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    Act RulesBills
    The Interplay of Special and General Provisions : Clause 206(12) of Income Tax Bill, 2025 Vs. Sectio...
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    Act RulesBills
    The Interplay of Special and General Provisions : Clause 206(12) of Income Tax Bill, 2025 Vs. Sectio...
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    Application clause ensures general tax provisions apply to MAT/AMT assessees unless expressly overridden by section rules.
    Clause 206(12) provides that, save as otherwise provided in this section, all other provisions of the Income Tax Act apply to assessees covered by Clause 206, so that specific MAT/AMT rules within the clause override general provisions only to the extent of inconsistency and otherwise preserve the operation of assessment, appeal, penalty, interest, set-off, carry forward and credit mechanisms under the Act.
    Act RulesBills
    Addresses the mechanism for granting tax credit for MAT/AMT paid in excess of regular tax liability ...
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    MAT/AMT credit mechanism permits excess minimum tax paid to be carried forward and set off against later regular tax liabilities.
    MAT/AMT credit under Clause 206(13) is the excess of minimum tax paid over regular tax payable, available automatically to assessees covered by the provision. The credit carries two limitations: no interest on the credit and disregard of any foreign tax credit that is excessive relative to regular tax. Set off of the credit is permitted only when regular tax exceeds MAT/AMT, limited to that excess, with unused credit carried forward for a defined period, and any credit must be adjusted to reflect changes from reassessment or appellate orders.
    Act RulesBills
    Addresses the mechanism for granting tax credit for MAT/AMT paid in excess of regular tax liability ...
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    MAT/AMT credit mechanism clarified - excess alternate-tax paid is a carry-forward entitlement usable against future regular tax liability.
    MAT/AMT credit is the difference between tax paid under Clause 206(1) and tax payable under normal provisions, carried forward as a non-refundable, non-interest-bearing entitlement to be set off in future years when regular tax exceeds MAT/AMT; credits are adjusted for excess foreign tax credits and for any changes in tax liability resulting from assessment or appellate orders, and lapse after the prescribed carry-forward period.
    Act RulesBills
    Harmonizing Minimum Tax Computation under India's Income Tax Laws : Clause 206(2)-(5) of the Income-...
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    Minimum tax harmonization: unified book profit computation and aligned accounting rules for MAT and AMT compliance.
    Clause 206(2)-(5) defines book profit by B = P + (I - R), lists items to be added and reduced in computing book profit, mandates preparation of profit and loss statements as per applicable enactments or Schedule III, consolidates special adjustments for varied assessees (including Ind AS transition treatments), requires consistency in accounting policies and depreciation for MAT/AMT purposes, and preserves recomputation and relief mechanisms akin to existing procedures.
    Act RulesBills
    imposition of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) on various classes of taxp...
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    Minimum Alternate Tax expansion ensures broader taxpayer coverage, detailed book profit computation, and a structured carryforward credit regime.
    Clause 206(1) creates a non-obstante regime imposing Minimum Alternate Tax and Alternate Minimum Tax across companies, co-operative societies and other persons by deeming book profit or adjusted total income as taxable where regular tax is below prescribed minima; it prescribes detailed additions and reductions to compute book profit, special rules for varied taxpayer classes (including Ind AS transition, insolvency and IFSC units), procedural certification, a structured MAT/AMT credit mechanism with carry forward, and specified exemptions and carve-outs.
    Act RulesBills
    Residency Reclassification and Tax Implications for Foreign Companies : Clause 220 of the Income Tax...
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    Place of Effective Management residency reclassification brings foreign companies within domestic tax regime subject to notified transitional exceptions.
    Clause 220 subjects foreign companies that become Indian residents under the Place of Effective Management test to the domestic tax code while allowing the Central Government, by notification, to prescribe exceptions, modifications and adaptations to computation of income, treatment of unabsorbed depreciation, carry forward and set off of losses, collection and anti-avoidance provisions; notifications may apply to succeeding years during assessment, benefits may be withdrawn for non-compliance with prescribed conditions with recomputation and a specified limitation period, and every notification must be laid before Parliament.
