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Author: CA Eshita Krishna

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GST

GSTR 9C – Easy Guide for FY 2024-25

GSTR 9C is the annual reconciliation statement under GST that provide the opportunity to the registered persons to reconcile their annual data filed as per the returns and the data as per their audited balance sheets. This is very crucial since to ensure congruence in the returns filed and the actual figures as per the audited financial statements. Any discrepancy, omissions, errors, mismatches may be resolved through the GSTR 9 and 9C annual return forms.

This annual exercise must be undertaken with great caution since it narrows down the possibility of any future notices or scrutiny for the taxpayer. With the due date for GSTR 9C form for FY 2024-25 fast approaching, let us understand how to compile the returns accurately –

gstr 9c

GSTR 9C Applicability for FY 2024-25

GSTR 9C is an annual reconciliation statement that must be filed along with Form GSTR 9 primarily to reconcile the data in the audited balance sheet and the GST returns to ensure congruence in the data reported in the audited financials and the GST returns. Form GSTR 9C must be mandatorily filed by all registered persons having an aggregate turnover of more than Rs. 5 crores in FY 2024-25. This statement was earlier audited by a Chartered Accountant however, now this is self-certified by the taxpayer only.

Certain categories of registered persons have been exempted from filing the GSTR 9 and 9C annual return –

  • Persons paying TDS u/s 51 of the CGST Act,
  • Persons paying TCS u/s 52 of the CGST Act,
  • Taxpayers under composition scheme,
  • Casual Taxable Persons,
  • Input Service Distributors,
  • Non-resident Taxable Persons.

Difference between GSTR 9 and 9C

GSTR 9 and 9C are both annual return forms under GST however the key differences between them are as under –

GSTR 9 FormGSTR 9C Form
GSTR 9 form is applicable mandatorily for all registered persons (except as mentioned above), having an aggregate turnover of over Rs. 2 crores in FY 2024-25.Form GSTR 9C must be mandatorily filed by all registered persons having an aggregate turnover of more than Rs. 5 crores in FY 2024-25.
GSTR 9 form consolidates the data from the monthly GST returns filed by the taxpayer.GSTR 9C is an annual reconciliation statement that must be filed along with Form GSTR 9 primarily to reconcile the data in the audited balance sheet and the GST returns to ensure congruence in the data reported in the audited financials and the GST returns.

Changes in GSTR 9C for FY 2024-25

The following changes have been incorporated in the GSTR 9C annual reconciliation statement from FY 2024-25 onwards –

  • Reconciliation of turnover

As per GSTR 9C for FY 24-25, in the table for reconciliation of turnover declared in the audited financial statements and the turnover as per GSTR 9 form will now include a clause reporting the supplies on which tax is to be paid by the e-commerce operators u/s 9(5) to be reported by the supplier. This will be adjusted for computation of taxable turnover as per books of accounts and GSTR 9.

  • Reconciliation of rate wise tax liability and amount payable thereon

As per GSTR 9C for FY 24-25, in the table for reconciliation of rate wise tax liability and amount payable thereon, a new clause has been inserted where e-commerce operators have to report the taxes on the supplies made by them on which tax has to be paid u/s 9(5).

  • Reconciliation of taxes paid – Additional amount payable but not paid

As per GSTR 9C for FY 24-25, in the table for reconciliation of taxes paid – Additional amount payable but not paid, a new clause has been inserted where e-commerce operators have to report the taxes on the supplies made by them on which tax has to be paid u/s 9(5).

How to file GSTR 9C?

While filing GSTR 9C form, the taxpayer needs to focus on the following –

  • Reconciliation of Gross Turnover

The taxpayer has to report the gross turnover as per the audited financials. This aggregate turnover must tally with the turnover reported as per GSTR 9 taking into account adjustments for credit notes, advances etc.

Any unreconciled component of the turnover will be deduced if the turnover as per GSTR 9 does not tally with the turnover as per the audited financial statements.

  • Reasons for unreconciled turnover

If the unreconciled turnover as per the previous table is not nil, the taxpayer must mention the reasons for difference in the turnover as per GSTR 9 and audited financial statements.

  • Reconciliation of Taxable Turnover

The taxpayer has to mention the annual turnover as per the audited financials and then adjust it for exempted supplies, zero rated supplies, inward supplies subject to RCM and thereby arrive at the taxable turnover as per the audited financials. This taxable turnover must tally with the taxable turnover as per the GSTR 9 for the financial year.

Any unreconciled component of the taxable turnover will be deduced if the taxable turnover as per GSTR 9 does not tally with the taxable turnover as per the audited financial statements.

  • Reasons for unreconciled taxable turnover

If the unreconciled taxable turnover as per the previous table is not nil, the taxpayer must mention the reasons for difference in the taxable turnover as per GSTR 9 and audited financial statements.

  • Reconciliation of taxes paid

As per the taxable turnover reported in the previous tables, the tax payable has to be mentioned in this table under CGST, SGST, IGST and cess on this taxabke turnover. The tax payable will now be compared with the tax payable as per GSTR 9 form.

Any unreconciled component of the tax payable will be deduced if the figures are not in congruence.

  • Reasons for unreconciled payment of tax

If the unreconciled payment of tax as per the previous table is not nil, the taxpayer must mention the reasons for such difference.

  • Reconciliation of taxes paid

This table pertains to the additional amount of tax payable but not paid due to the reasons specified in the table above.

  • Reconciliation of ITC

The taxpayer has to reconcile ITC declared in the GSTR 9 annual return form with the ITC availed on expenses as per the audited financial statements.

  • Reasons for unreconciled ITC

If the unreconciled ITC as per the previous table is not nil, the taxpayer must mention the reasons for such difference.

  • Tax payable on unreconciled ITC
  • Additional liability due to non-reconciliation.

GSTR 9C Penalty

If a taxpayer fails to file GSTR-9C by the due date i.e. 31st December of the year following the relevant financial year, there is no dedicated penalty under the law for this specific delay. However, the taxpayer may face a general penalty of Rs. 25,000.

FAQs on  GSTR 9C

Q1. Can GSTR 9C be filed without filing GSTR 1 and 3B?

A1. No, GSTR 9 and 9C for FY 2024-25 can only be filed after all the monthly GSTR 1 and GSTR 3B forms have been filed.

Q2. Can GSTR 9C be revised after it has been filed?

A2. No, GSTR 9C cannot be revised after it has been filed.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.  

