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    Cost of acquisition in case of depreciable asset: Clause 75 of the Income Tax Bill, 2025 vs. Section...
    Computation of capital gains in case of depreciable assets.: Clause 74 of Income Tax Bill, 2025 vs. ...
    Cost of acquisition for capital gains tax purposes: Clause 73 of the Income Tax Bill, 2025 vs. Secti...
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    Capital Gains on Share Buy-Backs: Clause 69 of the Income Tax Bill, 2025 vs. Section 46A of the Inco...
    Capital gains - Distribution of assets by companies in liquidation: Clause 68 of the Income Tax Bill...
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    Act RulesBills
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    Cost of acquisition adjustment: depreciable assets' acquisition cost tied to written down value, altering capital gains computation.
    Clause 75 treats the written down value of a depreciable asset, where depreciation has been claimed, as the cost of acquisition for capital gains purposes and directs that set-off and carry forward provisions apply subject to this modification, thereby aligning gain or loss on disposal with the asset's depreciated value.
    Act RulesBills
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    Computation of capital gains on depreciable assets: revised short term treatment under an overriding block based formula.
    Clause 74 creates an overriding framework for computing capital gains on depreciable asset blocks: if consideration from transfer exceeds transfer expenses plus the block's written down value at the year's start and additions during the year, the excess is treated as short term capital gains; on complete cessation of a block, acquisition cost is the opening written down value adjusted for acquisitions and resulting income is treated as short term capital gains.
    Act RulesBills
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    Cost of acquisition rules designate deemed cost for non purchase transfers, preserving prior owner's cost with specified formulas.
    Clause 73 prescribes the deemed cost of acquisition for assets received by gift, will, inheritance or similar transfers as the cost incurred by the previous owner, adjusted for improvements; it prescribes fair market value for assets declared under the Income Declaration Scheme and specific formulae for units in mutual funds, business trusts and segregated portfolios, and ties cost continuity to original assets in corporate reorganisations.
    Act RulesBills
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    Mode of computation of capital gains: updated indexation, tightened deductible items, and rules for business trusts and non-residents.
    Clause 72 updates the mode of computation of capital gains by retaining deductions for expenditure and cost of acquisition or improvement while specifying a Cost Inflation Index tied to the Consumer Price Index (urban) for indexation. It expressly disallows certain interest payments and securities transaction tax, sets out reduction rules for cost of acquisition involving business trusts and specified entities, and provides detailed computation rules for non-residents addressing foreign currency and rupee appreciation, alongside definitions for indexed cost concepts.
    Act RulesBills
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    Withdrawal of exemption: non compliance with transfer conditions triggers taxation of capital gains and successor liability.
    Clause 71 requires withdrawal of exemption and taxation of capital gains when a transferee converts a capital asset into stock in trade or when shareholding continuity of a parent/holding company in a subsidiary is broken within the prescribed period, and it makes successor entities or shareholders liable where specified conditions are not met, aligning functionally with the triggers and successor liability mechanisms in Section 47A of the Income tax Act.
    Act RulesBills
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    Capital gains exemptions for specified restructurings preserve tax neutrality and facilitate cross-border and corporate reorganisations.
    Clause 70 of the Income Tax Bill, 2025 designates specified classes of transactions as not regarded as transfer for capital gains purposes, exempting partitions of Hindu undivided families, transfers by will, gift or irrevocable trust, transfers between parent and subsidiary companies, amalgamations and demergers (including foreign company reorganisations), conversions and exchanges of securities, securities lending, reverse mortgage arrangements, mutual fund consolidations, transfers involving art and cultural institutions, and succession of business entities, thereby aligning with and expanding the scope of existing non-transfer provisions in Section 47 of the 1961 Act.
