Just a moment...

⚠ ✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Keyword Search :
AI Tools : New
Ask tax questions in natural language. Powered by AI trained on the TaxTMI legal database. Use AI Tools ➞
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
    6. Text Search
  6. The system will try to fetch results that contains ALL your words.
  7. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
    8. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search ❯
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws---- ❯
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ---- ❯
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    Manuals Income Tax
    Whether the recognition of retention money, receipt of which is contingent on the satisfaction of ce...
    Manuals Income Tax
    Is it correct that even service providers are now required to record inventory?
    Manuals Income Tax
    Does ICDS II apply to the trader or dealer of livestock, agriculture and forest products mineral oil...
    Manuals Income Tax
    Does provisions of ICDS II apply to shares of a company in which public are not substantially intere...
    Manuals Income Tax
    Does the provisions of ICDS II apply on derivatives.
    Manuals Income Tax
    ICDS-I requires disclosure of significant accounting policies and other ICDS requires specific discl...
    Manuals Income Tax
    As per ICDS-I the Marked to Market loss or an expected loss shall not he recognized unless the recog...
    Manuals Income Tax
    Since ICDS is not applicable for the purposes of maintenance of books of account, then what is the p...
    Manuals Income Tax
    Where a term has not been defined under ICDS, nor under the Act, but has different interpretations g...
    Manuals Income Tax
    Does ICDS apply to computation of Minimum Alternate Tax (MAT) u/s 115JB of the Act or Alternate Mini...
    Manuals Income Tax
    In case of conflict between ICDS and other specific provisions of the Income-tax rules, 1962 governi...
    Manuals Income Tax
    Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents...
    Manuals Income Tax
    Does ICDS apply for the purposes of computing exemption u/s 11 to 13.
    Manuals Income Tax
    Does ICDS apply to the applicability aspect of the TDS.
    Manuals Income Tax
    How will ICDS apply to companies which adopted Ind-AS. (Indian accounting standards)
    Manuals Income Tax
    Whether the provisions of ICDS shall apply to Banks, Non-banking financial institutions, Insurance ...
    Manuals Income Tax
    Whether ICDS is applicable to Non-Residents whose income is liable to be taxed at a flat rate of tax...
    Manuals Income Tax
    Can a assessee opt to change his method of accounting from mercantile to cash basis.
    Manuals Income Tax
    Can ICDS would apply to other categories of taxpayers whose income is taxed under presumptive tax sc...
    Manuals Income Tax
    Can a assessee can follow different methods of accounting for different sources of income under the ...
❮
❯
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