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GST

GSTR 9 Form Annual Return – Easy Guide FY 2024-25

GSTR 9 form is the annual return form under GST that provide the opportunity to the registered persons to reconcile their annual data filed as per the monthly returns and furnish their reconciled annual data. Any discrepancy, omissions, errors, mismatches in the monthly GST returns may be resolved through the GSTR 9 form. With the due date for the GSTR 9 form for FY 2024-25 fast approaching, let us understand how to file GSTR 9 accurately –

gstr 9 form

GSTR 9 Applicability for FY 2024-25

The annual return in Form GSTR 9 must be mandatorily filed by all registered persons filing GSTR 1 and 3B regularly, having an aggregate turnover of more than Rs. 2 crores in FY 2024-25. However, certain categories of registered persons have been exempted from filing the GSTR 9 annual return –

  • Persons paying TDS u/s 51 of the CGST Act,
  • Persons paying TCS u/s 52 of the CGST Act,
  • Taxpayers under composition scheme,
  • Casual Taxable Persons,
  • Input Service Distributors,
  • Non-resident Taxable Persons.

GSTR 9C Applicability for FY 2024-25

GSTR 9C is an annual reconciliation statement that must be filed along with Form GSTR 9 primarily to reconcile the data in the audited balance sheet and the GST returns to ensure congruence in the data reported in the audited financials and the GST returns. Form GSTR 9C must be mandatorily filed by all registered persons having an aggregate turnover of more than Rs. 5 crores in FY 2024-25. This statement was earlier audited by a Chartered Accountant however, now this is self-certified by the taxpayer only.

Difference between GSTR 9 and 9C

GSTR 9 and 9C are both annual return forms under GST however the key differences between them are as under –

GSTR 9 FormGSTR 9C Form
GSTR 9 form is applicable mandatorily for all registered persons (except as mentioned above), having an aggregate turnover of over Rs. 2 crores in FY 2024-25.Form GSTR 9C must be mandatorily filed by all registered persons having an aggregate turnover of more than Rs. 5 crores in FY 2024-25.
GSTR 9 form consolidates the data from the monthly GST returns filed by the taxpayer.GSTR 9C is an annual reconciliation statement that must be filed along with Form GSTR 9 primarily to reconcile the data in the audited balance sheet and the GST returns to ensure congruence in the data reported in the audited financials and the GST returns.

GSTR 9 Due Date

The due date for filing GSTR 9 form for FY 2024-25 is 31st December, 2025.

GSTR 9 Late Fees

TurnoverLate FeesMaximum Late Fees
< Rs.5 croresRs.50 per day0.04% of turnover in state/UT (0.02% each under CGST and SGST Act)
Rs.5 crore – Rs.20 croreRs.100 per day 0.04% of turnover in state/UT (0.02% each under CGST and SGST Act)
> Rs.20 croreRs.200 per day 0.50% of turnover in state/UT (0.25% each under CGST and SGST Act)

How to file GSTR 9 form?

While filing GSTR 9 form, the taxpayer needs to focus on the following –

Table 4 Details of outward supplies, inward supplies on which tax is payableThis will be auto-populated in the GSTR 9 form from the monthly returns and the taxpayer must confirm these figures. This table shows the aggregate of all supplies on which any tax – CGST, SGST, IGST or cess is payable by the taxpayer.
Table 5 Details of outward supplies on which tax is not payableThe zero-rated, exempted, nil rated supplies i.e. supplies on which no tax is payable will be auto-populated from the monthly returns and the taxpayer must confirm these figures.
Table 6 Details of ITC availed during the financial yearThe aggregate value of ITC availed in the monthly returns will be auto-populated and the taxpayer must confirm these figures.
Table 7 Details of ITC reversed and ineligible ITC for the financial yearThe aggregate value of ITC reversed and ineligible ITC reversed in the monthly returns will be auto-populated and the taxpayer must confirm these figures.
Table 8 Other ITC related informationThis table shows the ITC as per GSTR 2B and at the end shows the ITC that will be lapsed in the current financial year.
Table 9 Details of tax paid as declared in returns filed during the financial yearThe aggregate value of the tax payable and the total tax paid in cash and paid through ITC will be mentioned in this table.
Table 10,11, 12 and 13 Particulars of transactions for the financial year declared in returns of the next financial year till the specified periodThis table highlights the impact of debit notes and credit notes and mentions the – ITC of the financial year reversed in the next financial year, and ITC of the financial year availed in the next financial year.
Table 14 Differential tax paid on account of table 10 and 11This table shows the differential tax payable and paid on account of table 10 and 11 entries.
Table 15 Particulars of demands and refundsThe details of all demands and refunds have to be entered in this table by the taxpayer.
Table 16 Supplies received from composition taxpayers, deemed supply by job worker and goods sent on approval basisThe table contains details of the supplies received from composition taxpayers, deemed supply by job worker and goods sent on approval basis and the tax liability on the supplies.
Table 17 HSN wise summary of the outward suppliesThe summary of the aggregate HSN wise summary of goods and services components of the outward supplies will be auto-populated in this table.
Table 18 HSN wise summary of inward suppliesThe summary of the aggregate HSN wise summary of goods and services components of the inward supplies will be auto-populated in this table.
Table 19 Late fees payable and paidThe late fees payable and paid will be fetched if the GSTR 9 is filed after the due date i.e. after 31st December, 2025.

FAQs on  GSTR 9 Form

Q1. Can GSTR 9 from be filed without filing GSTR 1 and 3B?

A1. No, GSTR 9 for FY 2024-25 can only be filed after all the monthly GSTR 1 and GSTR 3B forms have been filed.

Q2. Can GSTR 9 form be revised after it has been filed?

A2. No, GSTR 9 form cannot be revised after it has been filed.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.  

Categories
Income Tax

Interest on home loan deduction – Save u/s 80EE and 80EEA Deduction

Under Income Tax, interest on home loan deduction is impacting a large section of society as it has been stated in the Financial Stability Report of the Reserve Bank of India, that the housing loans contribute to over 29% of the total household debt availed by the people in India. The Income Tax Act, 1961 as well as the revamped Income Tax Act, 2025, has certain benefits that can be availed by the assessee for interest on home loan deduction to allow them some relief in this segment. Section 130 and 131 of the new Income Tax Act, 2025 has replaced section 80EE and section 80EEA deduction as the two major deductions available for the assessees.

interest on home loan deduction

Interest on home loan deduction

As per section 130 of the Income Tax Act, 2025 (erstwhile section 80EE of the Income Tax Act, 1961), a deduction of upto Rs. 50,000 can be availed by the assessee on fulfilling certain conditions. Moreover, a separate section 131 of the Income Tax Act, 2025 (erstwhile section 80EEA deduction) focuses on the interest on home loan deduction for certain house properties i.e. affordable housing. Under 80EEA deduction upto Rs. 1,50,000 in a tax year can be availed by the assessee.

It is pertinent to note that these deductions are in addition to the deduction u/s 24 of the Income Tax Act, 1961. The deduction for any interest claimed under these sections will not be allowed under any other sections.

Section 80EE of Income Tax Act, 1961 (Section 130 of 2025 Act)

As per Section 130 of the Income Tax Act, 2025 (erstwhile section 80EE of the Income Tax Act, 1961), in respect of interest on home loan deduction, an assessee being an individual shall be allowed deduction of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.

