TaxTMI 
TaxTMI 
Assessment of Individuals Leaving India : Clause 317 of the Income Tax Bill, 2025 Vs. Section 174 of the Income-tax Act, 1961
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....on of returning. This commentary provides a comprehensive analysis of Clause 317, including its legislative intent, operative mechanism, and practical implications, and then compares it in detail with the existing Section 174, highlighting similarities, differences, and areas of evolution in legislative policy. Objective and Purpose The principal objective of both Clause 317 and Section 174 is to safeguard the interests of the revenue by pre-empting the risk of tax evasion by individuals who are about to leave India, potentially without returning. The legislative intent is to ensure that the income of such individuals for the period up to their departure is assessed and taxed without delay, circumventing the usual annual assessment cycle ....
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....t Mechanism (Sub-section 2) Clause 317(2) stipulates that the total income for each completed tax year or part thereof within the specified period is to be taxed at the rates in force for that year, with separate assessments for each completed year or part year. * Annual and Part-Year Assessment: Income is segmented by completed tax years and fractions thereof, ensuring precise assessment for each period. * Applicable Rates: Tax rates in force for the relevant year apply, maintaining consistency with general tax principles. Estimation of Income (Sub-section 3) Where income for the specified period cannot be readily determined, Clause 317(3) authorizes the AO to estimate the income for such period or any part thereof, using methods pr....
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....eparts. * Override of General Notice Periods: The AO can prescribe a shorter period than ordinarily allowed, subject to the seven-day minimum. Additional Tax Liability (Sub-section 6) Tax chargeable under Clause 317 is in addition to any tax chargeable under other provisions of the Act. This ensures that the special assessment does not preclude or substitute other tax liabilities. * Non-Exclusivity: The provision is supplementary, not exclusive. Practical Implications The practical effect of Clause 317 is to empower the tax authorities to act swiftly and comprehensively when an individual is about to leave India. Key implications include: * For Taxpayers: Individuals planning to leave India must be prepared for expedited assessmen....
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....ate of departure The new Bill covers the entire tax year, not just the post-previous year period, potentially broadening the scope of assessment. Income Segmentation Each completed tax year or part thereof in specified period Each completed previous year or part thereof in such period Wording updated but conceptually similar; reflects the change in terminology and structure under the new Bill. Estimation Power AO may estimate income where not readily determinable AO may estimate income where not readily determinable No substantive change; estimation power retained. Notice to Furnish Return Return in form and manner as u/s 268(1); minimum 7 days Return as u/s 142(1)(i); minimum 7 days Reference updated to new sectio....
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....ion not to return. This could be challenged for arbitrariness unless supported by cogent evidence. * Short Notice Period: The minimum seven-day period for compliance may be insufficient in complex cases, raising concerns of natural justice. * Overlap with Other Provisions: The provisions are "in addition" to other tax liabilities, which could create confusion or duplication unless carefully administered. Comparative Jurisprudence Globally, jurisdictions such as the UK and Australia have similar provisions for the assessment of persons leaving the country, often termed "exit tax" or "departure assessment." The Indian approach, both u/s 174 and Clause 317, is consistent with international practice, though the Indian regime is distinguis....