Category: Income Tax

The draft new Income Tax Bill 2025 PDF that is being circulated in public domain is a 622 pages document constituting 536 clauses, 23 chapters and 16 schedules. This new law is proposed to be effective from 1^st April, 2026. The Government is likely to table this bill in the Parliament on 13^th February, 2025. The key points of the proposed new income tax bill 2025 are elaborated as under:-

Applicability and Tax Regime

The new direct tax law is proposed to be effective from 1^st April, 2026. The new tax regime will be applicable on all individuals.

Change in terminology of PY and AY

The proposed bill suggests that the terms – ‘Previous Year’, ‘Financial Year’ and ‘Assessment Year’ will be replaced with the concept of ‘Tax Year’.

Definition of Accountants

As per Section 515(3)(b) of the proposed new income tax bill 2025, there will be no change in the definition of accountants. As per Section 63 of the proposed new income tax bill, Chartered Accountants retain the sole power to conduct tax audits.

Deductions under the New Tax Regime

Section 19(1) of the proposed new income tax bill 2025 contains list of deductions which will be permitted under the new tax regime.

Tax audit applicability

As per the propose new income tax bill, where the profits declared are lower than the profit to be declared as per Section 44AD, the taxpayer will be liable for tax audit.

No change in STCG

As per the proposed new income tax bill 2025, there will be no change in the tax rate and tenure for computation of short term capital gains. The period will be 12 months and 20% will be the STCG rate of tax.

Benefit of presumptive taxation

In the existing Income Tax Act, 1961, the benefit of presumptive taxation was limited to certain businesses and professions. However, as per the proposed new income tax bill, this benefit will be available across more categories including digital businesses for ease to the small businesses.

TDS and TCS

In the existing Income Tax Act, 1961, there were various rates for different heads of income for deduction of TDS and TCS. In the proposed new income tax bill, there will be a unified and simplified structure for TDS and TCS.

New Digital Economy Taxation

The proposed new income tax bill 2025 will include specific provisions for taxation of digital economy including crypto currency and e-commerce with penalties for lapses in reporting of crypto currency transactions.

Residential Status

In the existing Income Tax Act, 1961, the determination of residential status was based on number of days. However, in the new proposed income tax bill, there will be new definitions for NRIs and tax residency to curb instances of tax avoidance.

Scope of GAAR (General Anti-Avoidance Rules)

In the proposed new income tax bill, the scope of GAAR (General Anti-Avoidance Rules) will be strengthened to ensure stricter ant-avoidance measures and reduce tax evasion.

No new taxes introduced

The proposed new income tax bill does not introduce any new taxes and focuses on simplifying the existing direct tax law.

Click here to read more about the Focus areas of the New Income Tax Bill 2025.

Click here to read about the Highlights of the Union Budget 2025.

The Finance Minister Nirmala Sitharaman during her Union Budget speech on 01^st February, 2025 announced that the New Income Tax Bill 2025 will be introduced in the Parliament next week. The Union Cabinet has approved the new income tax bill on Friday. Once the bill is introduced in the Parliament, it will be sent to the Standing Committee on Finance for their review. The New Income Tax Bill 2025 will be a replacement to the existing Income Tax Act, 1961 which is almost 6 decades old and has undergone several amendments over the last few decades. The key focus of the New Income Tax Bill is to simplify the direct tax laws in the country.

Key Focus Areas of the New Income Tax Bill 2025

Ever since the FM in her Union Budget Speech 2025 has mentioned that the New Income Tax Bill aims to streamline and simplify the direct tax law, there are certain expectations that various sections of the society are hoping for. The Finance Ministry has also mentioned certain focus areas for change on various platforms.

Simplification of Direct Tax Laws

The New Income Tax Bill focuses on simplifying the direct tax law which is currently consisting of 298 sections with several provisos and amendments.

Concise language

The Income Tax Act, 1961 is often difficult to comprehend for the common man owing to the complexity and cross-referencing of sections. The Finance Ministry has mentioned that the focus will be on shorter sentences and easy to comprehend language.

Minimizing litigation

The Finance Minister Nirmala Sitharaman has highlighted that the spirit of the new law will be “Nyaya” and with the simplified provisions, the disputes and litigations will be reduced.

Unified tax rates

The focus will be on introducing unified tax rates in accordance with the global standards.

Simplified rules for residential status

The Finance Ministry is aiming to streamline and simplify the provisions regarding residential status in the New Income Tax Bill.

Concise Structure

Currently the Income Tax Act, 1961 has 298 sections and several provisos and explanations, the focus of the New Income Tax Bill will be to reduce the redundant sections and provide a more concise structure to the direct tax law.

Incorporating public suggestions

The Finance Ministry had invited suggestions from the public on the following four areas – simplification of language, reduction of litigation, redundant provisions and reducing compliance burden. The public expects that since the Finance Ministry had invited these suggestions, they will be considered while compiling the New Income Tax Bill.

Issues regarding interpretation resolved

There were several issues regarding interpretation of the direct tax law by various courts of law. With the introduction the simplified new law, the disputes arising from such interpretation issues will be resolved.

Removal of outdated provisions

Since the Income Tax Act, 1961 is a 6 decades old law, there are certain provisions that require review and may be removed since they are outdated.

Reducing procedural formalities

The existing Income Tax act was introduced at a time when there was no technology being used however, with time, the same has improved and today we are filing forms that have a huge portion of pre-filled data from various sources due to the integration of various platforms owing to the technological advancements, thus the aim of the New Income Tax Bill will be to reduce the procedural formalities and facilitate the procedure for the taxpayers.

Avoid cross-referencing

The existing Income Tax Act has been an ever-evolving law and has undergone several amendments often leading to cross-referencing with different sections and provisos to interpret a common point. The aim of the New Income Tax Bill will be to avoid such cross-referencing of sections thereby simplifying the interpretation of each section.

The Union Budget Speech 2025 live updates available here.

Click here to get the Highlights of the Budget 2025.

CBDT has notified the forms and rules for the Direct Tax Vivad se Vishwas Scheme (DTVSV 2.0) which will be effective from 1^st October, 2024. This has come in pursuance of the announcement made by the Hon’ble Finance Minister Smt. Nirmala Sitharaman in the Union Budget 2024-25 to resolve the bulk of the pending appeals for various income tax disputes.