The deduction under section 80EE shall not exceed Rs. 50,000 and shall be allowed for the tax year beginning on 1st April 2016 and subsequent tax years.

Section 80EE Deduction Eligibility

The deduction under section 130 of the Income Tax Act, 2025 (erstwhile section 80EE of the Income Tax Act, 1961), shall be allowed only on fulfillment of the following conditions –

  • The loan has been sanctioned by a financial institution,
  • The loan has been sanctioned between 1st April, 2016 and 31st March, 2017,
  • The amount of loan sanctioned for acquisition of the residential house property does not exceed Rs. 35 lacs,
  • The value of the residential house property does not exceed Rs. 50 lacs, and
  • The assessee does not own any residential house property on the date of sanction of loan.

Section 80EEA of Income Tax Act, 1961 (Section 131 of 2025 Act)

As per Section 131 of the Income Tax Act, 2025 (erstwhile section 80EEA of the Income Tax Act, 1961), in respect of interest on home loan deduction, an assessee being an individual who is not eligible for deduction under section 130 (section 80EE), shall be allowed deduction of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.

The assessee will be allowed deduction upto a maximum limit of Rs. 1.50 lacs in a tax year for the tax year beginning on 1st April, 2019 and subsequent tax years.

Section 80EEA Deduction Eligibility

The deduction under section 131 of the Income Tax Act, 2025 (erstwhile section 80EEA of the Income Tax Act, 1961), shall be allowed only on fulfillment of the following conditions –

  • The loan has been sanctioned by a financial institution,
  • The loan has been sanctioned between 1st April, 2019 and 31st March, 2022,
  • The stamp duty value of residential house property does not exceed Rs. 45 lacs, and
  • The assessee does not own any residential house property on the date of sanction of loan.

Interest on home loan deduction example

Interest on Home Loan Deduction – Example – An assessee has paid an interest of Rs. 3 lacs in a tax year for affordable housing residential house property. What is the maximum benefit of interest on home loan deduction that can be availed by him?

The assessee can claim deduction u/s 24 of the Income Tax Act, 196 upto Rs. 2 lacs (if self-occupied), for the balance Rs. 1 lacs, he can claim 80EEA deduction of Rs. 1 lac (since the maximum limit u/s 80EEA is Rs. 1.50 lacs). Thus, he can claim a deduction of the entire amount of interest paid by him.

FAQs on interest on home loan deduction

Q1. Can an NRI take deduction under Section 80EE and 80EEA?

A1. Yes, all individuals (residents as well as NRIS) can claim deduction under section 80EE and 80EEA.

Q2. Can an assessee claim deduction under section 80EE and 80EEA in the new tax regime?

A2. No, deduction under section 80EE and 80EEA can only be availed under the old tax regime.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.  

Categories
Income Tax

Section 24 of Income Tax Act – Save upto Rs. 2 lacs

Section 24 of Income Tax Act, 1961 has long been a key provision for taxpayers earning income from house property. It outlines the specific deductions that can be claimed to reduce the taxable value of such income, offering significant relief specifically to assessees with housing loans. Under the new Income Tax Act, the provisions will be covered under section 22. Let us understand the deductions available under section 24 of Income Tax Act, the maximum allowable deduction and the conditions to be fulfilled for availing such deductions –

section 24 of income tax act

Section 22 (erstwhile Section 24 of Income Tax Act, 1961)

As per Section 22 of the Income Tax Act, 2025 (erstwhile section 24 of Income Tax Act, 1961), the computation of income from house property includes the following deductions –

  • Standard deduction of 30% of the annual value determined u/s 21 i.e. after considering municipal taxes;
  • Deduction of interest payable on the capital borrowed for the acquisition, construction, repair, renewal or reconstruction of the house property;
  • If the capital as mentioned in clause (b) above has been borrowed prior to the tax year in which the property has been acquired or constructed, the interest payable for the prior period will be allowed as deduction in 5 equal installments i.e. in the tax year and the 4 immediately succeeding tax years.

However, if such prior period interest has already been deducted under any other provisions of this Act, then the same will not be considered to that extent under Section 24 of Income Tax Act.

Maximum deduction under Section 24 of Income Tax Act

In cases where the annual value of the house property is nil u/s 21(6) of the Income Tax Act, 2025 i.e. either the house is used for own residence or due to some reason it could not be occupied, there is a cap on the maximum deduction for the interest component allowable under section 22(1)(b) of the Income Tax Act, 2025 (erstwhile section 24 of Income Tax Act, 1961).

Therefore, the aggregate deduction under section 22(1)(b) in these cases shall not exceed –

Maximum deduction allowedConditions to be fulfilled for availing deduction
Rs. 2,00,000The acquisition or construction of the property has been completed within 5 years from the end of the tax year in which the capital was borrowed for such acquisition or construction And The assessee furnishes a certificate from the person to whom the interest is payable on the capital borrowed.
Rs. 30,000In any other case.

Therefore, for house properties covered u/s 21(6) i.e. where either the house is used for own residence or due to some reason it could not be occupied, the maximum deduction allowable u/s 22 of the Income Tax Act, 2025 (erstwhile section 24 of Income Tax Act, 1961) is Rs. 2 lacs.

Certificate for availing deduction of Rs. 2 lacs

As mentioned above, the assessee must furnish a certificate from the person to whom the interest is payable on the capital borrowed for availing the maximum benefit of Rs. 2 lacs under section 24 of Income Tax Act, 1961. The contents of the certificate must include –

  • The amount of interest payable on the capital borrowed,
  • The interest payable on any new loan, where subsequent to the capital borrowed, the assessee has taken any such loan for repayment of part or whole of the capital borrowed.

Treatment for interest payable outside India

Under section 22(6) of the new Income Tax Act, 2025, the interest chargeable on such borrowed capital payable outside India shall not be allowed as a deduction if –

  • Tax has not been paid or deducted on such interest in compliance with the provisions of Chapter XIX-B (TDS/TCS), and
  • In respect of such interest, there is no agent in India as per section 306.

This exception was earlier covered under a separate section 25 of the Income Tax Act, 1961 – ‘amounts not deductible from income from house property’.

Set off and carry forward of losses from house property

As per Section 109 of the new Income Tax Act, 2025 (erstwhile section 71 of the Income Tax Act, 1961), the loss computed under the head ‘income from house property’ shall be set off against any other head of income to the extent of Rs. 2 lacs.

As per Section 110 of the new Income Tax Act, 2025 (erstwhile section 71B of the Income Tax Act, 1961), if in any tax year, the loss computed under the head ‘income from house property’ cannot be wholly set off u/s 109 against any other head of income, the loss not so set off will be carried forward to the following tax year and will be –

  • Set off ONLY against the income from house property, if any, assessable for that tax year; and
  • If the loss is still not wholly set off, it will be carried forward to the following tax year and so on.

