Concessional tax regime for manufacturing companies requires irrevocable option and prohibits set off of attributable losses.
Clause 199 creates a concessional tax regime for qualifying domestic manufacturing companies, available at the taxpayer's option, conditioned on exclusive engagement in manufacturing related activities and computed without specified deductions. It precludes set off of losses attributable to those disallowed deductions by deeming such losses to have been fully given effect to. The option must be exercised in the prescribed manner by the due date for the first return and, once exercised, is irrevocable for subsequent years except where a statutory switch is permitted, thereby trading lower tax rates for forfeiture of targeted incentives and necessitating clear procedural compliance.

Taxation of special incomes: consolidated flat-rate regime covering life insurance profits and emerging digital income streams.
Clause 194 creates a consolidated flat-tax framework for specified special incomes-winnings, patent royalties, carbon credits, VDAs, online game winnings, and life insurance profits-providing category-specific rates, comprehensive definitions, and an overriding application. For life insurance business it preserves a concessional 12.5% flat tax and the aggregate computation method but omits the prior temporary deposit requirement and lacks detailed computation rules, potentially causing interpretive issues on measuring ''profits and gains.'' Clause 194 modernises taxation of emerging income streams while centralising special-income treatment under one provision.

Taxation of foreign portfolio investment: concessional rates tied to strict attribution and compliance requirements.
Clause 210 creates a consolidated tax framework for FIIs and specified funds on securities income and capital gains, setting concessional rates by income category and conditioning those rates on prescribed attribution to non resident unit holders (excluding permanent establishments). It restricts specified deductions where income consists solely of securities receipts, disapplies certain loss set off provisions for securities gains, and anticipates rule based mechanisms for daily AUM attribution and digital filing requirements, aligning and refining the policy and operational features previously governed by Section 115AD and Rules 21AJ/21AJAA.

Taxation of GDR income: concessional treatment for ESOP dividends and capital gains with notification based eligibility.
Clause 193 of the Income Tax Bill, 2025 continues the concessional tax regime for dividends and long term capital gains on Global Depository Receipts acquired in foreign currency by resident employees under government notified ESOPs, limits deductions where gross total income consists solely of such GDR income, updates statutory cross references and definitions to current corporate law and IFSCs, and excludes certain computation benefits for GDR capital gains while preserving the notification requirement to restrict eligibility to approved schemes.

Concessional tax regime for non resident bond and GDR income ensures specified rates, filing exemptions, and notification based eligibility.
Clause 209 creates a concessional tax regime for non resident income from specified bonds and GDRs purchased in foreign currency, requiring purchase through an approved intermediary for GDRs under government notified schemes; it prescribes specific tax rates for interest, dividends and long term capital gains, restricts deductions where specified income is sole income, ring fences capital gains by disallowing set off provisions for computation, exempts non residents from return filing when TDS is applied, and preserves treatment on amalgamation or demerger.

Taxation of offshore fund income: concessional rates for unit income and segregated treatment to prevent double deductions.
Clause 208 establishes a special tax regime for overseas financial organisations investing in units purchased in foreign currency: concessional rates apply to income from such units and to long term capital gains, other income is taxed at normal rates with aggregation across heads, deductions are disallowed where gross total income consists solely of such concessional income while in mixed income cases concessional income must be segregated and deductions allowed only against the non concessional portion, and eligibility requires specified investment arrangements with prescribed Indian institutions plus SEBI approval with ''unit'' defined by cross reference to the schedule or UTI.

Tax on provident fund accumulations: retrospective, year wise recalculation imposed when exemption conditions fail and tax withheld at payment.
Clause 191 charges tax on an accumulated balance of a recognised provident fund when schedule exemption conditions are unmet, directing the Assessing Officer to perform a retrospective, year wise calculation of the notional tax that would have applied had the fund not been recognised and to charge the excess over tax actually paid in the year of payment, with trustees required to withhold tax at source on the taxable portion.

Tax rates for non residents clarified: consolidated withholding regime, gross basis taxation, and filing exemptions streamlined.
Clause 207 consolidates tax treatment of specified Indian source incomes of non residents and foreign companies by prescribing rates for dividends, interest, royalties and fees for technical services, preserving concessional rates for IFSC incomes and infrastructure debt funds, and treating residual income at normal rates. It mandates gross basis taxation by denying deductions under specified sections, excludes specified incomes from deduction computations under Chapter VIII (with an IFSC exception), streamlines approval requirements for royalties and FTS, and exempts non residents from return filing where such incomes alone are subject to prescribed withholding tax.

Block assessment tax imposes a flat punitive rate on total income from search-derived block periods, broadening the tax base.
Clause 192 taxes the total income of the block period as determined under section 294, replacing the narrower concept of "undisclosed income," and prescribes a flat 60% tax rate with applicable surcharge, thereby broadening the tax base for block assessments while aiming to simplify rate and surcharge determinations.

Long-term capital gains taxation recalibrated to a higher concessional rate with STT linkage and IFSC carve-outs.
Clause 198 establishes a revised LTCG regime for transfers of equity shares, equity oriented fund units, and business trust units where STT conditions are met, prescribing a codified concessional tax on specified LTCG with an IFSC exemption for foreign currency trades; it preserves marginal relief for resident individuals and HUFs, restricts the order of applying deductions and rebates against LTCG, defines equity oriented fund investment thresholds and averaging rules, and grants government power to notify exceptions to STT requirements.

