond to the notice: Respond to the notice within the specified time limit, typically 15 days from the date of receipt of the notice.

2. Furnish the required documents or information: Furnish the required documents or information, such as financial statements, tax audit reports, or other relevant documents.

3. File your income tax return: If you have not filed your income tax return, file it immediately, along with any necessary documents or information.

4. Seek professional help: If you are unsure about how to respond to the notice or need help with filing your income tax return, seek the advice of a tax professional or chartered accountant.


Conclusion


A notice under Section 142(1) is a formal communication issued by the Assessing Officer to the taxpayer, requiring them to file their income tax return or furnish the required documents or information. If you receive such a notice, it is essential to respond promptly and take necessary action to avoid any penalties or consequences. By understanding the purpose and implications of a notice under Section 142(1), you can ensure that you comply with the requirements of the Income Tax Act and avoid any unnecessary complications.


Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.



		
		
	


	





	

		
File on Time, Export with Confidence: RoDTEP Annual Return Essentials
			

				Posted on  by Hatim Bharmal			

			


	
			

			
	

		
In a recent development, the Directorate General of Foreign Trade (DGFT) has introduced the Annual RoDTEP Return (ARR) through Public Notice No. 27/2024-25, dated 23rd October 2024. This blog will break down the key aspects of the ARR, its implications, and how exporters can ensure compliance


(A) Key Highlights of Public Notice No. 27/2024-25:


 


    

  1. 

    What is the Annual RoDTEP Return (ARR) 
    

      

    • The Annual RoDTEP Return (ARR) is a mandatory filing requirement for exporters who have claimed RoDTEP benefits exceeding Rs. 1 crore in a financial year. The ARR is designed to assess the nature of inputs used in export production and the actual taxes and duties incurred, as permitted under Paragraph 4.54 of the Foreign Trade Policy (FTP)
      • 

    

    2. 

  2. 

    Mandatory Filing of ARR
    

      

    • Who Needs to File?: Exporters (IECs) whose total RoDTEP claims exceed Rs. 1 crore in a financial year across all 8-digit HS codes. It is important note that if the total RoDTEP claim value exceeds Rs. 1 crore, the ARR must be filed, even if the actual claim received is less than Rs. 1 crore. For example – If the total RoDTEP claim value is Rs. 1,00,00,000, however, the actual claim received is Rs. 95,00,000, the exporter is required to file the Annual RoDTEP Return.
      • 

    • Deadline: The ARR for the financial year 2023-24 must be filed by 31st March 2025. Thereafter the Annual RoDTEP Return (ARR) for RoDTEP claims filed in a particular financial year shall be filed on DGFT Portal by 31st March of the next financial year.
      • 

    • Grace Period: A grace period of 3 months (until 30th June 2025) is provided for delayed filings, subject to a composition fee of Rs. 10,000. After 30th June, the fee increases to Rs. 20,000.
      • 

    

    3. 

  3. 

    Consequences of Non-Compliance
    

      

    • Denial of Benefits: Failure to file the ARR will result in the denial of RoDTEP benefits, and no further scroll-out of RoDTEP claims will be permitted at the Customs Port of Export after the grace period i.e. June 2025
      • 

    • Resumption of Scrolls: After paying the applicable composition fee, RoDTEP scrolls will resume within 45 days, covering Shipping Bills that were not scrolled out earlier due to non-compliance
      • 

    

    4. 

  4. 

    Record Keeping and Scrutiny
    

    5. 



    

  • 

      

    • Exporters must maintain physical/digital records substantiating their duty remission claims for 5 years. These records may be required for scrutiny by the concerned authorities.
      • 

    • Certain ARR filings may be subject to IT-assisted risk-based scrutiny to assess the nature of inputs and the actual taxes/duties incurred. Exporters found to have claimed excess benefits will be required to refund or surrender the excess amount.
      • 

    

    • 



 


(B) Complete Guide for Filing RoDTEP Return


 


    

  1. 

    Who Needs to File the Annual RoDTEP Return
    

    2. 



    

  1. 

      

    • Threshold of Rs. 1 Crore: If the total RoDTEP claim for an Importer-Exporter Code (IEC) holder exceeds Rs. 1 crore in a financial year, filing an ARR is compulsory.
      • 

    • If No Individual ITC-HS Code Crosses Rs. 50 Lakh then file the ARR only for the 8 digit HS code with the highest claim.

        

      •  Example:

          

        • HS1: Rs. 20 lakh
          • 

        • HS2: Rs. 30 lakh
          • 

        • HS3: Rs. 40 lakh
          • 

        • HS4: Rs. 30 lakh
          • 

        

        • 

      • ARR required only for HS3
        • 

      

      • 

    • If Any Individual ITC-HS Code Exceeds Rs. 50 Lakh then seperate ARR must be filed for each such HS codes.

        

      •  Example:

          

        • HS1: Rs. 60 lakh
          • 

        • HS2: Rs. 51 lakh
          • 

        • HS3: Rs. 3 lakh
          • 

        • HS4: Rs. 6 lakh
          • 

        

        • 

      • ARR required for HS1 and HS2.
        • 

      

      • 

    

    2. 

  2. 