Open Link
Notes
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
Manuals Income Tax
Whether the recognition of retention money, receipt of which is contingent on the satisfaction of ce...
Show AI Summary
Retention money recognition as revenue requires reasonable certainty of ultimate collection under ICDS on construction contracts.
Retention money, as part of overall contract revenue under the ICDS on construction contracts, shall be recognised as revenue only when the contingency tied to performance is satisfied or there is reasonable certainty of its ultimate collection.
Manuals Income Tax
Is it correct that even service providers are now required to record inventory?
Show AI Summary
Inventory recording requirement under ICDS II now mandates service providers to maintain inventories and disclose valuation for tax purposes.
Service providers are required to maintain records of inventories under the ICDS II standard on valuation of inventories, extending mandatory inventory recognition, valuation and disclosure obligations to entities providing services for purposes of income computation.
Manuals Income Tax
Does ICDS II apply to the trader or dealer of livestock, agriculture and forest products mineral oil...
Show AI Summary
Valuation of Inventories: ICDS II applies to traders and dealers of primary commodities while excluding producers.
ICDS II governs valuation of inventories for income computation and disclosure. The standard is excluded for a producer of primary goods like livestock, agricultural and forest products, mineral oils, ores and gases, but it applies to persons who trade or deal in those commodities; therefore the producer/dealer distinction determines whether ICDS II applies.
Manuals Income Tax
Does provisions of ICDS II apply to shares of a company in which public are not substantially intere...
Show AI Summary
ICDS II valuation excluded for closely held company shares when ICDS VIII classifies them as securities outside its scope.
Shares of a company in which the public are not substantially interested are excluded from ICDS II valuation even if held as inventory, because ICDS VIII's definition of securities expressly includes such shares, placing them outside ICDS II's scope.
Manuals Income Tax
Does the provisions of ICDS II apply on derivatives.
Show AI Summary
ICDS II applicability to derivatives: derivatives held as inventory fall under ICDS II because securities exclusion applies.
Where an assessee holds derivatives as part of inventory, the valuation and related provisions of ICDS II apply because the definition of securities in ICDS VIII expressly excludes derivatives, so such instruments are governed by the inventory valuation standard rather than the securities disclosure regime.
Manuals Income Tax
ICDS-I requires disclosure of significant accounting policies and other ICDS requires specific discl...
Show AI Summary
Disclosure of accounting policies: ICDS requires taxpayers to disclose net ICDS effect in returns and tax audit report.
ICDS I mandates disclosure of significant accounting policies and requires the net effect on taxable income from application of ICDS to be disclosed in the Return of Income; ICDS disclosures are to be made in the tax audit report in Form 3CD, with no separate disclosure requirement for persons not liable to tax audit.
Manuals Income Tax
As per ICDS-I the Marked to Market loss or an expected loss shall not he recognized unless the recog...
Show AI Summary
Marked-to-market gain recognition: ICDS I's non-recognition rule for MTM loss applies equally to gains.
Recognition of marked-to-market losses or expected loss is disallowed under ICDS I unless permitted by other ICDS provisions; the same conditional rule applies mutatis mutandis to recognition of marked-to-market gains or expected profit, so gains or anticipated income may not be recognised for income computation unless another ICDS expressly authorises recognition.
Manuals Income Tax
Since ICDS is not applicable for the purposes of maintenance of books of account, then what is the p...
Show AI Summary
Accounting Policies: treat ICDS I as computation policies affecting taxable income computation, not books of account.
ICDS I should be read as prescribing computation policies for taxable income so that accrual, going concern, consistency, substance over form and non recognition of mark to market losses apply to income computation under business or other sources, and the disclosure requirement concerns the policies used in computing income rather than the policies used for maintaining books of account.
Manuals Income Tax
Where a term has not been defined under ICDS, nor under the Act, but has different interpretations g...
Show AI Summary
Interpretation of undefined tax terms: ICDS provisions generally govern unless declared ultra vires by a competent authority.
Where a term in the ICDS coincides with terminology in Accounting Standards, the AS interpretation generally applies; where no AS analogue exists, judicial tax-law interpretations ordinarily govern. If a current ICDS provision conflicts with earlier AS or judicial interpretations, the ICDS provision will prevail for tax computation and disclosure unless declared ultra vires by a competent court or authority.
Manuals Income Tax
Does ICDS apply to computation of Minimum Alternate Tax (MAT) u/s 115JB of the Act or Alternate Mini...
Show AI Summary
ICDS applicability: ICDS do not apply to MAT on book profit but apply to AMT on adjusted total income.
ICDS do not apply to MAT because MAT is computed on book profit as per the Profit and Loss Account under company law, with specific statutory adjustments; ICDS are not incorporated into that book profit basis. ICDS apply to AMT because AMT is calculated on adjusted total income derived from total income determined under the regular tax provisions, and ICDS affect that regular computation.
Manuals Income Tax