Long term capital gains taxation reformed: uniform lower rate, limited indexation grandfathering, and exemption limit relief retained.
Clause 197 restructures long term capital gains taxation by imposing a uniform flat rate for most LTCG, removing indexation except for formulaic transitional relief for land and buildings acquired before the specified cut off, preserving basic exemption relief for resident individuals and HUFs by reducing LTCG by any shortfall in other income, excluding certain equity related instruments from its scope, and requiring deductions to be computed on gross total income excluding LTCG.

Short-term capital gains tax regime tightened: higher flat rate for STT-eligible securities alters investor incentives and compliance obligations.
Clause 196 targets short term capital gains from equity shares, equity oriented fund units and business trust units that are chargeable to STT, imposing a flat tax on such gains while preserving normal taxation of remaining income. It limits concessional treatment to exchange based STT transactions, provides relief by reducing eligible STCG where other income falls below the basic exemption, excludes IFSC foreign currency transactions, and allows Chapter VIII deductions only after reducing gross total income by the specified STCG.

Determination of tax where exempt income is included: deduction at the average tax rate neutralises tax on non chargeable income.
Clause 190 provides that where total income includes income on which no income-tax is payable, the assessee is entitled to a deduction from the tax chargeable equal to the tax computed at the average rate of income-tax on that non-taxable amount; the average rate is derived by dividing total tax by total income and applying that rate to the exempt portion to neutralise any tax attributable to non-chargeable income.

General Anti Avoidance Rule expansion: new accommodating party concept widens GAAR reach and tightens tax planning scrutiny.
Clause 184 of the Income Tax Bill, 2025 largely carries forward Section 102's wide definitions for GAAR-covering arrangement, asset, benefit, connected person, fund, party, step, and tax benefit-while introducing an accommodating party concept to capture third party facilitators, updating cross references and terminology (e.g., "tax year"), and explicitly including permanent establishments and treaty arrangements to strengthen anti avoidance coverage.

General Anti-Avoidance Rule expanded to permit concurrent or substitutive application, increasing substance-over-form scrutiny.
Clause 183 expands the statutory reach of the General Anti-Avoidance Rule (GAAR) by expressly permitting GAAR to apply "in addition to, or in lieu of" any other basis for determination of tax liability, while maintaining application "as per such guidelines and subject to such conditions, as prescribed." The clause enables authorities to apply a substance-over-form approach, allowing concurrent or exclusive use of GAAR alongside specific anti-avoidance or substantive provisions, and thereby alters the relationship between GAAR and SAARs previously left ambiguous under Section 101.

General Anti Avoidance Rule: clause makes GAAR an overriding tool but conditions its use on prescribed procedural guidelines.
Clause 183 preserves GAAR's authority to apply "in addition to, or in lieu of" other bases for tax determination, enabling recharacterisation of arrangements based on substantive economic realities. It uniquely conditions GAAR's exercise on "guidelines and...conditions, as prescribed," thereby mandating subordinate guidance to define thresholds, approval processes, taxpayer rights, documentation and timelines, with the intent of reducing arbitrariness and enhancing predictability compared with the earlier framework.

General Anti-Avoidance Rule: Treat connected and accommodating parties as one, enabling look-through of corporate structures.
Clause 182 authorises treating connected persons as one, disregarding an accommodating party, treating an accommodating party and another party as the same person, and looking through corporate structures to determine whether a tax benefit exists, thereby enabling recharacterisation of arrangements that lack commercial substance and are designed to secure tax advantages.

General Anti Avoidance Rule: broad authority to recharacterise and deny tax benefits where arrangements lack commercial substance.
Clause 181 empowers tax authorities to neutralise tax benefits from arrangements lacking commercial substance by denying benefits (including treaty benefits) and imposing a range of consequences: disregarding or recharacterising steps or whole arrangements; treating arrangements as not entered into; treating accommodating or connected parties as one; reallocating tax attributes; recharacterising residence or situs; and looking through corporate structures. Clause 181(3) authorises reclassification of equity/debt and capital/revenue character. Rule 10UA limits consequences to the impermissible part of an arrangement, providing proportionality.

Commercial substance test: disregard arrangements whose economic effect differs from form, focusing on round-trips and artificial parties.
An arrangement may be disregarded for tax purposes if it lacks commercial substance, determined by whether the overall economic effect differs materially from its formal steps; key indicators include round-trip financing, an accommodating party, offsetting elements, disguised transactions, relocations made for tax benefit, and arrangements that do not materially affect business risks or cash flows independent of tax. Certain factors-duration, taxes paid, or an exit route-are not alone sufficient to establish substance, and the Bill omits a prior explicit definition of accommodating party, potentially creating interpretive uncertainty.

GAAR main purpose test targets arrangements primarily motivated by tax benefit, with procedural safeguards for invocation.
Clause 179 defines an impermissible avoidance arrangement under GAAR as one whose main purpose is obtaining a tax benefit and which meets at least one of four tainting conditions: arm's length departure, misuse or abuse of law, lack of commercial substance, or non bona fide means; it creates a rebuttable presumption placing the burden on the taxpayer for impugned steps and is operationalized through Rule 10UB's pre reference notice, Commissioner review, and Approving Panel safeguards.