Compliance Fee for Delay in Furnishing Statements and Certificates : Clause 429 of Income Tax Bill, 2025 Vs. Section 234G of Income-tax Act, 1961

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....ligations under the new legislative framework. Its structure, language, and intent draw heavily from the existing Section 234G of the Income-tax Act, 1961, which was introduced by the Finance Act, 2020, to address similar compliance defaults. This commentary provides a detailed analysis of Clause 429, including its objectives, operative provisions, and implications, followed by a comparative examination vis-`a-vis Section 234G, highlighting both continuity and innovation in legislative approach. Objective and Purpose The principal objective of Clause 429 is to strengthen the compliance regime governing institutions that benefit from tax incentives for scientific research and charitable purposes. By introducing a daily fee for delays in fu....

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.... to sections 45 and 354 in the new Bill). Detailed Analysis of Clause 429 of the Income Tax Bill, 2025 1. Scope of Applicability Clause 429(1) specifies two broad categories of institutions subject to the fee: * Institutions engaged in scientific research: This includes research associations, universities, colleges, or other institutions referred to in section 45(3)(a), as well as companies u/s 45(3)(b) of the new Bill. These entities are typically eligible for tax deductions or exemptions for expenditures on scientific research. * Charitable institutions or funds: As referenced in section 354(1)(e) and (f), these are institutions or funds established in India for charitable purposes, often availing tax exemptions or deductions under....

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....addition to, and does not exclude, other consequences (such as disallowance of deductions or other penalties) that may arise from non-compliance. 5. Cross-Referencing and Interconnected Provisions The operation of Clause 429 is contingent upon the reporting requirements in sections 45 and 354 of the Bill. The precise nature of the statements or certificates, their prescribed forms, and timelines are determined by these substantive provisions and any rules framed thereunder. Thus, Clause 429 functions as an enforcement mechanism, buttressing the substantive obligations elsewhere in the statute. 6. Ambiguities and Issues in Interpretation * Calculation of Maximum Fee: The cap on the fee ("not exceed the amount in respect of which the fai....

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....earch) and section 80G (charitable donations) of the Income-tax Act, 1961, specifying the relevant sub-clauses for reporting obligations. * Clause 429: References section 45 (scientific research) and section 354 (charitable institutions) of the Income Tax Bill, 2025, reflecting the reorganization and renumbering of substantive provisions in the new legislative framework. This demonstrates a legislative intent to preserve the compliance regime while updating it for the new statutory architecture. 3. Evolution in Legislative Approach While the substance of the fee mechanism remains unchanged, Clause 429 reflects a broader trend towards consolidating and modernizing the compliance framework. The provision is designed to be more adaptable ....

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....associations, universities, colleges, companies, other institutions (per sections 45(3)(a), 45(3)(b)), institutions/funds (section 354) Research associations, universities, colleges (section 35(1)(ii)/(iii)), companies (section 35(1)(iia)), institutions/funds (section 80G(5)) Substantially similar; cross-references updated to new Bill's structure Triggering Event Failure to deliver/furnish statements/certificates under specified sections Failure to deliver/furnish statements/certificates under specified sections No substantive change; only section references updated Fee Amount Rs. 200 per day of default Rs. 200 per day of default Identical Maximum Cap Fee not to exceed the amount in respect of which failure occur....

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....in cases where prosecution or higher penalties may not be warranted. For Donors and Beneficiaries: Improved compliance by institutions enhances the credibility of the tax incentive system, benefiting donors who rely on the validity of certificates for claiming deductions. Compliance Requirements: Institutions must ensure prompt delivery of all prescribed statements and certificates, maintain robust record-keeping, and monitor deadlines to avoid escalation of fees. Procedural and Administrative Considerations * Payment Mechanism: The requirement that the fee be paid prior to submission of delayed documents ensures that compliance is not conditional or subject to future recovery. * Automation Potential: The simplicity and clarity of th....