International Tax Recovery Mechanisms under Indian Law : Clause 418 of the Income Tax Bill, 2025 Vs. Section 228A of the Income Tax Act, 1961

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....a, like many other countries, has entered into bilateral and multilateral agreements for mutual assistance in the collection and recovery of taxes. Clause 418 of the Income Tax Bill, 2025, and its predecessor, Section 228A of the Income Tax Act, 1961, are legislative instruments that operationalise such international agreements within the domestic legal framework. This commentary analyses Clause 418 of the Income Tax Bill, 2025, in detail, examining its structure, objectives, and practical implications. It then compares and contrasts these provisions with the existing Section 228A of the Income Tax Act, 1961, highlighting both the continuities and the changes. The analysis situates these provisions within the broader international and dome....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....his sub-clause empowers the Indian tax authorities to recover tax dues on behalf of a foreign government, where such recovery is requested under an agreement. * Recovery of Indian tax dues in a foreign country (Sub-clause 2): This sub-clause enables the Indian tax authorities to seek assistance from a foreign government in recovering tax dues from persons or assets in that country. 2. Mechanism for Recovery (Sub-clause 1) The provision is triggered when an agreement exists between India and a foreign country for mutual recovery of income-tax. The foreign government, or a designated authority, may send a certificate to the Indian Central Board of Direct Taxes (CBDT) requesting recovery of tax due under its laws from: * A resident of In....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Features: * Initiative by Indian Authorities: The process is initiated by the Indian TRO upon default by the assessee. * Board's Discretion: The Board has wide discretion to determine the appropriate course of action, subject to the terms of the agreement. * Alignment with International Practice: The provision reflects standard international practice for mutual assistance in tax collection. 4. Linkage with Section 413 Both sub-clauses refer to section 413, which presumably lays down the procedure for recovery of tax arrears in India. This ensures that the recovery process for foreign tax claims is harmonised with domestic recovery mechanisms, thereby avoiding procedural anomalies and ensuring due process. Comparative Analysis w....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e-structuring of the procedural provisions in the new Bill. * Otherwise, the language and operative mechanisms are substantially identical. Both provisions allow the foreign tax claim to be enforced "in the manner" of domestic tax recovery, ensuring that the same procedural safeguards (and limitations) apply. 4. Substantive Continuity There is no substantive expansion or contraction of the scope of the provision in Clause 418 as compared to Section 228A. The categories of persons covered, the authorities empowered, and the process for both inbound and outbound requests remain unchanged. 5. Amendments and Historical Evolution Section 228A has undergone several amendments since its introduction in 1972, notably by the Finance (No. 2) Ac....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e of "Resident" and "Person Having Property": The provision applies to "a resident" or "a person having any property in India." The precise scope of these terms-especially in complex cases involving trusts, shell entities, or indirect holdings-may require judicial clarification. * Discretion of the Board: The Board's discretion in taking "such action as it may deem appropriate" introduces an element of subjectivity, which could lead to inconsistent application unless clarified through rules or guidelines. * Expenses of Recovery: The provision allows deduction of "expenses in connection with the recovery proceedings." The method for determining such expenses is not specified and may be a matter of administrative practice. * Due Pro....