The DTVSV Scheme offers reduced settlement amounts for ‘new appellants’ compared to ‘old appellants.’ Additionally, it provides lower settlement amounts for taxpayers who submit their declaration on or before December 31, 2024, as opposed to those who file after that date.

Applicability of Vivad Se Vishwas Scheme 2024

The Direct Tax Vivad se Vishwas Scheme 2024 is applicable on any disputes or appeals, including writs and special leave petitions (Appeals), submitted by taxpayers or tax authorities, still pending as of 22^nd July, 2024 before the following bodies:

• The Supreme Court, High Court, Income Tax Appellate Tribunal, or Commissioner/Joint Commissioner (Appeals)
• The Dispute Resolution Panel (DRP), or cases where the DRP has issued directions but the final assessment order is yet to be passed
• Revision petitions under review by the Commissioner of Income Tax.

Amount payable to opt for the Vivad se Vishwas Scheme 2024 –

If the appeal is filed after 31/01/2020:

For tax arrears including: (i) Disputed tax, (ii) Interest charged or chargeable, and (iii) Penalty levied or leviable.	Amount due before or on 31.12.2024: The amount of the disputed tax. Amount due from 1.01.2025 to the final date: The amount of the disputed tax plus an additional 10%.
For tax arrears concerning: (i) Disputed interest, (ii) Disputed penalty, or (iii) Disputed fee.	Amount due before or on 31.12.2024: 25% of the disputed amount. Amount due from 1.01.2025 to the final date: 30% of the disputed amount.

If the appeal is filed before 31/01/2020:

For tax arrears including: (i) Disputed tax, (ii) Interest charged or chargeable, and (iii) Penalty levied or leviable.	Amount due before or on 31.12.2024: The amount of the disputed tax plus an additional 10%. Amount due from 1.01.2025 to the final date: The amount of the disputed tax plus an additional 20%.
For tax arrears concerning: (i) Disputed interest, (ii) Disputed penalty, or (iii) Disputed fee.	Amount due before or on 31.12.2024: 30% of the disputed amount. Amount due from 1.01.2025 to the final date: 35% of the disputed amount.

If the appeal or writ petition is initiated by the Income Tax Department rather than the taxpayer, the taxpayer is required to pay only 50% of the amounts outlined in the table.

Additionally, if the appellant files an appeal before the Commissioner (Appeals) or Joint Commissioner (Appeals), or raises objections with the Dispute Resolution Panel on an issue where they have already obtained a favorable ruling from the Income Tax Appellate Tribunal (ITAT) or the High Court (and the ruling has not been overturned by a higher court), the amount payable will be reduced to 50% of the amount calculated as per the table.

Similarly, if an appeal is brought before the ITAT on an issue where the appellant has previously received a favorable ruling from the High Court (and it has not been reversed by the Supreme Court), the amount payable will also be reduced to 50% of the amount specified in the table.

CBDT has notified Forms for DTVSV Scheme 2024

On 20^th September, 2024, CBDT has notified the following 4 forms for opting for the Direct Tax Vivad se Vishwas Scheme 2024:-

• Form – 1 – A declaration and undertaking to be filed by the applicant, separately for each dispute. The contents of this form include general details and information about tax payable. The applicant has to provide an undertaking to voluntarily waive all rights, whether direct or indirect, to seek or pursue any remedy or claim in relation to the tax arrear.
• Form – 2- Form for certificate to be issued by the Designated Authority including details of tax arrears and amount payable by the applicant for the full and final settlement of the said tax arrear.
• Form – 3 – Form for intimation of payment by the declarant that includes details of payments such as BSR code of the bank, date of deposit, serial number of challan and the amount deposited. The form also includes proof of withdrawal of any appeal, objection, writ, application, special leave petition or claim.
• Form – 4 – Final Order issued by the Designated Authority for the full and final settlement of tax arrears by the Designated Authority including details of the tax dispute, nature and amount of tax arrear.

The declarant must submit Forms 1 and 3 electronically. These forms will be accessible on the Income Tax Department’s e-filing portal at www.incometax.gov.in.

Procedure to be followed

The declaration must be submitted in the prescribed form, providing details of the tax arrears, including disputed tax, interest, penalty, or fees.

After the declaration is submitted, any ongoing appeals or petitions before tax authorities will be treated as withdrawn. If writ petitions or special leave petitions have been filed in higher courts, the declarant must withdraw these after receiving approval under the scheme. Following the submission of the declaration, the designated authority will assess the amount payable within 15 days and issue a certificate containing the relevant details. The declarant is then required to make the payment within 15 days of receiving the certificate and notify the designated authority. All connected cases will be closed, with no further action taken on those matters.

Cases where Vivad se Vishwas Scheme 2024 is not applicable

In the following cases, the Direct Tax Vivad se Vishwas Scheme 2024 will not be applicable:-

• Search and seizure cases
• In cases where assessment or reassessment is conducted following a search, this scheme differs from the VSV 2020, which permitted applications for search-related cases with disputed tax up to ₹5 crores. Under the current scheme, such search cases are entirely excluded from eligibility.
• Any cases outside the purview of Income Tax Act, 1961, for example, GST cases, benami property transactions, money laundering
• Cases of undisclosed foreign income or assets
• Taxpayers under specific legal restrictions or serious offences.

Benefits of the DTVSV 2024 Scheme

• The pending litigation issues will be resolved
• It offers settlements without penalties or interest
• Assessees can get relief from pending demands
• No prosecution will be initiated for cases resolved under this scheme
• Taxpayers can resolve their disputes efficiently within a time frame.

What is depreciation as per Income Tax Act? Depreciation is an allowable deduction for actual use of assets in a business or profession. Under Section 32 of the Income tax Act, 1961, the writing off of the cost of assets over its useful life has been allowed as a deduction and the depreciation rates as per Income Tax have been defined for categories of assets separately. As per accounting standards, there are two widely adopted methods of computation – Straight Line Method (SLM) and Written Down Value method (WDV).