However, the loss from income from house property cannot be carried forward under this section for more than 8 tax years immediately succeeding the tax year for which the loss was first computed.

Difference between the provisions as per 1961 and 2025

While there are no major changes introduced in deductions under section 22 of the new law as compared to section 24 of Income Tax Act, however, there are two primary distinctions between the two –

  • In the erstwhile section 24 of Income Tax Act, 1961, it was mentioned that the date of the capital borrowed should be after 1st April, 1999, however, the same was not relevant and therefore has been omitted in the new Income Tax Act, 2025.
  • The treatment of interest payable outside India was earlier covered under a separate section 25 of the Income Tax Act, 1961 – ‘amounts not deductible from income from house property’ which has now been incorporated in the primary section 22 – ‘deductions from income from house property’ of the New Income Tax, 2025.

FAQs on Section 24 of Income Tax Act

Q1. Will interest payable on outstanding interest be allowed as deduction for income from house property?

A1. No. As held in the case of Shew Kissen Bhatter v/s CIT (1973) 89 ITR 61 (SC), any interest paid on the outstanding amount of interest will not be allowed as a deduction for income from house property computation.

Q2. Will interest payable on second loan obtained for repayment of interest of the original loan be allowed as deduction for income from house property?

A2. Yes. As held in the case of K.S. Kamalakannan v/s Asst CIT (2010) 126 ITD 231 (Chennai), any interest payable on second loan obtained for repayment of interest of the original loan will be allowed as deduction for income from house property.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.  

Categories
Income Tax

Income from House Property – Sec 20- Easy Guide

Income from house property is one of the five major heads of income under the Income Tax law. A large number of assessees have to comply with the rules regarding the taxation of income from house property whether it is a self occupied property or in the form of rental income. With the introduction of the new Income Tax Act, 2025, let us navigate to understand the existing as well as future laws governing the taxation of the income from house property.

income from house property

Income From House Property – Section 20 of Income Tax Act, 2025

As per Section 20 of the Income Tax Act, 2025, the annual value of property consisting of any buildings or land appurtenant thereto, owned by the assessee shall be chargeable to income tax under the head ‘income from house property’. However, the same will not be applicable for properties or part of any property used by the assessee for his business or profession, the profits of which are chargeable to income tax.

This section as per the new Income Tax Act, 2025 is very similar to the erstwhile Section 22 of the Income Tax Act, 1961 and there are no changes between the two sections.

Determination of annual value

As per Section 20 of the Income Tax Act, 2025 (erstwhile section 22 of the Income Tax Act, 1961), the taxation under the head income from house property is based on the annual value of the property. Therefore, the most crucial component of the taxation under this head will be the correct determination of the annual value of the property.

Under Section 21 of the Income Tax Act, 2025 (erstwhile section 23 of the Income Tax Act, 1961), the annual value of any property shall be deemed to be the higher of the following –

  • The sum for which it might reasonably be expected to let from year to year; or
  • The actual rent received or receivable by the owner, if the property or any part of the property is let out.

However, the rent which cannot be realized by the owner shall not be included in computing the actual rent received or receivable subject to certain rules of income from house property computation.

Income from House Property – Annual Value reduced by taxes

As per Section 21(3) of the Income Tax Act, 2025, the annual value for income from house property as determined above will be reduced by the taxes (including service taxes) levied by a local authority in respect of such property, actually paid during the tax year by the owner, irrespective of when such taxes became payable.

Tax on rental income in case of vacancy

As per Section 21 of the Income Tax Act, 2025 (erstwhile section 23 of the Income Tax Act, 1961), if the property or any part of it is let and was vacant for the whole or any part of the tax year and owing to such vacancy the actual rent received or receivable by the owner is less than the amount that was reasonably expected, the annual value of such property shall be deemed to be the amount so received or receivable.

Conditions where the rental income is nil

Under Section 21 of the Income Tax Act, 2025 (erstwhile section 23 of the Income Tax Act, 1961), the annual value of house property or any part thereof shall be taken as nil under the following 2 circumstances –

  • If the owner occupies it for his own residence  i.e. self occupied property, or,
  • If the property cannot be occupied due to any reason.

The abovementioned circumstances will only be applicable in respect of two of such houses. However, the same will not be applicable if the house or any part thereof is actually let during any time of the tax year, or if the owner derives any other benefit from it.

Property held as stock-in-trade

Where a property is held as stock-in-trade and is not let wholly or partly at any time during the tax year, the annual value of such property or part thereof shall be nil for 2 years from the end of the financial year in which the completion certificate of construction is obtained from the competent authority.

Treatment of arrears of rent and unrealized rent received subsequently

Under Section 23 of the Income Tax Act, 2025 (erstwhile section 25 and 25A of the Income Tax Act, 1961), the amount of arrears of rent or any unrealized rent received by the owner from the tenant subsequently will be deemed to be income from house property in the tax year in which it us received/realized even if the assessee is not the owner of the house property in that tax year.

Differences between Income Tax Act, 1961 and 2025

While in essence and spirit, the provisions governing the income from house property taxation are similar under the new Income Tax Act, 2025 and the erstwhile Income Tax Act, 1961, however, there are a few major differences as elucidated below –

  • As per the new Income Tax Act, 2025 u/s 21(3), the annual value of any property shall be reduced by the taxes (including service taxes) levied by a local authority in respect of such property, actually paid during the tax year by the owner, irrespective of when such taxes became payable.

However, as per the erstwhile Section 23(c) of the Income Tax Act, 1961, the taxes will be reduced when levied (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner).

  • As per the Income Tax Act, 1961 under section 23(2)(b), it was specifically mentioned that if the property cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, the assessee has to reside at that other place in a building not belonging to him, then the annual value will be considered as nil.

However, under the new Income Tax Act, 2025, this specific provision has been removed and a general relief has been granted for any property that cannot be occupied due to any reason.

FAQs

Q1. How to calculate income from house property?

A1. The income from house property will be calculated based on the annual value and reduced by such deductions and taxes as allowed under the law.

Q2. How to calculate tax on rental income if property is owned by multiple owners?

A2. As per Section 24 of the Income Tax Act, 2025 (erstwhile Section 26 of Income Tax Act, 1961), if the property is co-owned with definite and ascertainable share, the co-owners shall not be assessed as an association of persons i.e. their income will be assessed separately as per their respective shares. Even the relief regarding rental income being considered as nil shall be provided to each co-owner individually.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.  