In case of conflict between ICDS and other specific provisions of the Income-tax rules, 1962 governi...
Show AI Summary
Income Computation standards: specific tax-rule provisions prevail over general ICDS when the two provisions conflict.
ICDS are subordinate general principles for computing income and do not override specific provisions of the Income-tax Rules; where a specific rule governs a particular circumstance, that rule prevails over any inconsistent ICDS guidance.
Manuals Income Tax
Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents...
Show AI Summary
ICDS applicability may govern specified transactional tax issues, raising whether prior judicial precedents remain operative.
The ICDS, notified under section 145(2), are intended to standardise computation of business and other income for the transactional issues they address and apply to assessment years following notification. They were framed after reviewing judicial views to supply authoritative guidance where earlier judicial decisions arose without statutory standards; nevertheless, some ICDS provisions may conflict with those precedents, posing a question about which authority should prevail.
Manuals Income Tax
Does ICDS apply for the purposes of computing exemption u/s 11 to 13.
Show AI Summary
ICDS application: accounting standards govern business income computation for exempt trusts, triggering ICDS when commercial books are maintained.
ICDS do not apply to the standalone computation of exemption for charitable entities based on the commercial concept of income; however, when income is taxed under the regular heads, ICDS apply to income classified under Profits and Gains of Business or Profession and Income from Other Sources if books are kept on the mercantile system. If a trust carries on incidental business with separate books, business income must be computed on a commercial basis and ICDS apply to that business income despite entitlement to charitable exemption.
Manuals Income Tax
Does ICDS apply to the applicability aspect of the TDS.
Show AI Summary
Applicability of ICDS may indirectly determine whether TDS provisions apply by altering gross receipts/turnover calculations.
ICDS influence the computation of gross receipts/turnover used to determine whether statutory TDS provisions apply; while ICDS govern income computation and not TDS rules, their application to receipts can indirectly change whether individuals, HUFs or presumptive taxpayers cross the turnover benchmarks that attract TDS obligations.
Manuals Income Tax
How will ICDS apply to companies which adopted Ind-AS. (Indian accounting standards)
Show AI Summary
ICDS applicability: applies to taxable income computation under business or other income irrespective of Ind AS adoption.
For computing taxable income under the heads Profits and Gains of Business or Profession and Income from Other Sources, ICDS provisions govern determination of income irrespective of whether an entity follows erstwhile Accounting Standards or Ind AS for financial reporting; companies adopting Ind AS must apply ICDS adjustments when computing taxable income under those heads.
Manuals Income Tax
Whether the provisions of ICDS shall apply to Banks, Non-banking financial institutions, Insurance ...
Show AI Summary
ICDS applicability clarified: sector-specific provisions and statutory overrides determine application to banks, insurers and financial firms.
ICDS apply generally for income computation unless an ICDS contains sector-specific provisions or the substantive law provides a special regime; ICDS VIII addresses banks and certain financial institutions, while statutory and regulatory accounting requirements for insurance business prevail over general ICDS provisions.
Manuals Income Tax
Whether ICDS is applicable to Non-Residents whose income is liable to be taxed at a flat rate of tax...
Show AI Summary
ICDS applicability to non-residents ensures income is determined under ICDS before flat-rate tax treatment on passive receipts.
ICDS applies to non-resident income taxed at a flat rate-such as interest, royalty and fees for technical services-because the flat tax is applied after determination of income, so Income Computation and Disclosure Standards govern measurement and recognition for computing taxable income.
Manuals Income Tax
Can a assessee opt to change his method of accounting from mercantile to cash basis.
Show AI Summary
Change of accounting method: an assessee may adopt cash basis if the change is bona fide and consistently applied thereafter.
An assessee may change the method of accounting from mercantile to cash basis if the change is bona fide and is followed regularly thereafter; such a change is distinct from a change in accounting policy and must be consistently applied to support proper income computation and disclosure.
Manuals Income Tax
Can ICDS would apply to other categories of taxpayers whose income is taxed under presumptive tax sc...
Show AI Summary
ICDS revenue recognition applies to presumptive tax schemes computing income from gross receipts or turnover.
ICDS on revenue recognition applies to taxpayers under presumptive tax schemes when such schemes compute income by reference to gross receipts, turnover or similar revenue measures; absent an express exclusion, ICDS principles govern the computation of those receipts or turnover for income-tax computation and disclosure.
Manuals Income Tax
Can a assessee can follow different methods of accounting for different sources of income under the ...
Show AI Summary
Accounting method application: ICDS governs sources using the mercantile system but not sources accounted on a cash basis.
ICDS applies at the source level: it governs only those sources where the assessee follows the mercantile (accrual) system of accounting and does not apply to sources maintained on the cash system, a distinction intended to prevent escapement of income caused by heterogeneous accounting across an assessee's activities.