However, as per the Income Tax Act, the method of depreciation is written down value method, except in case of generation and distribution of power where SLM method is adopted. Another provision for additional depreciation has been provided u/s 32(1)(iia) for new plant and machinery acquired and installed by an assessee engaged in the business of manufacturing or production.

Income Tax Depreciation – At a Glance

Particulars	At a Glance
Relevant provision	Section 32
Basis	Block of assets
General method	WDV
Tangible assets	Rates vary by asset
Intangible assets	Applicable prescribed rate
Asset used <180 days	50% of normal depreciation
Additional depreciation	Subject to specified conditions

Depreciation Rates as per Income Tax

Asset	Rate
Residential building (excluding hotels/boarding houses)	5%
Other specified buildings	10%
Temporary structures	40%
Furniture & fittings	10%
General plant & machinery	15%
Motor cars	15%
Computers & specified equipment	40%
Intangible assets	25%

• Buildings used for water treatment or supply projects in infrastructure facilities: 40%
• General plant and machinery: 15%
• Motor cars (excluding hire businesses): 15%, with a higher rate of 30% for cars acquired between August 23, 2019, and April 1, 2020.
• Vehicles used for hire (e.g., taxis, buses) have a rate of 30%, increasing to 45% if purchased within the same date range.

Special Equipment: Items such as computers, medical equipment, air pollution control devices, and energy-saving devices have varying rates, often 40% for faster write-offs.

Books: Books owned by professionals or businesses (like lending libraries) may be depreciated at rates between 60% 100% depending on whether they are annual or not.

Section 32 – Depreciation

Depreciation is allowed on the written down value of the block of assets at the depreciation rates as per Income Tax Act on both tangible as well as intangible assets except goodwill of a business or profession. Tangible assets include factory, equipment, plant, machinery while intangible assets include patents, trademarks, copyright and franchise. Depreciation is calculated on the block of assets basis and thus individual assets lose their identity.

The end user of the asset is the deciding factor for depreciation rate. For example, if the assessee is in the business of leasing out vehicles, then the rate will be higher i.e. 30% instead of 15% on plant and machinery.

Method of depreciation

As per Companies Act, 2013	As per Income Tax Act, 1961
Straight Line Method (SLM)	Straight Line Method (SLM) in case of generation and distribution of power
Written Down Value Method (WDV)
Unit of Production Method	Written Down Value Method (WDV)

Block of Assets

Depreciation under Income Tax follows the block of assets principle where each block is a selection of assets belonging to the same asset class, has similar life and similar use case. The depreciation rates as per Income Tax Act for each such class of assets have been defined in the rules.

Conditions to be fulfilled for claiming depreciation

There are certain conditions that have to be fulfilled for claiming deduction as explained below:-

• The asset must be wholly or partly owned by the assessee. Registration of the same under the Registration act is not determinative of ownership. The assessee for claiming dedecution is decided on the basis of beneficial ownership.
• Depreciation is allowed when the asset is actually put to use and not if the asset was ready to use and not put to actual use.
• The asset must be used for business or profession purposes, if the asset is put to use for both personal as well as business purposes, the amount be will be proportionately allowed to the extent it was used for business purposes.
• It is mandatory for the assessee to claim deduction of depreciation while computing his taxable income except if he is opting for presumptive taxation, where it is assumed that the impact of depreciation has already been considered.
• Revaluation of assets does not have any impact on depreciation computation as per the Income Tax Act i.e. the revaluation amount is ignored for computation.

180 Days Rule – Proviso to Section 32(1)

An important proviso to Section 32(1) is that when an asset is put to use for less than 180 days, the deduction amount on such asset will be restricted to 50% in the year of acquisition i.e. since the actual put to use date is less than half the year, therefore, full depreciation for that year cannot be allowed on the asset. This can be checked using the Income Tax Calculator.

Transfer of assets

In case of succession, amalgamation and demerger, the depreciation is allowed to both the parties in the ratio of the number of days for which the assets were used by them, however, the amount is computed assuming that no such succession, amalgamation or demerger has taken place.

Section 32(1)(iia) – Additional Depreciation

In case of any new plant or machinery other than ships and aircrafts which has been acquired and installed by an assessee engaged in the business of manufacture or production of any article or in the business of generation, transmission or distribution of power, an additional depreciation of 20% shall be allowed as deduction. However, there are certain restrictions for such deduction:-

• The deduction will not be allowed for second hand goods whether Indian or imported.
• If the asset is installed in the office premises or residential space, then no deduction will be allowed.
• If the deduction for the asset is provided for the complete amount already under any other section like for scientific research (100%), no deduction will be available here.

Assets acquired on hire purchase

Under the hire purchase agreement, the hired asset shall eventually become the property of the hirer, or give the hirer an option to purchase the asset. Accordingly, the periodical payments made by the hirer would be broken into interest (to be allowed as deduction to the hirer) and payment on account of capital cost of the asset. Depreciation is thus, allowed to the hirer on the initial value of the asset, i.e., the amount for which the hired item would have been sold for cash at the date of agreement.

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.

Section 54F of Income Tax Act is a major relief section for the residents who wish to purchase house property by allowing for exemption of the amount invested in the house property by sale of long term capital assets except house property. However, there are certain limitations and conditions to be fulfilled for availing exemption under section 54F of Income Tax Act which are elaborated hereunder.

Section 54F of Income Tax Act – Applicability

Section 54F of Income Tax Act is an exemption that is available on transfer of any long term capital asset except house property for purchase of a residential house property. Section 54F of Income Tax Act is developed on the same lines as of Section 54 with some modifications. A long term capital asset means an asset that has been held by the assessee for more than 24 months before it was transferred.

Moreover, this exemption is available only to resident individuals or HUFs.

In the case of CIT v. Podar Cement Pvt. Ltd. (1997), the Supreme Court held that “ownership” for the purpose of Section 54F includes possession under a housing scheme and doesn’t strictly require a registered deed.

Capital Assets covered u/s 54F

The section states that the capital asset other than house properties will be covered for exemption. Thus, the capital assets would include:-

• Shares
• Debentures
• Bonds
• Mutual Funds
• Jewellery
• Paintings
• Archaeological collections
• Art pieces
• Drawings
• Commercial properties
• Non-urban agricultural land.

