Business income inclusion expanded to capture specified receipts and broadened recapture for assets with previously allowed capital allowances. Section 26 charges income under the head Profits and gains of business or profession by an inclusive list that captures receipts such as compensation for termination or modification of management/agency/contract, profits on sale of import licences and export incentives, partner remuneration, sums for non competition or withholding of know how, Keyman insurance proceeds, fair market value on inventory treated as capital asset, and recapture receipts where whole expenditure was previously allowed as a deduction under specified statutory provisions.
Owner definition expanded to include transfers without adequate consideration and long-term rights, widening house-property tax reach. For the purposes of sections 20-24 (income from house property), the provision inclusively defines owner to cover persons who transfer property without adequate consideration to specified relatives (subject to an agreement to live apart exception), holders of impartible estates (deemed individual owners for all properties in the estate), cooperative society allottees or lessees under house-building schemes, persons in possession under section 53A part-performance arrangements, and persons acquiring long-term or enabling rights in property; leases of month-to-month or not exceeding one year are excluded from clause (e).
Taxation of arrears of rent: treat receipts as house property income in year of receipt with a standard deduction. Arrears of rent and unrealised rent realised subsequently are deemed income from house property in the year of receipt or realisation, included in total income irrespective of the recipient's ownership status in that year, with a prescribed deduction equal to 30% of the amount received.
Deduction from house property: 30% standard deduction and spreadable pre acquisition interest with capped interest relief. Deductions for Income from House Property allow a 30% standard deduction on annual value (as determined under section 21) and interest on borrowed capital for acquisition/construction; pre acquisition interest is spread in five equal instalments beginning in the year of acquisition/construction, spread amounts must be reduced by interest already allowed under other provisions, and capped aggregate interest deductions apply with certificate and completion conditions, while interest payable outside India is disallowed unless appropriate tax withholding or agent arrangements exist.
Determination of annual value: higher of expected or actual rent, with narrowed vacancy test and specific exemptions. Annual value is the higher of expected rent or actual rent received/receivable where let; the enacted text narrows vacancy relief by requiring that vacancy-related reduction make actual rent lower than the notional expected rent before annual value is fixed at actual receipts. Local taxes actually paid reduce annual value, unrealised rent is excluded subject to rules, stock-in-trade newly completed and not let enjoys two years nil annual value upon completion certificate, and owner-occupation yields nil annual value for up to two specified houses unless let or other benefits are derived.
Deductions from salaries: defined categories, formulaic computation and aggregation limits govern tax relief eligibility. Section 19 itemises fourteen categories of salary related receipts that are deductible or exempt and prescribes formulas, ceilings and conditions for each. Relief for gratuity, leave encashment, pension commutation, retrenchment and voluntary retirement is computed by statutory formulas or by reference to notified limits and other enactments; an aggregation rule limits cumulative exemption where multiple receipts occur. The provision depends on cross references to other statutes and notifications, requiring classification, documentary evidence and tracing of prior exemptions to determine allowable deductions.
Perquisite taxation: employer-provided benefits and securities treated as taxable salary components, with limited exclusions and prescribed valuation. Section 17 defines perquisite for salary taxation by listing employer-provided benefits treated as perquisites-including accommodation, employer-paid obligations, securities and sweat equity allotted or transferred at concessional rates, employer-paid insurance premiums and excess retirement contributions-while excluding certain employer-funded medical treatment, approved insurance arrangements, commuting vehicle expenditure and conditional foreign medical/travel payments; valuation methods and thresholds are delegated to subordinate rules and cross-references link perquisite treatment to existing constructs for gross total income and approved fund schemes.
Conditional exclusion from total income: schedule-based incomes and persons excluded if conditions met; otherwise included in tax base. A conditional exclusion regime provides that incomes in Schedules II-VI and persons in Schedule VII are excluded from total income only if schedule conditions are satisfied; failure to satisfy conditions results in inclusion of such income in total income and taxation for the relevant tax year, and the Central Government is empowered to make rules or notifications to operationalise those schedules.
Significant economic presence expands source taxation, bringing digital interactions and remote services within the domestic tax net. Section 9 sets an expansive source taxation rule deeming income to accrue or arise domestically where linked to domestic assets, a business connection (including agents), transfers of capital assets situated domestically, salary earned or payable for services linked to domestic performance, dividends of domestic companies, interest subject to exceptions (including separate taxation of interest of an Indian permanent establishment of a foreign bank), and royalty and technical fees; it introduces significant economic presence tests for digital/user-based connections and leaves key thresholds and valuation mechanics to subordinate rules.
Deemed transfer of distributed assets treated as taxable at entity level; fair market value sets consideration and guidelines now open-ended. Section 8 treats receipt by a partner or member of capital assets or stock-in-trade from a non-company specified entity on dissolution or reconstitution as a deemed transfer by the entity, with profits or gains taxed at the entity level and the full value of consideration deemed to be the fair market value on the date of receipt; the Board may issue guidelines with prior Central Government approval and parliamentary laying, and the enacted text removes the Bill's two-year sunset on that guideline-making power.
Residence in India: income-linked deeming now captures high-income returning citizens visiting short-term, and POEM defines company residence. Section 6 prescribes residence tests combining day-count rules (182-day and 60/365 tests), categorical exceptions for ship crew and visiting citizens/PIOs, an income-linked modification that extends the shorter day-count threshold for higher-income returning citizens, a deeming rule capturing citizens not taxable elsewhere, company residence via Indian status or Place of Effective Management, and a deeming provision that applies residence across all income sources; As Passed drafting clarifies interplay between the visiting exception and income-based modification and contains minor typographical refinements.