TMI Notes

Back

All TMI Notes

Showing Results for :
Reset Filters
No Records Found

TMI Notes

Home › TMI Notes › Income Tax › Act-Rules › Category › This
Back

All TMI Notes

whatsapp Join Channel
Showing Results for : Reset Filters
Income Tax

Comparison of SCHEDULE II "INCOME NOT TO BE INCLUDED IN TOTAL INCOME" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

17 September, 2025

Contents
Acts
Rules & Regulations
Summary
Note

Note

-

Bookmark

Print

Print

Print Options

SCHEDULE II INCOME NOT TO BE INCLUDED IN TOTAL INCOME

Income-tax Act, 2025

At a Glance

SCHEDULE II sets out classes of income that are excluded from "total income" for income-tax purposes. The Bill (Old Version) and the enacted Act differ in several material respects affecting life-insurance exclusions, pension/NPS entries, references to International Financial Services Centre (IFSC) entities, and the inclusion of equalisation-levy income. Affected parties include policyholders, insurers, employers, employees, pension subscribers, IFSC entities and tax authorities. Effective dates are stated within specific entries (for example, policy issue periods and 1 April 2002/2023) where provided; no single overarching commencement date for the Schedule is stated in the Bill text.

Background & Scope

Statutory hook: SCHEDULE II (See section 11) - "Income not to be included in total income." The Schedule lists categories of exempt income (column B) subject to conditions (column C). Definitions and notes at the end assign meanings to terms used in the table. The Bill (Old Version) is the source document for this commentary. Any differences vis-`a-vis the enacted Act are identified only insofar as both texts were provided; where a detail is absent in the Bill text, the phrase "Not stated in the document." has been used.

Statutory Provision Mode

Text & Scope

The Schedule enumerates 16 heads of income excluded from total income, including: agricultural income; sums under life-insurance policies (with sub-conditions tied to period of issue, premium-to-sum-assured ratios and aggregate premium ceilings); provident fund and recognised provident fund payments (with carve-outs for interest on large contributions on/after 1 April 2021); payments under Sukanya Samriddhi, National Pension System (NPS) Trust, Agniveer Corpus Fund, approved superannuation funds; scholarships; awards/rewards instituted or approved by government; interest or other receipts on specified government securities and deposits; interest on gold bonds/certificates; interest on bonds issued by local authorities or State Pooled Finance Entities; income on transfer of certain UTI units; income chargeable to equalisation levy (new insertion); and specific categories u/s 10(15) and related provisions of the 1961 Act as applicable.

Interpretation

The text frames exclusions as conditional: each head is subject to prescribed conditions and definitions in accompanying notes. Legislative intent, as discernible from the Bill text, is to preserve traditional exemptions (agriculture, certain pensions, scholarships, specified government securities) while tightening or clarifying tax-exempt treatment for life-insurance receipts and retirement/savings vehicles by reference to issue dates, premium ratios, aggregate premium ceilings and contribution thresholds. The insertion of equalisation-levy related exclusion (Sl. No. 15) signals explicit recognition of overlap between equalisation-levy chargeability and income-tax neutrality for certain cross-border digital services.

Exceptions/Provisos

Key carve-outs and conditions provided in the Bill include:

  • Life-insurance sums excluded only if policies meet period-specific premium-to-sum-assured ratios and, for certain periods, aggregate premium ceilings (Rs. 2,50,000 or Rs. 5,00,000) - and certain sums (section 127 receipts; Keyman policies) are expressly ineligible.
  • Portions of interest on provident fund/recognised provident fund balances attributable to contributions on/after 1 April 2021 are not eligible for exclusion where contributions exceed specified thresholds (Rs.5,00,000 / Rs.2,50,000) and the amount not excluded is to be computed as prescribed.
  • NPS payments excluded only to the extent they do not exceed 60% of the total amount payable on closure/opt-out.
  • Approved superannuation fund payments are exempt only in specified circumstances (death, commutation at retirement/age, refund in limited cases, transfer to specified pension schemes).
  • Equalisation-levy related incomes are excluded only where not chargeable as royalty/FTS in India under agreements notified u/s 159 (explicit exception in Sl. No. 15).

Illustrations

  • Example 1: A unit-linked life policy issued on 1 Oct 2023 with annual premium such that premium-to-sum-assured ratio is 12% and aggregate premium per tax year is Rs.2,00,000 - the Bill permits exclusion if it meets the Item 2 conditions (unit-linked post-1-April-2023: ratio <=15% for special, <=10% for others; aggregate <=Rs.2,50,000 for ULIP). Whether treated as "special policy" depends on disability/disease status u/rs - Not stated in the document.
  • Example 2: An employee receives accumulated recognised provident fund balance including interest attributable to contributions of Rs.6,00,000 made on/after 1 April 2021 in a year when no employer contribution was made - interest attributable to that contribution is not eligible for exclusion (threshold exceeded Rs.5,00,000); the portion not excluded to be computed as prescribed (procedure Not stated in the document).

Interplay

The Bill references other statutory instruments and provisions: Section 11 (hook), Section 127 (for life-insurance ineligibility), Schedule XI para 8, Schedule XV (definition of "actual capital sum assured"), Insurance Regulatory regulations, the Provident Funds Act, Government Savings Promotion Act (Sukanya Samriddhi), Dept. notifications regarding NPS (notifications not reproduced in the Bill text), Finance Act, 2016 (equalisation levy Chapter VIII) and section 159 agreements. The Bill contemplates Board guidelines for removal of difficulties. Where computation methods are required ("as prescribed"), the Bill defers to rules/regulations; these procedural details are Not stated in the document.

Differences between the Bill (Old Version) and the Enacted Act - Practical Impact

Topic Bill (Old Version) Act (2025) - Differences & Practical Impact
Reference to IFSC in life-insurance entry Exclusion clause expressly excludes policies issued by "International Financial Services Centre insurance intermediary office" from the general test; IFSC office language appears within clause (a).