Amount of Exemption – Section 54F of Income Tax Act

The exemption available u/s 54F is proportionate to the cost of the new asset i.e.

Exemption under Section 54F of Income Tax Act = LTCG X (Cost of New Asset/Net Consideration) subject to the maximum of LTCG.

However, as per the update in the Union Budget 2023, where the cost of the new house exceeds Rs. 10 crores, the amount in excess of Rs. 10 crores will not be considered for computation of the exemption under section 54F of Income Tax Act. This modification has been introduced w.e.f. 1^st April, 2024.

There will be a lock in period of 3 years from the date of construction or purchase of the residential property.

Difference between Section 54 and Section 54F of Income Tax Act

The major differentiator between section 54 and 54F is that section 54 of Income Tax Act deals with the exemption of LTCG on account of sale of a residential property for purchase of another residential property. However, section 54F deals with the exemption of LTCG on account sale of any long term capital asset other than residential property for sale of a new residential property.

Conditions to be fulfilled u/s 54F

Exemption u/s 54F will be allowed only if the following conditions are fulfilled:-

• The assessee does not own more than 2 residential house properties including the new property on the date of transfer of original asset.
• The assessee purchases residential property within 2 years of sale or constructs within 3 years any house property other than the new house.
• The property should be intended for residential use.

In the case of CIT v/s Sambandam Udaykumar (2012), the Karnataka High Court emphasized that “construction” of the new house does not have to be fully completed within the time limit, as long as substantial construction is done.

Consequences of non-compliance

There will be reversal of the exemption provided to the assessee in the following cases:-

• If the assessee fails to purchase a residential property within 2 years of sale of fails to construct within 3 years, then the proportion of capital gains exempted earlier shall be taxable in the year of such purchase or construction.
• If the assessee has transferred the new asset within 3 years, then the proportion of capital gains exempted earlier shall be taxable in the year in which such asset is transferred.
• If the assessee fails to utilize the deposit under the Capital Gains Deposit Account Scheme, then the proportion of capital gains exempted earlier shall be taxable in the year where the period of 3 years from the date of transfer of the original asset expires.

In the case of Fathima Bai v. ITO (2009), the Karnataka High Court ruled that the taxpayer can claim Section 54F exemption if the investment in a new residential property is made before the due date for filing the income tax return, not necessarily within the financial year of sale.

Illustrations for computation of exemption u/s 54F

Sales Consideration – Rs. 50 lakhs

Cost of acquisition – Rs. 10 lakhs

LTCG – Rs. 40 lakhs

Case I – When the entire net sales consideration is invested in purchase of residential house property.

If the entire net sales consideration is invested in purchase of residential house property, then the exemption u/s 54F will be allowed on the full LTCG amount of Rs. 10 lakhs.

Case II – When only Rs. 40 lakhs is invested in purchase of residential house property.

Exemption u/s 54F will be proportionate – (Rs. 40 lakhs/Rs. 50 lakhs * 10 lakhs) – Rs. 8 lakhs. 

Therefore, only exemption of Rs. 8 lakhs will be allowed under section 54F of Income Tax Act.

CGAS Scheme

The Capital Gains Account Scheme (CGAS) allows individuals to save capital gains (from the sale of assets like property) and claim tax exemption under sections 54, 54F, and 54EC of the Income Tax Act, 1961. Instead of immediately reinvesting the gains, taxpayers can deposit the proceeds into a designated account with authorized banks. This ensures that the exemption is retained even if the reinvestment is delayed.

Circular No. 471 and 672 – Section 54F of Income Tax Act

According to Circular No. 471 (October 15, 1986) & Circular No. 672 (December 16, 1993), the conditions for claiming exemption under Section 54F, emphasizing the need to invest in a new residential house within the specified time period.

FAQs of Section 54F of Income Tax Act

Q1. What if the capital assets that I have sold for purchase of a new house property have resulted in both STCG and LTCG incomes?

A1. The exemption u/s 54F will be applicable only the LTCG component of the income and will not be available on the STCG portion.

Q2. What happens if the capital gains are not used before the due date for filing returns?

A2. The unutilized capital gains should be deposited in a Capital Gains Account Scheme (CGAS) before the filing of the income tax return to maintain eligibility for the exemption.

Under the Income Tax Act, Section 194H deals with the TDS on commission other than insurance commission or brokerage, the threshold limits for deduction, applicability of such TDS, exceptions to the law and 194H TDS rate specifications. Let us now understand who is the deductor, who is the deductee, what is the threshold limit, what is the rate of TDS and important circulars and case laws pertaining to TDS on Commission.

Section 194H – Deductors and Deductees

TDS on commission u/s 194H has to be deducted on commission payments by any person other than an individual, HUF, AOP or BOI not having a total sales or gross receipts from business or profession excedding Rs. 1 crore or Rs.50 lakhs respectively in the preceding FY.

The deductee can be resident person.

Threshold Limit

This section is applicable when any of the deductors as explained above are liable to make a commission payment to any resident exceeding Rs. 15,000 during a financial year. Therefore, no TDS on commission will be deducted where the commission amount does not exceed Rs. 15,000.

When do we have deduct TDS u/s 194H?

TDS on commission u/s 194H has to be deducted:-

• At the time of crediting such sum to the account to the payee, or
• At the time of payment,

Whichever is earlier.

Even when the income is credited to any account in the nature of “Suspense Account” in the books of accounts of the payee, such credit shall be deemed to be credit of such income to the account of the payee.

Rate of TDS

The 194H TDS Rate Structure is as under:-

• Where the PAN of the deductee is available – 194H TDS Rate will be 5%. However, this rate has been reduced to 2% from 1^st October, 2024.
• Where the PAN of the deductee is not available – 194H TDS Rate will be 20%.

Therefore, where the PAN of the deductee is not available, whether resident individual or HUF or any other resident, the 194H TDS rate will be 20%.

