Slump sale definition amended to replace 'sales' with 'transfer', clarifying scope of transfers under tax law. The statutory definition of slump sale is amended to substitute the word "sales" with "transfer", clarifying that a slump sale means the transfer of one or more undertakings for a lump sum consideration without values being assigned to individual assets and liabilities, and the amendment is given retrospective effect to apply to the specified assessment year and subsequent assessment years.
Goodwill treatment: reduction from block of assets deemed a transfer, triggering capital gains consequences and cost adjustment. Goodwill is not a depreciable asset and where purchased its purchase price remains the cost of acquisition for capital gains computation, after reducing any depreciation previously claimed; reduction of goodwill from the block of assets is deemed a transfer for capital gains purposes and the clarificatory amendment applies retrospectively to the relevant assessment year and subsequent years.
Income-tax authority definition revised to limit qualifying officers to those specified by the Board, altering entry-and-verification scope. The proposed amendment restricts the definition of income-tax authority to officers who are subordinate to the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner as specified by the Board, thereby limiting which subordinate officers may exercise entry and verification powers under the section; the amendment takes effect from 1 April, 2022.
Relaxation of late filing fee enables administrative orders to relieve classes facing genuine hardship from mandated fee imposition. The amendment expressly adds the statutory late filing fee into the list of provisions for which the Board may, by general or special order, provide relaxation or relief for classes of incomes or cases; this enables the Board to issue orders to exempt or mitigate the fee for persons facing genuine hardships in filing returns on time.
Revision powers under section 263 expand to permit review of Transfer Pricing Officer orders with mandated implementation timelines. Proposed amendments grant senior officers assigned transfer pricing jurisdiction power under section 263 to call for and examine TPO records and to revise TPO orders deemed erroneous and prejudicial to revenue. Section 153 is modified so subsections (3) and (5) apply to TPO orders, a new subsection (5A) obliges the Assessing Officer to modify assessments in conformity with a TPO order within two months of receipt, and related implementation provisions are extended to such orders.
Deduction claimed by donor disallowed where donee fails to file statement of donations; amendment corrects drafting error. The amendment corrects sub section (1A) of section 35 to provide that the deduction claimed by the donor for donations to specified research associations, educational institutions or companies shall be disallowed unless the donee files the required statement of donations, aligning the rule with section 80G and taking effect retrospectively from April 1, 2021.
Approval authority for trusts changed to Principal Commissioner or Commissioner, replacing prescribed authority references and procedural filing locus. Proposal to substitute references to the prescribed authority with Principal Commissioner or Commissioner in specified sub clauses and the nineteenth proviso of clause (23C) of section 10 to align textual references with the existing filing and approval regime for trust applications under the first regime; the amendment is corrective and consequential to prior 2020 changes.
Application of income: amounts by trusts treated as applied only when actually paid, with an anti-duplication rule preventing later claims. Explanatory provisions treat sums payable by trusts as application of income in the previous year in which such sums are actually paid, irrespective of when the liability arose under the trust's regular accounting method; a proviso bars treating a sum as applied in a later previous year if it has already been claimed as applied in an earlier year. The amendments apply prospectively to the assessment years following the implementation date.
Voluntary renovation contributions may be treated as corpus if kept separate, used only for the specified purpose and properly invested. Trusts or institutions may, at their option, treat voluntary contributions for renovation or repair of notified religious places as part of the corpus, subject to conditions: application only for the specified purpose, no onward donations, separate identification, and investment in forms and modes specified under subsection (5) of section 11; violation of any condition renders the sum deemed income of the year in which the breach occurs. Parallel explanatory provisions are proposed for clause (23C) of section 10. Amendments are proposed retrospective to 1 April 2021.
Special-rate taxation of trust income under new provision: specified breach income taxed separately and no deductions allowed under the rule. Proposed amendments subject defined categories of trust or institution income to a special rate by treating only the part of income improperly applied, invested, accumulated or attributed as taxable specified income; disallow deductions or set-offs against such specified income; deem unutilised accumulated sums to be taxable in the last year of accumulation; and define specified income to include excessive accumulations, deemed income under accumulation rules, income rendered non-exempt for impermissible investments or benefit transfers, and income attributable to beneficiaries.
Deductible trust expenditure allowed when exemption denied, subject to prescribed conditions and exclusive tax treatment. Proposed amendments allow deduction of revenue (non capital) expenditure for the objects of a trust or institution when exemption is denied for specified non compliances, subject to conditions: expenditure must not be from corpus as at the last day of the preceding financial year, not from any loan or borrowing, not involve depreciation for an asset whose acquisition was treated as application of income earlier, and not be a contribution or donation. Section 40 and 40A provisions apply mutatis mutandis to determine such expenditure, and no other deduction, allowance or set off shall be permitted for that expenditure.
Exit tax on trusts extended to first regime entities, covering conversions, mergers and asset transfers under the amended provisions. The Finance Bill proposes to extend Chapter XII-EB's exit tax provisions to trusts and institutions under the first regime by making Sections 115TD, 115TE and 115TF applicable to them, thereby subjecting conversions to non charitable status, mergers with non charitable or dissimilar charitable entities, and failures to transfer assets to a levy on accreted income; the amendment is effective from the commencement of the specified fiscal year and applies to subsequent assessment years.