    Act RulesBills
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    Capital gains on share buy backs: updated rules tax the gain, deem certain consideration nil, and align definitions with corporate law.
    Clause 69 taxes the difference between acquisition cost and consideration on company repurchase of its own shares or specified securities, prescribes that certain forms of consideration under clause 2(40)(f) are deemed nil for tax purposes, and adopts the Companies Act definition of specified securities, thereby aligning tax treatment with current corporate law and updating statutory cross references.
    Act RulesBills
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    Capital gains on liquidation distributions: shareholders taxed on market value gains with dividend adjustment applied.
    Distributions of assets on company liquidation are not treated as transfers by the company; shareholders receiving money or assets are taxable under Capital gains, with gain measured by the market value of assets received less any part assessed as dividend, and that net amount deemed the full value of consideration for capital gains computation. Clause 68 parallels Section 46 in substance but changes the statutory cross reference used for calculation mechanics.
    Act RulesBills
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    Capital gains modernization clarifies valuation and timing for taxation, including insurance recoveries and conversions to stock in trade.
    Clause 67 retains the principle that gains from transfer of capital assets are taxable in the year of transfer and refines valuation and timing for specified situations: insurance recoveries are treated as capital gains with fair market value deemed as full consideration; unit linked insurance receipts are aligned with capital gains rules where exemptions do not apply; conversion to stock in trade uses fair market value at conversion as consideration and taxes gains when sold; beneficial interests in securities are attributed to the beneficial owner with FIFO cost and holding period rules.
    Act RulesBills
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    Tax deductions in co operative bank reorganisations: allocation rules and book value transfers ensure continuity and fairness in taxation.
    Clause 65 and Section 44DB set a special provision for computing tax deductions in co operative bank reorganisations by allocating deductions between predecessor and successor based on days before and after reorganisation, requiring transfers at book values, defining covered reorganisations by asset/liability transfer and continuity criteria, and providing for Central Government notification in specified cases to ensure genuine business purposes.
    Act RulesBills
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    High-turnover businesses must provide prescribed electronic payment facilities to increase transaction traceability and tax transparency.
    Clauses 64 and 187 of the Income Tax Bill, 2025 require persons carrying on business above the prescribed turnover threshold to provide facilities for accepting payments through prescribed electronic modes, in addition to any other electronic methods offered. These clauses parallel Section 269SU of the Income Tax Act, 1961, aiming to promote digital transactions, enhance traceability, and reduce tax evasion by imposing infrastructure and compliance obligations on high-turnover businesses.
    Act RulesBills
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    Tax audit thresholds updated to emphasise digital transactions, altering audit triggers and filing timing for taxpayers.
    Clause 63 updates mandatory tax audit triggers by revising turnover and receipt thresholds and by making the intensity of banking or online transactions decisive for higher audit thresholds; it maintains an audit requirement for professionals, preserves exemptions where declared profits align with deemed profit provisions, requires audit reports signed by an accountant and filed by the defined specified date, and allows reliance on audits under other laws if submitted on time.
    Act RulesBills
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    Maintenance of books of account: updated thresholds and technological recordkeeping govern taxpayer record obligations for income verification.
    Clause 62 modernizes maintenance of books of account by applying to specified professions and notified persons, updating income and turnover thresholds (with special treatment for individuals and HUFs), defining specified professions broadly, and empowering the Board to prescribe the types, form, manner and retention periods of records while encouraging technological methods of record-keeping to facilitate income verification and tax administration.