Time limit for TDS to be deposited

Once the TDS on commission has been deducted as per the rate structure as explained above, the deductor is required to be deposited as per the following timelines:-

• Payment has been made by or on behalf of the Government – TDS as to be deposited on the same day.
• Payment has been made for all cases other than the Government – TDS has to be deposited within 7 days from the end of the month in which the deduction has been made. However, for the month of March, the TDS has to be deposited on or before 30^th April.

TDS on Commission paid to employees

In many companies, commission is paid to employees and employee directors as incentives, however, these commissions are not covered u/s 194H. Therefore, TDS on commission payments to employees and employee directors are covered u/s 192 i.e. the section pertaining to TDS on salary along with the other components of their salary.

Securities and Commodities transactions

TDS on commission u/s 194H will be deducted on brokerage and commission paid for commodities transactions. However, no TDS u/s 194H will be deducted on brokerage and commission on securities. This is because of a specific exclusion from the definition of commission/brokerage in securities.

The exclusion of brokerage/commission on securities from the TDS provisions under Section 194H comes from the interpretation that such payments, specifically for securities transactions, are governed under separate regulatory provisions, mainly the Securities Contracts (Regulation) Act, 1956. This act excludes them from the general purview of Section 194H, as securities markets have a different regulatory and taxation framework.

In the case of commodities transactions, if a person pays brokerage or commission for these transactions, TDS will be deducted. This is because commodities are not covered by the definition of “securities” under the Securities Contract (Regulation) Act, 1956, and are treated as goods or other tradable items.

Exemptions from TDS

There are certain exemptions for deduction of TDS on commission as explained below:-

• Commission payments to employees and employee directors
• Aggregate commission payments to a single party not exceeding Rs. 15,000 in a financial year
• Commission on insurance
• On an application filed by the deductee, if the Assessing Officer is satisfied that on the basis of the total income of the deductee, a lower rate of income tax or no deduction of income tax is justified, then the AO will issue a certificate than can be furnished to the deductors for lower or nil rates of tax deduction.
• Any payment of commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees.
• Brokerage and commission on securities
• Turnover Commission payable by the RBI to the Agency Banks.

Landmark Case – Vodafone Essar Cellular Limited (Kerala)

Discounts given on supply of sim cards and recharge coupons by a telecom company to its distributors under a prepaid scheme will be treated as commission to attract the TDS provisions u/s 194H. The distributor only acts as a middleman on behalf of the assessee for procuring and retaining customers and thus these discounts are covered under the meaning of commission.

CBDT Circular on TDS in advertising business

As per the CBDT Circular No. 715 dated 8^th August, 1995, there are broadly two categories of payments involved in the advertising business –

• Payment by client to the advertising agency, and
• Payment by advertising company to the television channels/newspaper companies.

The CBDT circular clarifies that TDS u/s 194C will be applicable on payments by clients to the advertising agency as this is in the nature of works contract. However, no TDS u/s 194C will be applicable on payments by advertising company to the television channels/newspaper companies.

A common question is whether payments made to media houses through advertising agencies should be treated as commission or a contractual payment. The CBDT clarified that when an agency books an advertisement in print or electronic media on behalf of a client, the payment made by the client to the agency is considered a contractual payment and is subject to TDS under Section 194C.

However, if the media house gives a commission to the agency (for bringing in the client), such a commission is treated separately under Section 194 H, and the agency should deduct TDS on such commission.

These clarifications aim to streamline the process of tax deduction in the advertising industry and eliminate any confusion regarding the appropriate section and rate for different types of transactions.

Jagran Prakashan Ltd. v. DCIT (TDS) (2012)

Issue: Whether payments to advertising agents should be treated as “commission”?

Ruling: The Allahabad High Court held that since the relationship was principal-to-principal, TDS under Section 194H was not applicable.

CIT v. Singapore Airlines Ltd. (2013)

Issue: Whether discounts given to travel agents by airlines constitute “commission”?

Ruling: The Delhi High Court ruled that the discounts were trade discounts, not commission, so no TDS under Section 194H was applicable.

Section 194A of the Income Tax Act, 1961, deals with the TDS on interest income other than interest on securities. This provision mandates that any person, other than an individual or Hindu Undivided Family (HUF) not liable for tax audit, must deduct TDS on interest payments exceeding Rs. 5,000 in a financial year (Rs. 40,000 for banks and certain financial institutions, and Rs. 50,000 for senior citizens). The current TDS rate under Section 194A is 10%. This ensures that the government collects tax revenue on interest income at the source, promoting tax compliance and reducing tax evasion. Let us now delve into the detailed explanation of section 194A pertaining to TDS on interest.

Section 194A – Deductors and Deductees

As explained above, TDS has to be deducted by any person, other than an individual or Hindu Undivided Family (HUF) not liable for tax audit. This implies than the deductor is any person, other than an individual or HUF whose total sales or gross receipts does not exceed Rs. 1 crore or Rs. 50 lakhs respectively in the preceding financial year.

The deductee is any resident individual.

Section 194A – TDS on interest threshold limits

As mentioned above, TDS has to be deducted on interest payments exceeding Rs. 5,000 in a financial year (Rs. 40,000 for banks and certain financial institutions, and Rs. 50,000 for senior citizens). This implies that the aggregate of such interest income credited or paid or likely to be credited or paid during the financial year exceeds:-

• Rs. 40,000 where the payer is a banking company, cooperative society bank or post office. This limit is enhanced to Rs. 50,000 in case of senior citizen payees. Where the banks have adopted CBS, this limit will be considered based on the aggregate of all the accounts of the customer across branches as per Circular No. 03/2010 dated 02.03.2010.
• Rs. 5,000 in any other case.

The interest income includes the interest on time deposits such as fixed deposits and recurring deposits.

When do we have deduct TDS u/s 194A?

The TDS on interest u/s 194A has to be deducted at the time of credit or payment, whichever is earlier similar to 194C.

Rate of TDS u/s 194A

TDS on interest payments has to be deducted u/s 194A @ 10%. However, if the PAN has not been furnished by the deductee or if he is a specified person u/s 206AB, then TDS will be deducted @ 20%.

