TaxTMI 
TaxTMI 
TaxTMI 
Evolution and Analysis of Interim Tax Charging Provisions : Clause 530 of the Income Tax Bill, 2025 Vs. Section 294 of the Income-tax Act, 1961
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....ssessment year. This safeguard is currently embodied in Section 294 of the Income-tax Act, 1961. With the introduction of the Income Tax Bill, 2025, Clause 530 seeks to carry forward, and potentially refine, this essential statutory mechanism. Both Section 294 and Clause 530 are designed to address a practical legislative gap: the period between the commencement of a new tax year and the enactment of the relevant Finance Act that formally charges income tax for that year. These provisions ensure that the machinery of tax administration continues seamlessly, protecting both the interests of the revenue and the rights of taxpayers. This commentary provides an in-depth analysis of Clause 530, its objectives, detailed provisions, and practical ....
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....at may be proposed but not yet enacted. Detailed Analysis of Clause 530 of the Income Tax Bill, 2025 Textual Analysis "If on the 1st April in any tax year, provision has not yet been made by a Central Act for the charging of income-tax for that tax year, this Act shall nevertheless have effect until such provision is so made, as if the provision in force in the preceding tax year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force." Key Elements of Clause 530: * Triggering Event: The provision is activated if, on the 1st April of any tax year, a Central Act (usually the Finance Act) has not been enacted to charge income tax for that year. * Continuit....
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.... in case of ambiguity. Temporal Scope * Clause 530 applies only until the new charging provision is enacted. Once the Finance Act is passed, its provisions apply retrospectively from April 1 of the relevant tax year, and the interim deeming provision ceases to have effect. Comparison with Section 294 of the Income-tax Act, 1961 Text of Section 294: "If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income-tax for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the asse....
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....s not define what constitutes "more favourable" in cases where the old and proposed laws differ. This could give rise to disputes, especially in complex cases involving different rates, deductions, or procedural requirements. Judicial interpretation may be required to determine favourability in specific scenarios. 2. Application to Procedural vs. Substantive Provisions While the provision clearly applies to the charging of tax (a substantive matter), it is less clear whether procedural changes proposed in the new Finance Bill (e.g., changes in filing deadlines, penalty provisions) would also be covered by the "more favourable" test. 3. Retrospective Effect of the Finance Act Once the Finance Act is enacted, its provisions typically ap....
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....afting clear and unambiguous transitional provisions in tax legislation. Conclusion Clause 530 of the Income Tax Bill, 2025, represents a continuation and modernization of the legislative safeguard provided by Section 294 of the Income-tax Act, 1961. Both provisions serve the crucial function of ensuring that the machinery of tax administration operates smoothly, even in the absence of a new charging provision at the start of the tax year. The explicit protection of taxpayer interests through the "more favourable to the assessee" rule reflects a balanced approach, safeguarding both revenue collection and taxpayer rights. The transition from "assessment year" to "tax year" terminology in Clause 530 aligns with contemporary legislative draf....