The Act broadens IFSC coverage differently (references to "International Financial Services Centre Insurance Office") and later adds a special carve-out that aggregate premium conditions do not apply to policies issued on or after 1 April 2025 by the IFSC Insurance Office.

Practical impact: IFSC-issued policies post-1-Apr-2025 enjoy relaxed aggregate-premium limits under the Act versus the Bill - this benefits IFSC policyholders and insurers.
Section reference for ineligible insurance sums Ineligibility lists section 127 (no subsection reference) and Keyman policies.

The Act specifies "section 127(4)" as ineligible; this narrows or clarifies which portion of section 127 is meant.

Practical impact: narrower/clearer exclusion scope for section 127 receipts, reducing interpretive ambiguity.
Aggregate premium thresholds for policies issued on/after 1-Apr-2023 ULIPs: aggregate <=Rs.2,50,000; other policies: aggregate <=Rs.5,00,000.

The Act restates these ceilings but then adds the IFSC carve-out for policies issued on/after 1-Apr-2025.

Practical impact: domestic policyholders unchanged, IFSC policyholders gain advantage.
NPS-related entries (Sl. Nos. 15 & 16) The Bill lacks specific entries for "lump sum amount" defined by a particular notification and for Unified Pension Scheme subscriber-specific references.

The Act adds two discrete entries (Sl. Nos. 15 and 16) dealing with NPS payments to Unified Pension Scheme subscribers and "lump sum amount" per a departmental notification dated 24 Jan 2025.

Practical impact: greater specificity and targeted exemption for Unified Pension Scheme subscribers under NPS, linking to a concrete notification (FX-1/3/2024-PR). This reduces uncertainty for affected NPS subscribers.
Equalisation levy income Bill includes Sl. No. 15 addressing income chargeable to equalisation levy.

The Act omits the Bill's Sl. No. 15 equalisation-levy entry or shifts numbering; comparison shows the Act instead includes other NPS-related items.

Practical impact: the treatment of equalisation-levy incomes requires reconciliation between Act text and prior Bill; taxpayers relying on the Bill's exclusion must verify the final Act wording (Not stated in the document).

Practical Implications

  • Compliance and risk areas: Life-insurance exclusions carry detailed temporal and quantitative conditions (period of issue, premium-to-sum-assured ratio, aggregate premium ceilings). Insurers and policyholders must verify issue date classifications and compute premium ratios and aggregate premiums across the policy term. The explicit ineligibility for keyman policies and section 127 receipts increases scrutiny over policy ownership and assignment.
  • NPS and provident fund entries impose record-keeping obligations: authorities and subscribers must track contributions made on or after 1 April 2021 separately, and identify portions of interest attributable to contributions exceeding thresholds. The method of computing the amount not excluded is left to prescribed rules - until rules are notified, potential uncertainty persists.
  • Equalisation-levy clause (Sl. No. 15): taxpayers and digital service providers should reconcile equalisation-levy exposure and Income-tax chargeability; the clause excludes income chargeable to equalisation levy except where the income is otherwise taxable in India as royalty/FTS under notified agreements (thus creating an interplay with tax treaty determinations and notifications u/s 159).
  • IFSC references: the Bill treats certain IFSC insurance intermediary office receipts differently in the life-insurance entry (exclusion/inclusion language differs versus the Act). Parties operating within IFSCs should note the special treatment and any administrative guidance forthcoming.
  • Procedural uncertainty: multiple entries defer to "as prescribed" computations and to notifications by the Central Government; until those are issued, taxpayers face interpretation and compliance risk. The Board's power to issue binding guidelines (with Central Government approval) is preserved, indicating administrative rule-making will shape practical application.

Key Takeaways

  • The Bill retains traditional exemptions (agriculture, scholarships, certain pension/retirement receipts) while imposing quantified tests on insurance exclusions (period-specific ratios and aggregate premium ceilings).
  • Interest on provident fund balances attributable to large post-1-April-2021 contributions is explicitly excluded from exemption, with thresholds (Rs.5,00,000 / Rs.2,50,000) and prescribed computation methods.
  • Equalisation-levy related income is newly addressed - excluded except where taxable in India as royalty/FTS under notified agreements.
  • Certain specific sums are expressly excluded from insurance exemption (section 127 receipts; Keyman insurance), tightening the prior broader language.
  • Several entries defer key operational questions to rules/notifications; substantial administrative guidance is required to operationalise the Schedule.

Full Text:

SCHEDULE II INCOME NOT TO BE INCLUDED IN TOTAL INCOME

Topics

Acts Income Tax
Next ➔