Exceptions to Section 194A

The exceptions are designed to simplify compliance and avoid undue tax burden in specific scenarios, ensuring that TDS is only applied where it is necessary and practical. TDS u/s 194A will not be deducted in the following cases:-

• The aggregate amount of interest credited or likely to be credited does not exceedRs. 5,000 in a financial year (Rs. 40,000 for banks and certain financial institutions, and Rs. 50,000 for senior citizens).
• The interest credited has been paid by a firm to a partner of the firm, being a resident. However, TDS u/s 195 will be deducted in case the partner is a non-resident.
• Any interest paid to a banking company, a cooperative society engaged in banking, or a public financial institution is not liable for deduction of TDS u/s 194A.
• Interest on certain bonds and debentures, which are specifically exempted by the government, does not attract TDS.
• Any interest paid to institutions or entities that are exempt under Section 10 of the Income Tax Act is not subject to TDS under Section 194A.
• Any interest credited or paid by the Central Government under specified schemes or savings certificates is also exempt.
• Interest paid by a cooperative society to its members or to other cooperative societies is not subject to TDS under this section.
• Interest paid to insurers, such as Life Insurance Corporation (LIC) or other insurance companies, is exempt from TDS under this section.
• Interest paid on compensation awarded by the Motor Accidents Claims Tribunal is exempt from TDS.
• Interest paid by primary agricultural credit societies or primary credit societies to their members is exempt from TDS.
• Interest paid to any institution or association that the Central Government has notified for the purpose of this section does not attract TDS.
• Interest payments made to entities notified under the provisions of this section, which are generally entities involved in infrastructural development and other specified activities, are exempt from TDS.
• Interest payments made under schemes notified by the Central Government, such as certain schemes for small savings or welfare funds, do not attract TDS.
• Interest earned on savings bank accounts held with banks, cooperative societies, or post offices is not subject to TDS under this section.
• Interest payments made by a cooperative society to another cooperative society are exempt from TDS.
• Interest on bonds issued by infrastructure debt funds or bonds which have been specifically exempted by the government from the purview of TDS.

CBDT Notification No. 110/2021

CBDT Notification No. 110/2021 dated 17.09.2021, provides an exemption from the requirement of TDS u/s 194A of the Income-tax Act, 1961. This exemption applies to interest payments made by scheduled banks to members of Scheduled Tribes residing in specified areas. However, certain conditions to be fulfilled for this exemption such as verification of the customer’s ST status, bank must report these interest payments in the TDS statements as mandated by Section 200(3) and the total interest paid should not exceed Rs. 20 lakhs in a financial year.

Avenue Super Chits Private Limited

Chit dividend paid by the chit fund company to its members is not interest and therefore TDS u/s 194A will not be deducted in such case.

Important Case Law – CIT v/s Vijaya Bank (2008)

Vijaya Bank was paying interest on deposits to its customers but did not deduct TDS on the interest paid to its members who were also shareholders of the bank. The bank argued that since the shareholders were receiving dividends and not interest, TDS under Section 194A was not applicable.

The primary issue was whether the bank was liable to deduct TDS under Section 194A on the interest paid to its members who were shareholders.

The Supreme Court held that the interest paid to shareholders, even though they were members of the bank, was subject to TDS under Section 194A. The Court observed that the nature of the payment was interest and not dividend, and thus, the bank was obligated to deduct TDS on such interest payments. This case clarified that the nature of the payment should be analyzed to determine the applicability of TDS under Section 194A. Even if the recipient is a shareholder or member of the entity making the payment, if the payment is in the nature of interest, TDS provisions under Section 194A will apply.

80TTA deduction and 80TTB deduction are available for interest in savings account. Most of the times we tend to keep our savings in our savings bank accounts on which we received interest at low rates. This income from interest on deposits in savings account is included in the gross total income under the income from other sources. Moreover, senior citizens also get benefit of deductions for the interest on savings bank and FDs held by them.

Therefore, deductions u/s 80TTA and 80TTB are often beneficial to the assessee in these cases. Both these sections aim to provide tax relief on interest income, with Section 80TTA catering to the general population and Section 80TTB offering enhanced benefits specifically for senior citizens. Similarly, deduction u/s 80G, 80GGB and 80GGC are regarding donations that we will cover extensively here. We will now discuss the applicability, limit and conditions to be fulfilled for each of these deductions.

80TTA Deduction and Eligibility

Individuals or HUFs, both residents as well as non-residents, earn interest on their savings accounts held in banks, cooperative banks and post office. 80TTA deduction will be available to such individuals or HUFs; however, the quantum of 80TTA deduction will be the interest amount or Rs. 10,000 whichever is lower. Therefore, the maximum 80TTA deduction available for any assessee is Rs. 10,000.

It is important to remember here that this deduction is only for interest from savings account and not for interest received from fixed deposits.

80TTA Deduction Exclusions

All individuals and HUFs (both residents and non-residents) can claim the deduction u/s 80TTA except for senior citizens that are covered u/s 80TTB.

80TTA Deduction Illustration

Q. Mr. Abhay (aged 45 years) has earned an interest of Rs. 25,000 from his savings account and Rs. 40,000 interest from his FD last year. What is the amount of 80TTA deduction that he can claim?

A. 80TTA deduction is only for interest from savings account and not for interest received from fixed deposits. Therefore, he will not get any deduction on the interest from his FD of Rs. 40,000.

Moreover, the amount of 80TTA deduction is the interest amount or Rs. 10,000, whichever is lower.

Therefore, the allowable 80TTA deduction will be lower of Rs. 25,000 and Rs. 10,000 i.e. Rs. 10,000.

80TTB Deduction and Eligibility

80TTB deduction is available exclusively for resident senior citizens who earn interest on their savings accounts, recurring deposits as well as fixed deposits.

The quantum of 80TTB deduction will be the interest amount or Rs. 50,000 whichever is lower. Therefore, the maximum 80TTB deduction available for the resident senior citizen is Rs. 50,000.

80TTB Deduction Illustration

Q. Mr. Vijay (aged 65 years), resident of India, has earned an interest of Rs. 35,000 from his savings account and Rs. 40,000 interest from his FD last year. What is the amount of 80TTB deduction that he can claim?