Categories
Income Tax

Section 43B of Income Tax Act 1961 – Important Section 37 of Income Tax Act 2025

Section 43B of Income Tax Act 1961 has always been a crucial parameter for a range of deductions that are allowed only on actual payment basis. Section 43B of Income Tax Act 1961 has been an important pre-requisite for claiming deductions for over the last few decades. With the introduction of the new direct tax law from FY 2026-27, 2025, Section 37 of the Income Tax Act, 2025 has replaced the erstwhile Section 43B of Income Tax Act 1961.

The new law in alignment with the existing law has highlighted certain deductions that are allowed on actual payment basis only. Let us understand the applicability and coverage of these deductions while also deciphering the difference between the old and the new law.

section 43b of income tax act

Section 37 (erstwhile Section 43B of Income Tax Act 1961)

Section 37 (erstwhile Section 43B) – ‘Certain deductions allowed on actual payment basis only’ contains a list of expenses disallowed under section 43B of the Income Tax Act 1961 and under section 37 of the new Income Tax Act, 2025 unless actual payment for such expenses has been made i.e. the deduction for such expenses will be allowed only in the tax year in which the actual payment has been made.

Expenses covered under Section 37 (erstwhile Section 43B of Income Tax Act 1961)

The “sum payable” covered under Section 37(2) of Income Tax Act 2025 (erstwhile Section 43B) that will be allowed for deduction under section 26 –

  1. Taxes, duties, cess, surcharge or fees, by whatever name called, levied under any law in force,
  2. Employer’s contribution to a provident fund or superannuation fund or gratuity fund or any other fund for the purpose of welfare of their employees. Thus, employees contribution towards any of the funds will not be covered u/s 37,
  3. Amount payable by an employer in lieu of any leave at the credit of the employee,
  4. Any amount referred u/s 32(a) of the Income Tax Act, 2025 i.e. bonus or commission for services rendered by employees and not as a component of profit participation for employees,
  5. Interest on loans or advances or borrowings from specified financial entities as per the terms and conditions of the agreement governing such loans or advances or borrowings,
  6. Amount payable to the Indian Railways for the use of railway assets,
  7. Amount payable by the assessee to an entity registered under the MSME Act, 2006 beyond the time limit as specified u/s 15 of the MSME Act, 2006.

Here, the term ‘”sum payable” means a sum for which the assessee has incurred liability in the tax year even though such sum might not have been payable within that year under that relevant law.

Time limit for payment to claim deduction

As explained above, certain deductions will only be allowed for deduction on actual payment basis. Therefore, it is pertinent to remember that under Section 37(3) of the Income Tax Act, 2025 (erstwhile Section 43B of the Income Tax Act 1961) for all the above mentioned expenses except (g) that are paid after the end of the tax year in which the liability was incurred, but paid on or before the due date of filing of return of income u/s 263(1) for such tax year, the deduction towards such sum shall be allowed in such tax year.

Moreover, it has been specifically mentioned in Section 37(5), that if a deduction has been allowed in any tax year when such liability was incurred, the deduction for the same will not be allowed again in any subsequent tax year when it is paid.

Conversion of interest to loan

As per the expenses listed above covered under section 37 of the Income Tax Act, 2025, the interest on loans from specified financial entities will be allowed as a deduction only on actual payment basis. However u/s 37(4) it has been expressly specified that any conversion of the interest component to another loan or advance or borrowing or debenture or any other financial instrument by which the actual liability to pay has been deferred to a future date, shall not be deemed to have been actually paid. Therefore, the same will be disallowed u/s 37.

The term ‘specified financial entities’ here means a Public Financial Institution or State Financial Corporation or State Industrial Investment Corporation or such class of NBFCs as may be notified by the Central Government or a scheduled bank or a cooperative bank (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank.)

Difference between Section 37 of Income Tax Act, 2025 and Section 43B of Income Tax Act, 1961

The primary difference between Section 37 of Income Tax Act, 2025 and Section 43B of Income Tax Act, 1961 is that the old section had been amended multiple times over the last few decades and therefore it had 8 long explanations. However, Section 37 of Income Tax Act, 2025 incorporates all these explanations in a more concise manner and is more streamlined than Section 43B of the Income Tax Act, 2025.

Moreover, sub-section 1 of Section 37 of Income Tax Act, 2025 expressly includes the following clause which was not in the erstwhile Section 43B of Income Tax Act 1961 which states that the sum payable as mentioned above will be considered for deduction u/s 26 only in the tax year in which such sums are actually paid irrespective of –

  • Any provision to the contrary in this Act, or
  • Method of accounting regularly followed, or
  • The tax year in which the liability was incurred.

Implication of Section 37 on advance payments

In the case of CIT vs C.L. Gupta and Sons (2003) 259 ITR 513 (AII) it was decided that if a payment is made in  advance, it can be allowed in the year of payment, though the amount is deductible in normal circumstances under the law in the year in which it is booked as expenditure.

FAQs

Q1. What is Section 43B of Income Tax Act, 1961?

A1. Section 37 (erstwhile Section 43B) – ‘Certain deductions allowed on actual payment basis only’ contains a list of expenses disallowed under section 43B of the Income Tax Act 1961 and under section 37 of the new Income Tax Act, 2025 unless actual payment for such expenses has been made.

About the Author – This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.

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Income Tax

Income from Business and Profession – Sec 26 of Income Tax Act, 2025 – Easy Guide

The income from business and profession or more precisely the income under the head ‘Profits and gains of business or profession’ is covered under section 26 of the Income Tax Act, 2025 replacing the erstwhile section 28 of the Income Tax Act, 1961. Both the sections i.e. the erstwhile Section 28 and the new Section 26 are similar in spirit as the charging section for the income from business and profession with some minor differences that we will explore here in detail.

income from business and profession

Section 26 – Income from Business and Profession

Section 26 of the Income Tax Act, 2025 is the charging section for income under the head ‘Profits and gains of business or profession’. This essentially means that the incomes included in this section will be chargeable to tax under the head ‘Profits and gains of business or profession’ and not taxed in any other head of income. There will be no exceptions while computing income from business and profession for the incomes included in this section unless mentioned otherwise.

Income from Business and Profession u/s 26

Under Section 26 of the Income Tax Act, 2025, the following incomes will be chargeable to tax under the head ‘Profits and gains of business or profession’ –

  • Profits and gains from any business or profession carried out by the assessee at any time during the tax year. It is pertinent to note here that the term profits and gains also include any losses from business and profession.
  • Any compensation or any such payment by whatever name called due or received by any person in connection with termination of management or contract or modification of terms and conditions with either an Indian company or a foreign company operating in India or ay agency in India or any other contract related to the business.
  • Any compensation or any such payment by whatever name called due or received by any person for vesting of the management of any property or business in any any corporation owned or controlled by the Government i.e. where the Government vests the management of its corporation with a private entity.
  • Any income derived by a trade, professional or similar association from specified services performed for its members.
  • In case of assessees in the export business, the profits on sale of import license (that was provided for facilitation of export business), cash assistance against exports, duty drawback or duty remission or any other export incentive, received or receivable. Therefore, it is expressly clarified here that any such profits will not be taxed under the head ‘Income from Capital Gains’ since they are being taxed here under the head ‘Profits and gains of business or profession’.
  • The value of any benefit or perquisite arising from business or the exercise of a profession, whether convertible into money or not or in cash or in kind or partly in cash and kind.
  • Any sum received under the Keyman Insurance Policy including the sum allocated by way of bonus on such policy. Therefore, if a company receives the proceeds, it will be taxed under the head income from business and profession while if the employee receives the proceeds it will be treated as income from salary.