    Seperate filings
    

      

    • It is important to note that seperate returns are required for exports under Domestic Tariff Area (DTA) and Special Economic Zones (SEZ)/Export-Oriented Units (EoU)/Advance Authorization (AA).
      • 

    • Example – if company is exporting 4 different HS codes through both Advance Authorization and without Advance Authorization and company has also claimed RoDTEP exceeding Rs. 50 lacs for each of the 4 HS codes then total 8 ARR (Annual RoDTEP Return) are required to be filed.
      • 

    • Details of the tax/duties/levies need to be provided in the return on pro-rata basis for export products on which the return is being filed.
      • 

    

    3. 

  3. 

    Step-by-Step Process to File RoDTEP Return
    

      

    • Basic Details like Name of Exporter, Type of Unit, PAN/IEC, Complete address and contact details and period of export i.e. Financial year
      • 

    • Export Product Details like 8 digit HS code, Unit Quantity Code (UQC), description of product as per shipping bill, export quantity and FOB Value.
      • 

    • Cost Component Details

        

      • (i) VAT and Excise duty on Inbound transportation (Road/Rail) of raw materials, suplies or part needed to make your export product.
        • 

      • (ii) VAT and Excise duty on Outbound transportation (Road/Rail) of export product from factory to the gateway port.
        • 

      • (iii) Electricity duty paid on the electricity consumed during the period.
        • 

      • (iv) Stamp duty on export documentation
        • 

      • (v) VAT and Excise paid on Fuel cost for captive power generation.
        • 

      • (vi) Embedded GST in purchases made from the unregistered dealers.
        • 

      

      • 

    • Details fo Incidence of tax borne by the export product on account of prior stage cumulative taxes on raw materials/inputs consumed in the manufacturing of export product like

        

      • (i) HS code of Input product
        • 

      • (ii) Value of Input used in the manufactur of per unit of Export product
        • 

      • (iii) Qty of input used in the manufacture of per unit of Export product
        • 

      • (iv) UQC/ Unit of measurement
        • 

      • (v) Total taxes/duties/levies paid on raw materials/input consumed
        • 

      

      • 

    • Total Tax/duties paid

        

      • Total taxes/duties paid on export product (based on above details provided)
        • 

      • Applicable RoDTEP rate as per governement policy (As mentioned in Annexure  4R and Annexure 4RE)
        • 

      • Final RoDTEP claim for the period.
        • 

      

      • 

    

    4. 

  4. 

    Common Queries and Clarifications
    

    5. 



    

  • 

      

    • Q1. Do merchant exporters need to file ARR?

        

      • Yes, merchant exporters who have availed RoDTEP benefits exceeding Rs. 1 crore in a financial year are required to file the ARR. They must collaborate with the manufacturer to obtain the necessary details.
        • 

      

      • 

    • Q2. How to calculate taxes on fuel used for transportation?

        

      • If exact fuel consumption details are unavailable, exporters can use an approximation method based on a survey with transporters. This approximation should be justified and kept ready for verification
        • 

      

      • 

    

    • 



Conclusions


The RoDTEP scheme is a significant step towards making Indian exports more competitive in the global market. By understanding the intricacies of the scheme, especially the ARR filing process, exporters can ensure compliance and maximize their benefits.


For further details, refer to the RoDTEP User Guide and the relevant appendices (4R and 4RE). Stay updated with the latest notifications from the Directorate General of Foreign Trade (DGFT) to avoid any last-minute hassles.


 


 



		
		
	


	





	

		
Understanding the Income Tax Slab Rates for AY 2025-26 in India
			

				Posted on  by CA Meet Dhrangadhariya			

			


	
			

			
	

		
Understanding the Income Tax Slab Rates for AY 2025-26 in India


Introduction The income tax slab rates are an essential component of the financial planning process for individuals and businesses alike. This blog aims to provide an overview of the income tax slabs and their significance.








What are Income Tax Slabs?


Income tax slabs represent the ranges of income that are taxed at different rates. In India, the progressive tax system ensures that higher income is taxed at a higher rate, thereby promoting equitable distribution of income.


Income Tax Slab Rates AY 2025-26:


New Tax Regime:






Tax Slab
Tax Rate




Up to Rs 3 lakh
Nil




Rs 3 lakh – Rs 7 lakh
5%




Rs 7 lakh – Rs 10 lakh
10%




Rs10 lakh – Rs 12 lakh
15%




Rs 12 lakh – Rs 15 lakh
20%




Above Rs 15 lakh
30%






Old Tax Regime:






Income Slabs
Age < 60 years & NRIs
Age of 60 to 80 years (Resident Individuals)
Age above 80 Years        (Resident Individuals)




Up to ₹2,50,000
NIL
NIL
NIL




₹2,50,001 – ₹3,00,000
5%
NIL
NIL




₹3,00,001 – ₹5,00,000
5%
5%
NIL




₹5,00,001 – ₹10,00,000
20%
20%
20%




₹10,00,001 and above
30%
30%
30%




Up to ₹2,50,000
NIL
NIL
NIL




₹2,50,001 – ₹3,00,000
5%
NIL
NIL












Importance of Knowing Tax Slab Rates Staying updated with the latest tax slab rates helps in:


    

  • Effective financial planning.
    • 

  • Maximizing tax savings through available exemptions.
    • 

  • Avoiding last-minute tax filing hassles.
    • 









Conclusion


The income tax slab rates for AY 2025-26 will play a crucial role in shaping the financial decisions of millions of taxpayers in India. Keeping an eye on the Union Budget and related announcements is essential. Stay tuned for updates as we bring you the latest information once the slabs are officially declared.


Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.