    Act RulesBills
    Special provisions regarding conversion of an Indian branch of a foreign company, into a subsidiary ...
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    Tax neutrality for branch-to-subsidiary conversions preserves carryforward attributes but is conditional on regulatory compliance and allows retrospective clawback.
    Clause 219 provides conditional tax neutrality for conversions of Indian branches of foreign banking companies into subsidiary Indian companies under an RBI scheme: capital gains on conversion are not taxable in the tax year of conversion and unabsorbed depreciation, carry forward losses and tax credits continue subject to notified exceptions and adaptations. Non compliance with RBI or Central Government conditions results in forfeiture of benefits and application of general tax provisions; previously allowed reliefs may be treated as wrongly allowed and reassessed, and notifications must be laid before Parliament.
    Act RulesBills
    Special vs. General Tax Regimes for NRIs : Clause 218 of Income Tax Bill, 2025 Vs. Section 115I of I...
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    Opt-out of special NRI tax regime permits annual election to be taxed under the general provisions by declaration in the return.
    Clause 218 allows a Non-resident Indian to elect, by declaration in the return of income for the tax year, not to be governed by sections 212-217; upon such annual opt-out those sections do not apply and the taxpayer's total income is computed and taxed under the general provisions of the Act, with the election binding for that year and raising practical issues about declaration format and interaction with other tax provisions.
    Act RulesBills
    Concessional Tax Regime to non-resident Indians (NRIs) become residents of India : Clause 217 of the...
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    Grandfathering of concessional tax treatment for NRIs continues for qualifying foreign-exchange assets after becoming residents.
    Grandfathering of concessional tax treatment allows NRIs who become residents to continue concessional taxation on investment income from qualifying foreign-exchange assets if they furnish a contemporaneous written declaration with their return; the benefit endures until the asset is transferred or converted into money. Clause 217 excludes shares in Indian companies and cross-references sections 212-218, while Section 115H refers to Chapter XIIA and includes broader asset coverage. The declaration requirement and the conversion/transfer termination trigger are operative compliance and continuity mechanisms.
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    Exemption from return filing for NRIs when income is only investment income or long term gains and tax is deducted at source.
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    Show AI Summary
    Capital gains exemption for NRI reinvestment: exemption hinges on timely reinvestment and a lock in that can trigger taxability.
    Capital gains on transfer of foreign exchange assets by non-resident Indians are exempt under Clause 215 if the net consideration, whole or part, is invested in a specified asset within the reinvestment window; full exemption obtains where the new asset's cost is not less than the net consideration and a proportionate exemption otherwise, with defined meanings for net consideration and cost, and a claw-back that renders the exemption taxable if the new asset is disposed of or converted into money within the lock-in period.
    Act RulesBills
    Transitioning NRI Taxation : Clause 214 of Income Tax Bill, 2025 Vs. Section 115E of Income Tax Act,...
    Show AI Summary
    Concessional taxation for nonresident investment income and capital gains restructured, standardizing rates and raising scope and transitional questions.
    Clause 214 restructures tax treatment for non-resident investment income and long-term capital gains by prescribing concessional flat rates for gains on specified assets and other investment income, retaining an aggregation mechanism that segregates concessional categories from remaining total income taxed at normal rates, while leaving key terms such as specified asset, investment income, and long-term capital gain to be defined by cross-reference, which creates potential scope and transitional ambiguities.
    Act RulesBills
    Special provisions that govern the computation of total income for non-resident Indians (NRIs) : Cla...
    Show AI Summary
    Investment income taxation: new rule bars deductions and segregates capital gains, altering deduction eligibility for non-residents.