Income of a Partner from a firm

Any interest, salary, bonus, commission or any remuneration, by whatever name called, due to or received by a partner of a firm will be taxed under income from business and profession. However, the deduction for this expense will be allowed to the extent as per Section 35(e) of the Income Tax Act, 2025.

Therefore, it has been made clear that salary income of a partner from a firm will not be taxed under the head ‘Income from Salaries’ since it is being covered here under income from business and profession. Moreover, the interest income of a partner from a firm will not be taxed under the head ‘Income from other sources’ since it is being covered here under income from business and profession.

Stock in trade converted into Capital asset

Where any stock-in-trade is converted by the assessee into a capital asset, the fair market value of the stock as on the date of such conversion will be chargeable to tax under the head income from business and profession. Therefore, this conversion will not be taxed under the head ‘Income from Capital Gains’.

Income for not carrying out any activity

As per Section 26(h)(i), any sum received or receivable, either in cash or in kind, under any agreement for not carrying out any activity in relation to any business or profession, except

  • On account of transfer of right to manufacture, produce or process any article or thing or the right to carry on business or profession that is already chargeable under the head ‘Income from Capital Gains’, or
  • Any sum received as compensation from the multilateral fund of the Montreal Protocol on Substances that deplete the ozone layer under the United Nations Environment Programme as per the terms of agreement entered into with the Government of India.

Capital Expenditure of Specified Business

As per Section 26(k), any sum due or received in cash or kind when a capital asset other than land or goodwill or any financial instrument, is demolished, destroyed, discarded or transferred and the whole of the expenditure has already been allowed as deduction u/s 46 of the Income Tax Act, 2025 or the erstwhile section 35AD of the Income Tax Act, 1961 will be chargeable to tax under the head income from business and profession.

Income from Speculation Business

Any business or transactions carried out by an assessee that are speculative in nature, will be deemed to be distinct and separate from any other business.

Income from Residential House Property

As per Section 26(4) of the Income Tax Act, 2025, it has been clarified that any income from letting out of a residential house property, or a part of it by the owner will not be covered under the head income from business and profession. Therefore, the rental income from any residential house property will be taxed under the head ‘Income from House Property’ only.

Difference between the old and the new law

Section 26 of the new Income Tax Act, 2025 is very similar to the erstwhile Section 28 of the Income Tax Act, 1961 except for the following three differences –

  • Section 26 of the new Income Tax Act, 2025 follows the concept of ‘tax year’ replacing the earlier concept of ‘previous year’ and ‘assessment year’ used in Section 28 of the Income Tax Act, 1961.
  • The terminology has been simplified in the new law.
  • Since the Income Tax Act, 1961 had been in force for over 6 decades, several amendments had been incorporated u/s 28 of the old law. However, the new Income Tax Act, 2025 incorporates all these amendments in a simplified and concise manner u/s 26.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.

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GST Latest News

Simplified GST Registration Scheme under Rule 14A and Rule 9A w.e.f from 01.11.2025

Under the GST laws, there was a need for a simplified GST Registration Scheme to counter the persisting issues faced by the assessees in obtaining GST registration that have been highlighted at various forums. As per Notification No. 18/2025 – Central Tax dated 31st October, 2025, the Central Board of Indirect Taxes and Customs has inserted 2 new rules i.e. Rule 14A and Rule 9A in the GST law to introduce a simplified GST registration scheme to bring small business into the formal economy by simplifying the registration process.

simplified gst registration scheme rule 14a and 9a

Need for a simplified GST registration scheme

There have been several instances where the assessees who are interested in obtaining GST registrations have faced challenges that have prevented them from entering into the formal economy such as –

  • Delays in the physical verification process,
  • Minor discrepancies in documents leading to rejections,
  • Multiple queries and documents required from small businesses, amongst others.

Therefore, there was a need for a simplified GST registration scheme for addressing these common challenges faced by a large section of the economy.

Rule 14A – ‘Option for taxpayers having monthly output tax liability below threshold limit’

As per the newly inserted Rule 14A – ‘Option for taxpayers having monthly output tax liability below threshold limit’ – any person, who on his own assessment feels that his output tax liability on the supply of goods and services or both, to registered persons will not exceed Rs. 2.50 lacs per month, shall be eligible for this simplified GST registration scheme under Rule 14A. The threshold limit for the output tax liability of Rs. 2.50 lacs per month includes CGST, SGST, IGST as well as compensation cess.

Rule 14A – Advisory

As per the latest advisory released on the GSTN portal on 01.11.2025, the following features must be kept in mind while opting for this simplified GST registration scheme –

  • Aadhar authentication is mandatory for the Primary Authorized Signatory and atleast one promoter/partner. However, Aadhar authentication will not be a required if the assessee falls under the category of exempt specified persons u/s 25(6D) of the CGST Act, 2017 covering PSUs, non-citizens of India, local authorities, etc.
  • A person opting for GST registration under Rule 14A in one state or union territory will not be allowed to apply for another GST registration under Rule 14A in any other state or union territory on the same PAN.
  • Once the ARN has been generated, the registration will be electronically granted within 3 working days subject to aadhar authentication.
  • There should be no pending amendment or cancellation application for registration availed under rule 14A.
  • There should be no initiated or pending proceedings under Section 29 (cancellation of registration) for registration availed under rule 14A.

How to apply for GST registration under Rule 14A?

In order to facilitate the simplified GST registration scheme under Rule 14A, the Form REG – 01 has been amended to include the following clause in the application form in Part B after Serial No. 4 –

“4.1 – Option for registration under rule 14A – Yes or No.”

“4.1.1 – Declaration by person opting for registration under rule 14A – I hereby declare that the aforesaid business shall abide by the conditions and restrictions specified in the Act or the rules for opting to register under rule14A”

Withdrawal from the simplified GST registration scheme

Any taxpayer intending to withdraw from this simplified GST registration scheme at a later stage must fulfill the following conditions –

  • The taxpayer must ensure that all returns due from the effective date of registration upto the date of filing the withdrawal application have been filed.
  • If the taxpayer wishes to withdraw from the scheme before 1st April, 2026, then returns for a period of minimum 3 months must be filed before application for withdrawal.
  • If the taxpayer wishes to withdraw from the scheme after 1st April, 2026, then returns for a period of minimum 1 tax period must be filed before application for withdrawal.

