Legal and Practical Perspectives on the Taxation of Carbon Credit Transfers : Clause 194 (Table: S. No. 3) of the Income Tax Bill, 2025 Vs. Section 115BBG of the Income-tax Act, 1961

Taxation of carbon credit transfers: concessional flat tax with prohibition on deductions simplifies compliance and defines eligible credits.

Clause 194 of the Income Tax Bill, 2025 subjects income from transfer of carbon credits to a self contained regime: any person is taxable on such income at a flat 10% rate, computed by taxing the carbon credit income at 10% and taxing remaining income under normal provisions. The provision defines carbon credit as a UNFCCC validated reduction of one tonne of CO2 or equivalent gases tradable at market price, contains an overriding clause over other Act provisions, and expressly disallows any deduction or allowance in computing such income, resulting in taxation of gross consideration.