A. 80TTB deduction is available exclusively for resident senior citizens who earn interest on their savings accounts, recurring deposits as well as fixed deposits. Thus, Mr. Vijay is eligible to claim deduction u/s 80TTB.

Total Interest Income = Rs. 35,000 + Rs. 40,000 = Rs. 75,000

However, the amount of 80TTB deduction is the interest amount or Rs. 50,000, whichever is lower.

Therefore, the allowable 80TTB deduction will be lower of Rs. 75,000 and Rs. 50,000 i.e. Rs. 50,000.

Section 80G – Deduction for donations

Any assessee, whether resident or non-resident, can claim deductions u/s 80G for certain donations made by them. This deduction is available to all taxpayers, including individuals, companies, firms, and other entities. To claim this deduction, the donation must be made to a recognized organization, which can be a public charitable trust, a registered society, or a company registered under Section 25 of the Companies Act, 1956. The amount of deduction varies depending on the type of organization and the amount donated.

No deduction u/s 80G made in excess of Rs. 2,000 is allowed if the amount has been paid in cash.

80G – Categories of qualifying donations u/s 80G

There are four main categories under which donations can qualify for the 80G deduction:

1. 100% deduction without qualifying limit: Donations made to entities like the National Defence Fund or the Prime Minister’s National Relief Fund fall into this category.
2. 50% deduction without qualifying limit: Contributions to institutions such as the Jawaharlal Nehru Memorial Fund are eligible.
3. 100% deduction subject to qualifying limit: This includes donations to entities engaged in promoting family planning.
4. 50% deduction subject to qualifying limit: Donations made to any other charitable institution qualify here, with the overall limit capped at 10% of the taxpayer’s adjusted gross total income.

80GGB – Contributions by Companies to Political Parties

Deduction u/s 80GGB is available only to Indian Companies for the contributions made by them to political parties or electoral trusts. The entire amount can be claimed as deduction u/s 80GGB without any upper limit. The donations must be made to a political party registered under Section 29A of the Representation of the People Act, 1951, or to an electoral trust.

To qualify for the deduction, the donation must be made through any mode other than cash, such as cheque, demand draft, electronic transfer, or any other banking channels.

80GGC – Contributions by any assessee to Political Parties

Deduction u/s 80GGC is available to all assessees except Indian Companies that are covered u/s 80GGB, for the contributions made by them to political parties or electoral trusts. The entire amount can be claimed as deduction u/s 80GGB, without any upper limit. This provision aims to promote transparency and accountability in political funding from non-corporate contributors.

Individuals, Hindu Undivided Families (HUFs), firms, and any other person except local authorities and artificial juridical persons wholly or partly funded by the government can claim this deduction. The donations must be made to a political party registered under Section 29A of the Representation of the People Act, 1951, or to an electoral trust. Similar to Section 80GGB, the donation must be made through any mode other than cash to qualify for the deduction.

Both Section 80GGB and Section 80GGC aim to incentivize contributions to political parties and electoral trusts by providing tax deductions, thus fostering a more transparent and accountable political funding system.

Get full details on 80C, 80D and 80EEA here.

Budget 2024 – The Finance Minister Nirmala Sitharaman presented the Union Budget of India for FY 2024-25 on 23^rd July, 2024 in the Lok Sabha with major focus on the 4 sections – Poor, Women, Youth and Farmers. Several major changes have been announced in Income Tax in the budget. There has been a huge change in the capital gains tax segment. The tax rate structure under the new tax regime has been revised. Here are the top highlights related to Income Tax especially in the capital gains segment in the Union Budget of India as presented by the Finance Minister Nirmala Sitharaman.

Comprehensive Review of the Act – Union Budget of India

The Finance Minister Nirmala Sitharaman has announced that there will be comprehensive review of the Income Tax Act, 1961 to simplify the taxation norms and streamline the tax processes for relief to the taxpayers. The aim is to simplify charities, TDS, litigation, appeals and deepening the tax base.

Personal Income Tax Rate Structure

The Personal Income Tax Rate Structure under the New Tax regime has been revised for FY 24-25. The revised tax structure as laid down under the Budget 2024 is as under:-

Revised Income Slabs	Revised Rate of Tax
Upto Rs. 3 lacs	Nil
Rs. 3 lacs to Rs. 7 lacs	5%
Rs. 7 lacs to Rs. 10 lacs	10%
Rs. 10 lacs to Rs. 12 lacs	15%
Rs. 12 lacs to Rs. 15 lacs	20%
More than Rs. 15 lacs	30%

Earlier the slab rates under the new tax regime were as under:-

Income Slabs	Rate of Tax
Upto Rs. 3 lacs	Nil
Rs. 3 lacs to Rs. 6 lacs	5%
Rs. 6 lacs to Rs. 9 lacs	10%
Rs. 9 lacs to Rs. 12 lacs	15%
Rs. 12 lacs to Rs. 15 lacs	20%
More than Rs. 15 lacs	30%

The Finance Minister Nirmala Sitharaman pointed out that more than 2/3^rd of the taxpayers have filed the returns for the previous FY 23-24 in the new tax regime till now.

New Tax Regime – Important Limits

The Finance Minister Nirmala Sitharaman has increased the standard deduction for salaried individuals from Rs. 50,000 to Rs. 75,000. Moreover, the family pension relief has increased from Rs. 15,000 to Rs. 25,000. The relief as stated have been provided under the new tax regime. Thus, with the revised rate structure and such relief, the new tax regime has been encouraged further. Therefore, a salaried employee can save upto Rs. 17,500 in taxes with these changes.

Capital Gains Tax

Major changes have been introduced in the capital gains tax in the Budget for FY 24-25. The rate of STCG has been increased from 15% to 20%. Moreover, the LTCG tax rates have also been increased from 10% to 12.5%. The LTCG exemption has been increased from Rs. 1 lac to Rs. 1.25 lacs per annum. Moreover, indexation benefits under the second proviso to Section 48 for computation of LTCG on asset classes like unlisted shares, gold and real estate have been removed. These changes will be effective from 23rd July 2024. Transactions completed before 23rd July 2024 will be taxed under previous rules.