Upon verification of the withdrawal application under Form REG – 32, the proper officer may approve the withdrawal by issuing Form REG – 33 or reject the application by issuing Form REG – 05. Once the taxpayer has received the approved Form REG – 33 on the GSTN portal, he may file returns with output tax liability higher than Rs. 2.50 lacs per month from the first day of the succeeding month in which the said order has been issued.

This ensures that taxpayers cannot retroactively modify their output tax liability for periods prior to the withdrawal order in a way that would push it beyond the Rs. 2.50 lacs limit. It serves as a safeguard to prevent exploitation of the lower threshold provision.

Moreover, the concept of “deemed approval” under Rule 9(5), where an application is automatically accepted if no response is made by the officer within the prescribed time will not be valid in such situations. This provision ensures that cases involving serious grounds for cancellation are carefully reviewed, eliminating any possibility of using withdrawal as a way to avoid cancellation proceedings.

Rule 9A – ‘Grant of Registration Electronically’

As per the newly inserted Rule 9A, notwithstanding anything contained in Rule 9, any person who has applied for registration under Rule 8 (Normal Registration) or Rule 12 (Registration for TDS/TCS deductors) or Rule 17 (Non-Resident Taxable Persons/Casual Taxable Persons), shall, upon identification on the common portal based on data analysis and risk parameters, be granted registration electronically by the common portal, within 3 working days from the date of submission of application.

Therefore, this is an alternative to Rule 9 and is applicable for taxpayers applying for registration under Rule 8 (Normal Registration) or Rule 12 (Registration for TDS/TCS deductors) or Rule 17 (Non-Resident Taxable Persons/Casual Taxable Persons).

FAQs

Q1. What is the effective date for Rule 14A and Rule 9A?

A1. The effective date for the newly inserted Rule 14A and Rule 9A is 01.11.2025.

Q2. How to amend Form REG – 32 (Application for Withdrawal from Scheme) ?

A2. Once FORM GST REG-32 is filed, no amendment application will be allowed to be filed till the disposal of application under FORM GST REG-32.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.

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Income Tax

Residential Status in Income Tax – Simplified – Section 6

The concept of residential status in Income Tax is very crucial for determination of the applicability of taxation of income in India. The applicability of residential status is not just on individuals but also on companies, firms, HUFs, AOPs etc. Therefore, the implication of the residential status in Income Tax has an impact on all kinds of assessees. Let us understand how to determine the residential status –

residential status in income tax

Residential Status Meaning

The residential status should not be confused with the citizenship of the assessee. There are certain pre-defined conditions that have to be checked for the determination of the residential status of the assessee. Even a foreign citizenship assessee can fall under the category of resident of India and sometimes even an Indian citizen does not fall under the category of resident of India. Thus, it is pertinent to remember that the residential status of an assessee has to be studied carefully as a separate concept and is not decided by citizenship.

Importance of Residential Status in Income Tax

The residential status in Income Tax determines the taxability of income of the assessees. This needs to be determined before proceeding with the liability and computation of tax of the assessee. Therefore, in a way, it is the first checkpoint that must be covered before moving ahead to the tax determination of an assessee. Moreover, the residential status can change every financial year for the assessee and thus has to be done annually for correct determination of tax liability.

Section 6 – Residential Status

As per Section 6, the residential status in Income Tax is classified as under –

  • Resident and Ordinarily Resident (ROR)
  • Resident and Not Ordinarily Resident (RNOR)
  • Non-resident.

Tax Implications for ROR, RNOR and NR

The categories of the residential status in Income Tax broadly determine the tax implications of the income of the assessees. The taxation in India for each of these categories is explained in the table below –

IncomeRORRNORNR
Income received or deemed to be received in IndiaTaxable in IndiaTaxable in IndiaTaxable in India
Income accrued or deemed to be accrued in IndiaTaxable in IndiaTaxable in IndiaTaxable in India
Income accrued or received or arising outside India from a business controlled from India or a professional setup in IndiaTaxable in IndiaTaxable in IndiaNot Taxable in India
Income accrued or received or arising from outside IndiaTaxable in IndiaNot Taxable in IndiaNot Taxable in India

Residential Status of an Individual

Before understanding whether the assessee is a ROR, RNOR or NR, let us understand who is considered a resident as per Section 6 of the Income Tax Act.

As per Section 6(1), an assessee would qualify as a resident of India if he satisfies one of the following 2 conditions –

  • Stay in India for a year is 182 days or more in the previous year, or
  • Stay in India for the immediately 4 preceding years is 365 days or more and 60 days or more in the previous year.

However, an exception to the above rules is that if an Indian citizen joins as a member of an Indian ship crew and leaves India or for the purpose of employment during the previous year leaves India, he will be treated as a resident only if he stays in India for 182 days or more i.e. the second condition will not be applicable on him.

Deemed Resident of India

Section 6(1A) was inserted by the Finance Act, 2020 with effect from AY 2021-22 introducing the concept of Deemed Resident of India. As per Section 6(1A), if an individual who is a citizen of India, has a total income, other than the income of foreign sources, exceeding Rs. 15 lacs during the previous financial year shall be deemed to be a resident of India in that previous year if he is not liable to taxation in any other country by reason of his domicile or reference or any other reason. As per Section 6(6), any person satisfying the condition as per Section 6(1A), will be treated a resident but not ordinarily resident of India in that previous year.

However, any individual that satisfies the conditions as per Section 6, will not be considered u/s 6(1A).

Resident and Ordinarily Resident (ROR)

If an individual satisfies the conditions as per Section 6(1) of the Income Tax Act, the assessee will be deemed to be a resident of India.

As per Section 6(6), the residential status in Income Tax of an individual will be determined as “Resident and Ordinarily Resident” if he fulfills both the following 2 conditions –

  • He was a resident of India in 2 out of the last 10 immediately preceding previous years, and,
  • He has stayed in India for atleast 730 days in the last 7 immediately preceding previous years.

Resident and Not Ordinarily Resident (RNOR)

As per Section 6(6) of the Income Tax Act, the residential status of an individual will be “Resident and Not Ordinarily Resident” in the following cases –

  • If an individual is a deemed resident of India as explained above, i.e., if an individual satisfies the conditions as per Section 6(1A),
  • If an individual fails to satisfy the conditions of being an ROR,
  • If an individual is a deemed resident of India due to any reasons, he will by default by an RNOR.

Non Resident (NR)

An individual will qualify as a Non-Resident (NR) if they satisfy any of the following conditions –

  • Stay in India is less than 181 days during the previous year,
  • Stay in India for a maximum of 60 days during the previous year,
  • Stay in India for more than 60 days in a financial year but their total stay in the previous four financial years is less than 365 days.