Payment to specified person: income applied for their benefit deemed their income, anti benefit rules extended to first regime trusts. A proviso to clause (23C) of section 10 deems any income or property of a first regime trust applied for the benefit of a person in section 13(3) to be that person's income in the year of application; sections 13(2), (4) and (6) are made applicable to first regime trusts, aligning anti benefit and attribution rules across regimes.
Accumulation provisions alignment: consistent tax treatment for accumulated charitable income with prescribed conditions and deemed income triggers. The measure harmonises accumulation rules between the two exemption regimes by requiring a prescribed statement to the Assessing Officer, investment or deposit of accumulated funds in specified modes, and timely filing; it provides that accumulated income meeting these conditions is excluded from total income but will be deemed income of the last previous year of the accumulation period if misapplied, ceases to be invested as required, is not utilised within the stated period, or is credited or paid to another exempt trust or institution.
Cancellation of charitable registration: Principal Commissioner empowered to inquire and cancel approvals within a prescribed decision period. Amendments empower the Principal Commissioner or Commissioner to call for documents, inquire into and, after hearing, cancel or refuse to cancel registrations or approvals of trusts, institutions and similar entities on finding one or more specified violations (including misuse of income, non incidental business income without separate books, non genuine activities, preferential religious benefit, or final non compliance with other laws). Orders must be forwarded to the Assessing Officer and the entity, and a six month statutory deadline governs decision making from the quarter end in which the first notice is issued.
Penalty for passing on unreasonable benefits: trusts face penalties equal to the benefit for first offences and greater penalties for repeat breaches. The proposal inserts section 271AAE to penalise trusts or institutions that apply income for the benefit of trustees or specified persons: the Assessing Officer may impose a penalty equal to the aggregate amount so applied where the violation is first detected in a previous year, and a higher penalty where the violation is detected again in a subsequent previous year; this penalty is in addition to any other penalties under Chapter XXI and the amendments take effect for the relevant assessment year following enactment.
Liability of directors of private company clarified as joint responsibility for tax, fees, interest and penalties if company recovery fails. Amendment renames the section title to Liability of directors of private company to reflect that directors are jointly and severally liable where tax cannot be recovered from the company, clarifies that this liability is not conditional on liquidation, and expands the Explanation so that the expression "tax due" expressly includes fees alongside penalty, interest and other sums payable.
Penalty authority expanded: Commissioner (Appeals) may now impose penalties for undisclosed income; per day penalty increased. Amendments enable the Commissioner (Appeals) to levy penalties alongside the Assessing Officer for provisions targeting undisclosed income, unexplained credits or expenditures, and falsification or omission in books of account; and increase the per day penalty for failures to answer questions, sign statements, furnish information, returns or allow inspections to strengthen deterrence. These measures are to take effect from 1 April 2022.
Assessment and reassessment procedures clarified, aligning search linked notices, limitation exclusions and officer level safeguards. Proposed amendments streamline assessment and reassessment procedure by removing duplicate approval requirements for notices under section 148 where an order under section 148A(d) exists, correcting drafting errors in section 148 explanations, extending search/requisition consequences into assessments under sections 143(3), 144 and 147, prescribing officer level approval norms for post search orders, excluding a capped period from limitation where material is seized or requisitioned, and clarifying the meaning of information and threshold conditions for issuing section 148 notices.
Undisclosed income set-off prohibited: losses and unabsorbed depreciation cannot be adjusted against income found by search or survey. Section 79A prohibits set-off of any loss, whether brought forward or otherwise, and unabsorbed depreciation under sub section (2) of section 32 against undisclosed income discovered as a result of a search under section 132, requisition under section 132A, or survey under section 133A (excluding surveys under sub section (2A) of section 133A). "Undisclosed income" is defined to include money, valuables, books entries or transactions not recorded or not disclosed before the detection, and expense entries found to be false and revealed only because of the detection action.
Reforming of Taxation of Specified Income of Non-Profit Organisations (NPOs) : Clause 337 of the Income Tax Bill, 2025 Vs. Section 115BBI of the Income-tax Act, 1961
5 May, 2025
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Taxation of specified income tightened for non-profit organisations, expanding taxable triggers and clarifying timing of taxability. Clause 337 creates an event based tax regime for specified income of registered non profit organisations by enumerating eleven triggers (including ... Summary
Taxation of specified income tightened for non-profit organisations, expanding taxable triggers and clarifying timing of taxability.
Clause 337 creates an event based tax regime for specified income of registered non profit organisations by enumerating eleven triggers (including anonymous donations above a threshold, related party benefits, prohibited overseas application, investment contraventions, corpus condition breaches, misapplication or non utilisation of accumulated income, transfers to other NPOs, application to non charitable purposes, and assessing officer determined business income) and linking each trigger to the tax year in which the taxable event occurs, thereby prioritising disclosure, accountability, and timing clarity while leaving rate and deduction rules to other provisions.
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