    Clause 213 bars any deduction or allowance in computing the investment income of a non-resident Indian and provides that where gross total income consists only of investment income and/or long-term capital gains no deductions under Chapter VIII are permitted; where such income coexists with other income, the investment/long-term capital gains component must be excluded from gross total income before computing allowable deductions under Chapter VIII.
    Act RulesBills
    Special taxation regime applicable to non-residents and foreign companies : Clause 212 of Income Tax...
    Show AI Summary
    Foreign exchange asset definition narrows concessional tax eligibility for non-residents, affecting documentation and asset scope.
    Clause 212 defines key terms for the concessional tax regime applicable to non-residents and foreign companies: foreign exchange asset (assets acquired with convertible foreign exchange), investment income (income from such assets), long-term capital gains (capital gains on foreign exchange assets not short-term), non-resident Indian (citizen or person of Indian origin who is not resident) and specified asset (shares, certain debentures and deposits, government securities, and notified assets). The clause updates cross-references to current company law and retains notification powers, while omitting an explicit explanation of person of Indian origin and an in-text definition of convertible foreign exchange, creating potential interpretive need for rules or guidance.
    Act RulesBills
    Reforming of Taxation of Specified Income of Non-Profit Organisations (NPOs) : Clause 337 of the Inc...
    Show AI 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.
    Act RulesBills
    Evolution of the digital economy "Taxation of winnings from online games" : Clause 194 (S. No. 5) of...
    Show AI Summary
    Taxation of online gaming winnings: a ring fenced flat rate regime with prescribed computation and enhanced reporting obligations.
    Clause 194 creates a distinct tax regime for net winnings from any online game, applying to any person and defining online games broadly. Net winnings must be computed as prescribed, with gaming receipts ring fenced and taxed at a specified flat rate while remaining income is taxed ordinarily. The provision emphasizes definitions aligned with technology statutes and anticipates detailed subordinate rules for aggregation, timing, promotional credits, and interaction with TDS, with limited scope for deductions unless the computation rules provide otherwise.
    Act RulesBills
    Development in the taxation of income arising from the transfer of virtual digital assets (VDAs) : C...
    Show AI Summary
    Taxation of virtual digital assets: flat rate plus denial of loss relief reshapes compliance and reporting obligations.
    Clause 194 (Table: S. No. 4) creates a dedicated tax regime for income from transfer of virtual digital assets, applying to any person and taxing such income at a flat rate while allowing only the cost of acquisition as a deduction. All other expenses, allowances, set offs and carry forwards of losses from VDA transfers are disallowed. The statutory definition of "transfer" applies to VDAs irrespective of capital asset status, requiring segregation of VDA income in tax computation and imposing enhanced record keeping and compliance obligations.
    Act RulesBills
    Legal and Practical Perspectives on the Taxation of Carbon Credit Transfers : Clause 194 (Table: S. ...
    Show AI Summary
    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.
    Act RulesBills
    Concessional tax regime for Patent Royalty Income for resident patentees: Clause 194 (Table: S. No. ...
    Show AI Summary
    Concessional patent royalty regime offers lower tax for resident patentees subject to option, no deductions, and lockout on noncompliance.
    A concessional regime taxes royalty from patents developed and registered in India for resident patentees as gross income at a concessional rate, disallowing any deduction; assessees must exercise a prescribed option within the prescribed time, and non compliance for any of five succeeding years triggers a five year ineligibility. Definitions require substantial in country development expenditure and exclude sale proceeds and capital gains from royalty.
    Act RulesBills
    Taxation of Unexplained Incomes : Clause 195 of Income Tax Bill, 2025 Vs. Section 115BBE of Income-t...
    Show AI Summary
    Tax on unexplained income: punitive flat rate and denial of deductions for incomes classified under specified provisions.
    Clause 195 targets income referred to in sections 102-106, applying whether self declared or determined by the Assessing Officer, and mandates taxation of those amounts at a punitive flat rate while the balance income is taxed normally. It further provides an overriding rule that no deduction, allowance, or set off of losses is permitted against the income so classified, thereby preventing taxpayers from reducing liability on such unexplained or unaccounted sums.