Residential Status in Income Tax of an HUF

A Hindu Undivided Family (HUF) is considered resident in India if its control and management are situated in India, otherwise, it will be classified as non-resident.

If the Karta (manager) of a resident HUF meets the following criteria, the HUF will be treated as “resident and ordinarily resident.” If not, it will be regarded as “resident but not ordinarily resident”-

  • The Karta has been a resident in at least 2 out of the 10 preceding years,
  • The total stay of the Karta in India during the last 7 years is 730 days or more.

Residential Status in Income Tax of a Company

A company will be regarded as resident in India if it meets one of the following conditions –

  • It is incorporated in India, or,
  • The place of effective management (POEM) during the relevant previous year is located in India.

The place of effective management refers to the location where key management and commercial decisions essential for running the business or entity are made.

Residential Status of Firms, LLPs, AOPs

The residential status of firms LLPs, AOPs, Local Authorities, AJPs, is based on where their management and control are exercised. If these functions are directed from within India, the entity will be treated as resident, if they are directed from outside India, it will be treated as non-resident.

FAQs

Q1. What is Residential Status of Income Tax?

A1. The residential status in Income Tax determines the taxability of income of the assessees. This needs to be determined before proceeding with the liability and computation of tax of the assessee. Therefore, in a way, it is the first checkpoint that must be covered before moving ahead to the tax determination of an assessee.

Q2. What is residential status in Form 12B?

A2. Form 12B is a tax-related form in India that an employee submits when joining a new employer in the middle of a financial year. In Form 12B, residential status refers to whether an individual is classified as a Resident or Non-Resident in India for income tax purposes during the relevant financial year. This classification is determined based on the number of days the person has stayed in India, as per the conditions laid out in the Income Tax Act.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.

Categories
Income Tax

269ST of Income Tax Act – Simplified

269ST of Income Tax Act was introduced in the Finance Act, 2017 with effect from 1st April, 2017 for reducing the instances of huge cash transactions by imposing a high penalty for cash transactions above Rs. 2 lacs. The objective of Section 269ST of Income Tax Act is to prevent cash dealings, curb instances of tax frauds and reduce the channels of black money in the market by streamlining the modes of payments and laying emphasis on banking channels and digital economy. Moreover it promotes transparency in the system and is crucial to strengthen the economy of the country.

section 269st of income tax act

Section 269ST of Income Tax Act

As per Section 269ST of Income Tax Act, 1961, no person other than the Government or a bank shall receive an amount of Rs. 2 lacs or more –

  • In aggregate from a person in a day, or
  • In respect of a single transaction,
  • In respect of transactions relating to one event or occasion from a person

Otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or such electronic modes as may be prescribed.

Exclusions from Section 269ST of Income Tax Act

The implications of section 269ST of Income Tax Act will not be applicable in any of the following cases –

  • Transactions that are already covered u/s 269SS of Income Tax Act
  • Receipts by any person from a bank
  • Where the recipient is a government
  • Where the recipient is any banking company, post office savings bank, cooperative bank, etc.
  • Such recipients as may be notified by the government.

Repayment of loan from NBFC/HFC

After this section was introduced, several NBFCs and HFCs sought clarification on whether the Rs. 2 lacs limit applies to each individual loan instalment or to the total repayment amount. In response, the Income Tax Department clarified that for loans repaid to NBFCs or HFCs, each instalment is considered a separate transaction. Therefore, if an individual loan instalment is below Rs. 2 lacs, it may be paid in cash. Multiple instalments for a single loan do not need to be combined to assess the Rs. 2 lacs threshold.

Penalty for violation of Section 269ST of Income Tax Act

In cases of non-compliance of section 269ST of Income Tax Act, penalty u/s 271DA will be levied. Such penalty will be equal to the amount of such receipt i.e. If you receive Rs. 3 lacs in cash for selling a car, you violate section 269ST and under Section 271DA, a penalty of Rs. 3 lacs can be levied. This penalty shall be imposed by the Joint Commissioner and can be removed if the person can prove sufficient cause for the transaction.

Illustrations for applicability of 269ST of Income Tax Act

Mr. A receives Rs. 2.10 lacs in cash from Mr. B on a single day for selling furniture.Cash received from one person in a single day exceeds the Rs. 2 lacs limit. Therefore, this is in violation of Section 269ST and a penalty of Rs. 2.10 lacs will be imposed u/s 271DA.
Ms. C gets Rs. 1.50 lacs in cash one day and Rs. 1 lac the next day for a single service agreement.Payments are for a single transaction, even if received on different days. Therefore, this is in violation of Section 269ST and a penalty of Rs. 2.50 lacs will be imposed u/s 271DA.
An event planner receives Rs. 1 lac in cash on three different dates for the same event, aggregating Rs. 3 lacs.The payments are related to one occasion/event, and together exceed the Rs. 2 lacs cash limit. Therefore, this is in violation of Section 269ST and a penalty of Rs. 4 lacs will be imposed u/s 271DA.

Supreme Court Decision – April 2025

The Supreme Court emphasized stricter oversight of large cash transactions in legal and property matters. It directed that whenever cash payments of Rs. 2 lacs or more surface in civil suits or property registrations, such instances must be reported to the Income Tax Department. This step is intended to enhance tax transparency and curb misuse of cash dealings in legal disputes and settlements.

Latest Judgement of Delhi High Court

In the case of Birmala Projects (P.) Ltd. v. Ashwani Ahluwalia, the Delhi High Court held that mere receipt of cash and the alleged violation of section 269ST does not automatically render the agreement void or unenforceable in court. Moreover, the Court’s focus on the principle of unjust enrichment reinforces that regulatory norms should not be misused to escape contractual responsibilities. Permitting the defendant to retain the amount due to a mere technical breach would have set a problematic standard, undermining fairness in contracts. The Court appropriately affirmed that both legal and contractual rules must be applied to prevent any unfair advantage.

Circular 25/2022 – Milk Producer’s Cooperative Society

In respect of the Milk Producer’s Cooperative Society, dealership/distributorship contract by itself does not constitute an event/occasion under 269ST(c). No aggregation across multiple days to be done as long as 269ST(a) and (b) are complied with.

What is the difference between section 269SS and 269ST?

Section 269SS prohibits accepting loans, deposits, or specified advances of Rs. 20,000 or more in cash, requiring such transactions to be done through banking modes. In contrast, Section 269ST restricts receiving Rs. 2,00,000 or more in cash from a person in a single transaction, in a day, or for a single event, regardless of the nature of the receipt. While 269SS targets cash-based loans and advances, 269ST applies broadly to all high-value cash receipts.

Section 269ST is applicable from which assessment year?

269ST of Income Tax Act was introduced in the Finance Act, 2017 with effect from 1st April, 2017.

Click here to know about all deductions available under the New Tax Regime.

About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.