Scope of total income: residents taxed broadly with limited foreign income inclusion for not ordinarily resident persons. Section 5 sets the scope of total income by applying receipt and accrual tests: residents are taxed on income received or deemed received in India, income accruing or arising or deemed to accrue or arise in India, and foreign income only in limited cases for a person who is not ordinarily resident (foreign income included when derived from a business controlled in India or a profession set up in India). Non residents are taxed on income received or deemed received in India and income accruing or arising or deemed to accrue or arise in India. The section also prevents balance sheet inclusion from constituting receipt and bars double inclusion on accrual and receipt bases.
Charge of income-tax: linkage to central rates and application to total income, with withholding and advance payment obligations. Section 4 links the charge of income-tax to rates enacted by a Central Act, charges income-tax on the total income of the tax year of every person (while allowing charging for other specified periods), includes any additional income-tax by whatever name, and requires deduction/collection at source and advance payment for income chargeable under the section.
Stamp duty value treated as a notional benchmark for tax valuations, overriding conflicting valuation laws for tax purposes. Section 2(105) defines stamp duty value as the value adopted, assessed or assessable by a Central or State authority for stamp duty on immovable property, where "assessable" is expressly a notional value the authority would have adopted if referred the matter, and that definition applies irrespective of anything to the contrary in any other law in force.
Holding-period tiers determine capital gain classification with a shorter threshold for listed securities and specific fund units. Definition of short-term capital asset establishes a two-tier holding-period regime for capital gains classification, retaining a general holding-period test and a shorter test for listed securities, units of the Unit Trust of India, units of equity-oriented funds and zero-coupon bonds; detailed rules determine inclusion, exclusion and commencement of holding periods on liquidation, corporate reorganisations, conversions, allotments, renunciations, free allotments and GDR redemptions, with certain technical matters deferred to prescribed rules.
Definition of company in which the public are substantially interested: drafting variance may create conjunctive interpretation risk affecting tax classification. Clause 2 supplies a comprehensive glossary for the Income-tax Act, 2025, defining terms such as company, capital asset, income and virtual digital asset, often with cross-references, provisos and delegated prescriptions; clause 2(29)'s categories for a company in which the public are substantially interested are materially consistent between Bill and Act, but the Bill's connector wording risked a conjunctive reading of alternative tests that the Act's later disjunctive phrasing rectifies, creating interpretive consequences for tax classification and related compliance.
Definition of company clarified; temporal qualification in transitional limb may narrow which historic entities remain within tax scope. Section 2 supplies statutory definitions that determine tax coverage. The definition of company comprises Indian companies, foreign bodies corporate, entities assessable as companies under the repealed Act, and Board declared entities. The Bill adds a temporal qualification limiting entities assessed under the prior Act to particular assessment years; the Act text omits this qualification. Scattered drafting and cross reference differences exist. Operational consequences hinge on threshold facts (shareholding, listing, assessment history, population/distance tests) and on unstated transitional provisions.
Capital asset definition updated to include IFSC-regulated funds and broaden unit-linked policies, affecting capital gains treatment. The Act retains an inclusive definition of capital asset with exceptions for stock-in-trade, specified personal effects and certain agricultural land, while refining the securities limb to expressly include securities held by FIIs and investment funds regulated under SEBI or IFSC regimes and removing a temporal issuance-date qualifier for unit-linked insurance policies, thereby broadening the category of policies treated as capital assets; numerous drafting and cross-reference clarifications aim to reduce interpretive uncertainty.
Negative list of specified goods narrows eligibility for investment tax incentives and consolidates explanatory clarifications in law. SCHEDULE-XIII establishes a negative list of fifteen specified articles excluded from certain investment-linked tax incentives, consolidating explanatory clarifications into the main text and streamlining obsolete entries. Referenced to section 45(2)(c) and (d) of the Bill, the Schedule preserves policy continuity-excluding luxury, non-essential, and public-health-sensitive goods-while aiming to reduce interpretive ambiguity and improve legislative clarity. The drafting changes and omissions reflect a modernization and simplification of the earlier SCHEDULE 11, though some item inclusions and obsolete entries indicate a continuing need for periodic review and alignment with broader tax and policy frameworks.
Mineral classification determines tax incentive eligibility for prospecting and extraction, preserving continuity but requiring clearer definitions. Statutory classification of minerals determines which mineral activities qualify for tax incentives under income tax law by listing specified minerals and associated groups; SCHEDULE XII (2025) reproduces SCHEDULE 07 (1961) verbatim in substance, enumerating 27 minerals and 16 associated groups as the determinative reference for eligibility of capital expenditure on prospecting, extraction and processing, while leaving interpretive issues (broad terms, technical thresholds, typographical inconsistencies) that may require periodic review and clearer definitions.
Comparison of Section 149 "Deduction in respect of income of co-operative societies." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
3 September, 2025
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Deduction for co-operative societies: specified cooperative income receives preferential tax deductions, subject to governance and computation rules. Clause 149 permits targeted tax deductions for co operative societies by fully or partially deducting income attributable to enumerated cooperative ... Summary
Deduction for co-operative societies: specified cooperative income receives preferential tax deductions, subject to governance and computation rules.
Clause 149 permits targeted tax deductions for co operative societies by fully or partially deducting income attributable to enumerated cooperative activities (banking/credit to members, cottage industries, marketing of members' agricultural produce, supply of agricultural inputs, processing without power, collective disposal of members' labour, and fishing/allied activities), supplies by primary societies to federal cooperatives or government entities, inter cooperative investment income, and income from letting godowns; certain non specified activities qualify only up to capped amounts, governance restrictions on voting rights condition some deductions, and cooperative deductions are computed after reducing specified pre existing deductions.
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