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      Bills

      Rationalisation of provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)

      1 February, 2021

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      Budget 2021-22 + FINANCE Bill, 2021

      Rationalisation of provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)

      Clause (23FE) of section 10 of the Act provides for the exemption to specified persons from the income in the nature of dividend, interest or long-term capital gains arising from an investment made by it in India. Specified persons are SWF or PF which fulfils conditions prescribed therein and are specified for this purpose by the Central Government through notification in the Official Gazette. This provision was introduced through the Finance Act, 2020 to encourage investments of SWF and PF into infrastructure sector of India. Subsequent to enactment, a notification was also issued to enlarge the scope of infrastructure activities eligible for investments. One SWF has already been notified under this provision. In order to rationalise the provision of this clause and to remove the difficulties in meeting some of the conditions, the followings amendments are proposed in the Bill:

      • Allowing Alternate Investment Fund (AIF) to invest up to 50% in non-eligible investments

      Presently SWF/PFs may invest in a Category-I or Category-II Alternative Investment Fund, having 100% investment in eligible infrastructure company. It is proposed to:

      (a) relax the condition of 100% to 50%.

      (b) allow the investment by Category-I or Category-II AIF in an Infrastructure Investment Trust (InvIT).

      (c) Exemption under this clause shall be calculated proportionately, in case if aggregate investment of AIF in infrastructure company or companies or in InvIT is less than 100%.

      • Investment through holding company

      Presently, SWF/PFs are not allowed to invest through holding company. It is proposed to allow the same subject to the following conditions:

      (a) Holding company should be a domestic company.

      (b) It should be set up and registered on or after 1st April, 2021.

      (c) It should have minimum 75% investments in one or more infrastructure companies.

      (d) Exemption under this clause shall be calculated proportionately, in case if aggregate investment of holding company in infrastructure company or companies is less than 100%

      • Investment in NBFC- IDF/IFC (non-banking finance company-infrastructure debt fund/Infrastructure finance company)

      Presently, SWF/PFs are not allowed to invest in NBFC-IFC/IDF. It is proposed to allow the same subject to the following conditions:

      (a) NBFC-IDF/IFC should have minimum 90% lending to one or more infrastructure entities.

      (b) Exemption under this clause shall be calculated proportionately, in case if aggregate lending of NBFC-IDF or NBFC-IFC in infrastructure company or companies is less than 100%.

      • Loan or borrowings by SWF/Pension Fund

      Presently, SWF/PFs are not allowed to have loans or borrowings or deposit or investments as there is a condition that no benefit should enure to private person. It is proposed to provide that there should not be any loan or borrowing for the purpose of making investment in India. It is also proposed to provide that the condition regarding no benefit to private person and assets going to government on dissolution would not apply to any payment made to creditor or depositor for loan taken or borrowing other than for the purpose of making investment in India.

      • Commercial activity

      Presently, SWF/PFs are not allowed to undertake any commercial activity. This condition is proposed to be removed and replaced with a condition that SWF/PFs shall not participate in day to day operation of investee. However, appointing director and executive director for monitoring the investment would not amount to participation in day to day operation.The term "investee" is propoed to define to mean a business trust or a company or an enterprise or an entity or a category I or II Alternative Investment Fund or an Infrastructure Investment Trust or a domestic company or an Infrastructure Finance Company or an Infrastrure Debt Fund, in which the SWF or PF, as the case may be, has made the investment, directly or indirectly, under the provisions of this clause.

      • Liable to Tax

      Presently, some PFs are liable to tax in their country though given exemption subsequently. It is proposed to amend this sub-clause to provide that if pension fund is liable to tax but exemption from taxation for all its income has been provided by the foreign country under whose laws it is created or established, then such pension fund shall also be eligible.

      • Rules to prescribe the method of calculation

      It is also proposed to provide that the Central Government may prescribe the method of calculation of 50% or 75% or 90%referred above.

      This amendment will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.

      [Clause 5]

       

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      Budget 2021-22 + FINANCE Bill, 2021

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