Context:
The Income Tax Bill, 2025, proposes the introduction of a ‘Tax Year’ concept, replacing the current Assessment Year, with the goal of streamlining tax reporting.
Key Features of the Income Tax Bill 2025
- Tax Year: A 12-month period starting from April 1, during which income will be assessed and taxed in the same financial year.
- No change in Financial Year (FY): Continues to start on April 1 and end on March 31.
- Calendar Year Not Adopted: The new bill does not align with the calendar year for taxation purposes.
Existing System (Income-tax Act, 1961)
2 concepts: Financial Year (FY) and Assessment Year (AY)
Assessment Year (AY): The year following the financial year in which income is earned
Example: For FY 2024-25, the AY is 2025-26
Inclusion of Virtual Digital Assets (VDAs) as Capital Assets:
- VDAs recognized: Cryptocurrencies, NFTs, and other digital assets are now formally recognized as capital assets.
- Taxation: Treated similarly to traditional assets like land, buildings, shares, securities, bullion, jewelry, and artwork.
- Implications: Ensures clarity on taxation of digital assets, aligns with global trends, addresses growing digital economy.
Expanded Definition of “Virtual Digital Space”:
- Taxpayers under investigation: Must provide access to their digital records, including email servers, social media accounts, online investments, trading and banking accounts, cloud servers, and digital platforms.
- Current Practice: Tax authorities already demand access to laptops, hard drives, and emails during surveys, searches, and seizures.
Capital Gain Exemptions:
- Section 54E removed: Exemptions for capital gains on transfer of capital assets prior to April 1992 removed.
- Streamlined Deductions: Deductions streamlined, outdated exemptions removed.
Dispute Resolution:
- Dispute Resolution Panel (DRP): Clearer guidelines for issuing decisions, reducing ambiguity and potential litigation.
Income and Tax Rates:
- Expanded Definition of Income: Includes emerging sources.
- Detailed Tables: Provides tables for exempt income, conditions for claiming exemptions, deductions, TDS, and TCS in separate schedules for clarity.
- New Tax Regime: Slabs provided in tables; old regime rates omitted, promoting the new regime.
- Continuity: No major changes in tax structure, penalties, or compliance rules.
Source: Indian Express
Previous Year Question
Consider the following statements with reference to India:
1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006’, the ‘medium enterprises’ are those with investments in plant and machinery between ₹ 15 crore and ₹ 25 crore.
2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.
Which of the statements given above is/are correct?
[UPSC Civil Service Exam – 2023 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (b)
Explanation:
The Government of India on 01.06.2020 decided for upward revision of the MSME Definition. For medium Enterprises, now it will be Rs. 50 Crore of investment and Rs. 250 Crore of turnover. So, statement 1 is not correct.