Vivad Se Vishwas Scheme 2024

In the Budget 2024, it was announced that the Vivad se Vishwas Scheme, 2024, aims to resolve certain income tax disputes currently under appeal. Additionally, it is proposed to raise the monetary thresholds for filing appeals in Tax Tribunals, High Courts, and the Supreme Court to Rs 60 lakh, Rs 2 crore, and Rs 5 crore, respectively, for cases related to direct taxes, excise, and service tax.

TDS on payment of salary to partners

A new TDS section 194T has been introduced for deduction of TDS on payments such as salary, bonus and interest to any partner in a partnership firm if the aggregate amount of payments exceeds Rs. 20,000 in a financial year. TDS rate u/s 194T will be 10%. The provisions of this section will be applicable from 1^st April, 2025.

Other Income Tax related important announcements

• The TDS rate on e-commerce has been reduced from 1% to 0.1%.
• Angel tax has been abolished.
• Corporate tax rate on foreign companies reduced from 40% to 35%.
• Simpler tax regime for operating domestic cruise.
• Safe harbour rates for foreign mining companies for selling raw diamonds will be provided.

The complete bill is available here.

Assessees before filing their ITR must keep in mind that they can claim 80EEA, 80EEB, 80E and 80GG deduction as well. Have you claimed deductions u/s 80C and 80D and still have some investments or expenditures that you can claim further deductions on? Yes! There are some deductions available for interest on loan taken for education or house property. Moreover, even in respect of rent paid by individuals who are not receiving any HRA, deductions can be claimed. However, there are certain key points to remember regarding applicability, eligible amount and mandatory conditions for availing such deductions. Let us go through these sections that are often overlooked to ensure better tax savings!

Section 80GG Deduction and Eligibility

The benefit of this deduction can be availed by individuals (residents as well as non-residents) or HUF. Individuals in employment or self-employed, but are neither receiving house rent allowance (HRA) from their employers nor have been provided with any accommodation that is rent free for them by their employers are eligible for 80GG deduction. Therefore, if the salary of the employee includes the HRA component, then he will not be eligible for 80GG deduction.

People who live with their parents in a house owned by the parents can also take advantage of Section 80GG deduction benefits. To be eligible u/s 80GG, they must enter into a rental agreement with their parents. The amount paid as rent will be considered taxable income for the parents when they file their taxes.

Non-resident Indians (NRIs) can also claim tax benefits u/s 80GG, but they must be paying rent for a property situated in India to be eligible.

80 GG Deduction – Quantum allowed

80GG deduction can be allowed as the lower of the following:-

• Rs. 5,000 per month;
• 25% of the total income (excluding long-term capital gains, short-term capital gains under section 111A, and income under sections 115A or 115D) before allowing deduction u/s 80GG; or
• Excess of actual rent paid over 10% of total income before allowing deduction u/s 80GG.

Form 10BA for 80GG deduction

Form 10BA is a declaration required to claim deductions u/s 80GG for rent paid when HRA is not received. The details required in the form are as under:-

• Name of the assessee
• PAN of the assessee
• Complete address of the assessee
• Mode of payment
• Assessment Year
• Address of the rented property
• Name of the landlord
• PAN of the landlord, if the rent exceeds Rs. 1 lac annually
• Total amount paid for rent
• Declaration confirming that you do not own a residential property in the location where you reside, work, or conduct business.

80GG Deduction – Practical Example

Mr. A earns Rs. 5 lacs annually. He pays an annual rent of Rs. 1.20 lacs. He does not receive any HRA from his employer. What will be the amount of 80GG deduction that he can claim?

Total annual income = Rs. 5,00,000

Annual rent paid = Rs. 1,20,000

The deduction under Section 80GG will be the least of the above three amounts:

• Rs. 5,000 per month i.e. Rs. 60,000 annually
• 25% of total income i.e. Rs. 1,25,000
• Actual rent paid minus 10% of total income = Rs. 1,20,000 – Rs. 50,000 = Rs. 70,000.

Thus, the 80GG deduction amount will be Rs. 60,000 annually.

Section 80EEA – Deduction and Eligibility

Any individual, who has taken a loan from any financial institution for acquisition of a residential house property, can claim 80EEA deduction. This benefit is in addition to the Rs. 2 lakhs deduction u/s 24(b) for interest on home loans for self-occupied property. This has been added by Finance Act, 2019 to help first-time home buyers by allowing them to claim additional deduction on the interest component of the loans. Only individuals, who do not own any residential property, on the date of sanction of the home loan can avail deduction u/s 80EEA.

The maximum quantum of deduction u/s 80EEA is Rs. 1,50,000.

Section 80EEA – Conditions to be satisfied

The deduction u/s 80EEA on the interest component will be allowed only if all the following conditions are fulfilled:-

• The home loan has been sanctioned between April 1, 2019, and March 31, 2022;
• The stamp duty value of the residential house property does not exceed Rs. 45 lakhs;
• The loan must be taken from a financial institution or a housing finance company.

Section 80EEB – Deduction and Eligibility

Any individual, who has taken a loan from any financial institution for purchase of an electric vehicle, can claim deduction u/s 80EEB. The loan should have been sanctioned by the financial institution between April 1, 2019, and March 31, 2023.

The maximum allowable deduction u/s 80EEB is Rs. 1,50,000.

80E Deduction – Education Loan Interest

Section 80E deduction allows individuals to claim a deduction on the interest paid on education loans. Any individual, who has taken loan for either his or his relative’s higher education, can claim deduction on the interest component of such loan. Only the interest paid on the loan is eligible for the deduction, not the principal repayment.

There is no upper limit on the amount that can be claimed as a deduction. However, the deduction is available for a maximum of 8 years, starting from the year in which the repayment of interest begins, or until the interest is fully paid, whichever is earlier.

80E Deduction – Conditions to be fulfilled

The deduction u/s 80E on the interest component of the education loan will be allowed only if all the following conditions are fulfilled:-

• The loan must be taken for pursuing higher education, which includes any course of study after completing the senior secondary examination;
• The loan has been taken for the assessee, their spouse, children, or a student for whom the assessee is a legal guardian;
• The loan must be from a financial institution or a charitable institution approved by the Central Government.