    Act RulesBills
    Show AI Summary
    Presumptive taxation for non-residents fixes sectoral deemed profit rates and permits audit-based lower profit declaration.
    Clause 61 establishes a special presumptive computation regime for specified non-resident business activities-shipping (including demurrage), cruise ships, aircraft operation, turnkey power project construction, mineral-oil services, and specified electronics services-by prescribing sectoral deemed profit rates as the taxable base, permitting non-residents to elect audit-based lower declared profits if they maintain detailed books and undergo audit, and restricting allowance of losses, deductions, and depreciation against the presumptively computed income.
    Act RulesBills
    Show AI Summary
    Head office expenditure deductions limited by an adjusted total income cap, simplifying cross-border allocation and documentation requirements.
    Clause 60 permits deduction of administrative costs incurred by non-resident head offices against profits and gains of business or profession, subject to a capped proportion of adjusted total income (or its average when losses occur) and to specified definitions of head office expenditure, thereby standardizing computation and limiting disproportionate reductions in taxable income.
    Act RulesBills
    Show AI Summary
    Taxation of royalties and technical service fees: non resident receipts taxed as business profits if effectively connected to a permanent establishment.
    Clause 59 charges royalties and fees for technical services received by non residents as Profits and gains of business or profession when receipts from the Government or an Indian concern arise under an agreement, the assessee carries on business in India through a permanent establishment or fixed place of profession, and the rights, property or contract are effectively connected with that presence; deductions are limited to expenses wholly and exclusively for the Indian establishment and books of account and audit are required.
    Act RulesBills
    Show AI Summary
    Presumptive taxation for goods carriages simplifies reporting for small fleet owners while limiting deductions and requiring records.
    Clause 58 establishes a presumptive basis for computing profits from plying, hiring or leasing goods carriages by applying prescribed per-vehicle rates, permitting declaration of higher actual income, allowing specified partner salary and interest deductions for firms, requiring books and audit where declared income is lower than the presumptive amount, disallowing other deductions against presumptive income, and treating written down value as if depreciation were claimed and allowed.
    Act RulesBills
    Show AI Summary
    Presumptive taxation for professionals deems a portion of gross receipts as taxable income, simplifying compliance but restricting deductions.
    Clause 58 institutes a presumptive taxation scheme for specified resident professionals, prescribing turnover-based eligibility and deeming taxable income at a fixed proportion of gross receipts or actual profit, whichever is higher. Eligible taxpayers are generally relieved from routine accounting and audit obligations, but must maintain books and undergo audit if they claim profits lower than the presumptive amount. Deductions or losses are not permitted against the presumptive income, and depreciation is to be treated as if claimed and allowed. Certain entity types are excluded from the scheme.
    Act RulesBills
    Show AI Summary
    Presumptive taxation scheme differentiates rates by transaction mode and imposes a five-year lock-in to simplify compliance.
    Clause 58 permits computation of presumptive income for eligible small businesses and professions with turnover-based eligibility, distinguishes presumptive rates by mode of receipt, allows actual profit to be claimed if higher, mandates books and audit where actual profits are lower and total income exceeds the basic exemption, and imposes a five-year lock-in for continued application of the scheme.
    Act RulesBills
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    Revenue recognition requires percentage-of-completion for construction and service contracts, with completion or straight-line service options.
    Clause 57 mandates the percentage of completion method for construction and service contracts, with a project completion alternative for short-term services and a straight-line option for recurring service arrangements. Contract revenue includes retention money, and contract costs must not be reduced by incidental income such as interest, dividends, or capital gains. The provision references notified accounting standards and aims to align revenue recognition with international practices while imposing compliance and disclosure obligations.

