February 2025
February 2025
Amendment to existing Income-tax Act, 1961
Concern regarding the virtual digital spaces defined in the law
- Before it becomes law, a select committee will review it.
- The key concern is a clause that expands the scope of tax searches beyond what’s currently allowed to include “virtual digital spaces”.
- Right now, tax officers can ask for access to laptops, hard drives, and emails, but since the current tax law doesn’t explicitly mention digital records, such demands often face legal pushback.
- However, the new bill makes it clear: As per clause 247, tax authorities can demand access to digital assets, and if a taxpayer refuses, they can bypass passwords, override security settings, and unlock files, starting April 1, 2026.
- “virtual digital space,” a term the bill defines as platforms allowing users to interact via computers, including cloud servers, email accounts, social media, and trading platforms. India Today
Key Highlights of the bill
- Introduction of tax year
- No changes to tax rates
- Sections reduced from 819 to 536
- TDS or TCS sections merged from 71 to 11
- Formula based approach for definitions
- Word count reduced by 50%
Cultivation of Land:
Tax is still exempt, but now requires stricter documentation to prove farming activities.
Rent or Revenue from Agricultural Land:
Income from leasing agricultural land is now taxable if the land is located in an urban area.
Processing of Agricultural produce:
Taxable if value-adding processes are applied beyond what’s necessary to make produce marketable.
Income from Nursery Operations:
Only traditional nursery activities remain exempt; commercial nurseries are now taxable.
Income from Dairy Farming:
No longer considered agricultural income; dairy, poultry, and fisheries are now fully taxable.
Agro-Based Industries:
Tax incentives have been significantly reduced, with only small-scale agro-industries retaining benefits, while large agribusinesses face higher taxes.
NRI will be taxed as residents
- NRIs Will Be Taxed as Residents at 120 Days (Not 182 Days!) Old Rule: NRIs were taxed as residents only if they stayed in India for 182+ days. New Rule: If an NRI ➟ stays 120+ days & earns ₹15L+ in India, they will be taxed as a Resident. More NRIs will now be taxed on global income. Be careful with your India travel plans! Staying too long = Higher tax liability.
NRIs’ Global Income is Now Under Tax Radar!
Earlier: Only Indian income was taxed for NRIs. Now: If you qualify as RNOR (Resident but Not Ordinarily Resident), India may tax your foreign passive income!
Which foreign incomes will be taxed? Interest earned from foreign bank accounts Dividends from foreign stocks Capital gains from selling foreign assets Foreign Assets & Bank Accounts Must Be Reported!
NRIs & residents must declare all foreign assets & bank accounts in tax filing
What must be disclosed? Foreign bank accounts Offshore real estate Foreign stocks, ETFs, & mutual funds Cryptocurrency holdings on foreign exchanges
Penalty for hiding assets? 300% of tax due + Criminal Prosecution!
Foreign Remittances Will Face Higher Scrutiny!
LRS (Liberalized Remittance Scheme) is under stricter tracking!
Sending ₹7L+ abroad? Higher TCS (Tax Collected at Source)! Investing overseas? Indian authorities will track your money. Foreign education & medical remittances still get lower TCS, but with more documentation.
NRIs, plan your remittances wisely! Extra taxes can eat into your savings.
Foreign Businesses with Indian Clients Now Taxable!
New Significant Economic Presence (SEP) Rule: Even if a company has NO physical office in India, it may be taxed if it serves Indian clients.
Who is affected? Foreign SaaS & IT companies with Indian customers 💻 E-commerce platforms selling to India 🛍️ Consultants & freelancers earning from Indian clients 📊
Dubai or Singapore won’t protect you anymore! Your business may still be taxed in India
Stricter Rules for Claiming DTAA (Double Tax Avoidance Agreement)!
NRIs using DTAA benefits must now submit MORE documentation!
New Requirements: Report all foreign taxes paid & refunds received Declare DTAA-covered income in a prescribed format Any misuse of DTAA benefits = Penalties & legal action!
The loopholes in DTAA are closing fast! Ensure full compliance!
- Foreign Crypto & Offshore Investments Now Taxed Differently!
- If you invest in Bitcoin, Ethereum, or any crypto via a foreign exchange, you must declare it! 🚀
New Tax Rules: Crypto transactions with foreign exchanges MUST be reported. Foreign mutual funds, ETFs, & REITs face new capital gains tax rules. If you hold foreign stocks (Apple, Tesla, Amazon), taxation rules have changed!
NRIs investing abroad? Track these new tax rules or risk massive fines!
Foreign Pension & Retirement Accounts Now Under Tax Lens!
Have a 401(k) in the US, Superannuation in Australia, or EPF in UAE?
New Tax Rules: Withdrawals from foreign retirement accounts may now be taxed in India! DTAA benefits apply ONLY under strict conditions. NRIs must disclose all foreign pension accounts when filing taxes.
Returning to India?
Plan your withdrawals carefully to avoid higher taxes! Returning NRIs Get Special 2-Year Tax Relief! If you return to India, you get tax benefits—but only for 2 years!
Special Provisions:
Foreign income earned before return = Not taxed in India. You get RNOR status for 2 years to adjust your tax status. After 2 years, your global income may be taxed in India.
Heavy Penalties & Criminal Charges for Non-Compliance!
Hiding foreign income? ➟ 300% penalty + Jail time 🚔 Failure to disclose foreign assets? ➟ Criminal charges under anti-black money laws Foreign transactions above ₹50L not reported? ➟ Your income may be seized!
Qualitative Improvements Simplified language, making the law more accessible. Consolidation of amendments, reducing fragmentation. Removal of obsolete and redundant provisions for greater clarity. Structural rationalization through tables and formulae for improved readability. Preservation of existing taxation principles, ensuring continuity while enhancing usability.
Crypto as Property:
Virtual digital assets such as cryptocurrencies have been included in the definition of property to be counted as a capital asset.
Dispute Resolution:
It provides the points of determination, decision, and the reasons behind it, marking a shift from the earlier section, which lacked clarity on the manner of issuing DRP directions.
Capital Gain Exemptions:
Section 54E of the Act, which details exemptions for capital gains on transfer of capital assets prior to April 1992 has been removed.
Tax Year:
The Bill introduces the concept of “tax year”, which has been defined as the 12-month period beginning April 1.
April 2025
Banking Laws (Amendment) Bill, 2024 passed
The bill was passed in the Lok Sabha, with amendments made by the Rajya Sabha. The bill focuses on enhancing regulatory standards in banking.
July 2025
Parliamentary panel finalises the report
- The select committee of the parliament finalised the report on the bill with 285 suggestions
- Likely to be submitted in the monsoon session , to be started from july 21.
- The committee headed by the BJP MP Baijayant Panda 1