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      Review of Customs duty Exemptions

      1 February, 2025

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      Union Budget 2025-26 (Full) + Finance Bill, 2025

      VII. Review of Customs duty Exemptions

      A. Review of conditional exemption rates of BCD prescribed in notification No. 50/2017- Customs dated 30.6.2017:

      A comprehensive review has been undertaken in respect of 25 conditional exemptions/concessional rate entries in Notification No. 50/2017-Customs dated 30th June, 2017 whose validity is expiring by 31.3.2025. After review, 24 entries are being continued for varying periods with modification in few entries and 1 entry is being lapsed.

      (1) The details of exemptions/concessional rates being extended with or without modifications:

      S.No

      Description

      Entry No

      End date

      1

      Ships and vessel for breaking up

      S. No. 555A

      31.3.2035

      2

      Raw materials, components, consumables or parts, for use in the manufacture of ships/vessels

      S. No. 559

      31.3.2035

      3

      Bulk drugs for manufacture of drugs or medicines [A separate entry is being created for Drugs, medicines, diagnostic kits specified in List 3 with modifications in the list]

      S. No. 166

      31.3.2029

      4

      Bulk drugs used in the manufacture of polio vaccine and Monocomponent insulins

      S. No. 166A

      31.3.2029

      5

      Bulk drugs used in the manufacture of life saving drugs or medicines [A separate entry is being created for Drugs, medicines, diagnostic kits specified in List 4 with modifications in the list]

      S. No. 167

      31.3.2029

      6

      Drugs, Medicines or Food for Special Medical Purposes (FSMP) used for treatment of rare disease

      S. No. 167A S. No. 607B

      31.3.2029

      7

      Good specified in List 36 imported by testing agencies specified in List 37, for the purpose of testing and/or certification

      S. No. 532A

      31.3.2029

      8

      Crude Glycerin for use in manufacture of Epichlorohydrin

      S. No. 81A

      31.3.2027

      9

      Denatured ethyl alcohol for use in manufacture of industrial chemicals

      S. No. 104B

      31.3.2027

      10

      Fish meal for use in manufacture of aquatic feed S. No. 104C 31.3.2027

       

       

      11

      Goods for the manufacture of telecommunication grade optical fibres or optical fibre cables

      S. No. 168, S. No. 341, S. No. 341A

      31.3.2027

      12

      Textile machinery (with addition of two new machinery)

      S. No. 460 S. No. 460A S. No. 460B S. No. 460C S. No. 460D

      31.3.2027

      13

      Parts and components for use in manufacturing of textile machineries

      S. No. 460E

      31.3.2027

      14

       Goods for use in the manufacture of Open cell of LCD and LED TV panel

      S. No. 515B

      31.3.2027

      15

      Seeds for use in manufacturing of rough Lab- Grown Diamonds [IGCR condition removed]

      S. No. 345B

      31.3.2026

      16

      Parts of wind operated electricity generators, for the manufacture or the maintenance of wind operated electricity generators [The entry has also been modified]

      S. No. 405

      31.3.2026

      17

      Permanent magnets for manufacture of PM synchronous generators above 500KW for use in wind operated electricity generators

      S. No. 406

      31.3.2026

      Note: Description of entries is indicative. Notification may be referred to for complete description.

      (2) The following entry is being allowed to lapse with effect from 01.04.2025:

      S. No.

      S. No. of 50/2017- Customs

      Description

      1.

      489AA

      Heat Coil for use in the manufacture of Electric Kitchen Chimneys falling under tariff item 84146000

      (3) Other Changes in notification No. 50/2017 -Customs dated 30.6.2017

      Certain entries are being modified as under:

      S. No.

      S. No. of 50/17-Cus

      Brief Description

      1.

      257A

      9 new groups of items such as sea shell, adhesive etc are being added to the list of duty free items for use in manufacture of handicrafts for export. The time period for export of the handicraft items is also being increased from 6 months to 1 year, further extended by another three months.

      2.

      539

      BCD exemption is being extended to imports of ground installations for satellites and payloads and its spares and consumables of such installations.

      3.

      539A

      BCD exemption is being provided on goods for use in the building of launch vehicles and launching of satellites

      Note: Description of entries is indicative. Notification may be referred to for complete description.

      B. Amendment of Notifications Nos. 16/2017-Customs dated 20.04.2017 and 153/94-Customs dated 13.07.1994

      Notification No.

      Brief Description

      16/2017-customs dated 20.04.2017

      The notification exempts specified drugs and medicines from the whole of the duty of customs leviable thereon subject to their being supplied free to cost to patients under Patient Assistance Programme (PAP) run by the pharmaceutical companies.

       

      37 new drugs and 13 patient assistance programmes are being added to the list

      153/94-customs dated 13.07.1994

      Currently, articles of foreign origin can be imported into India for maintenance, repair and overhauling subject to their export within six months extendable to 1 year. The duration for export in the case of railway goods imported for such purpose has been increased from 6 months to 1 year further extendable by 1 year

      Note: Description of entries is indicative. Notification may be referred to for complete description.

       


      Full Text:

      Union Budget 2025-26 (Full) + Finance Bill, 2025

      Topics

      ActsIncome Tax