In a major relief for foreign investors in India from Mauritius, Singapore and Cyprus, the Central Board of Direct Taxes (CBDT) has clarified that investments from these countries made prior to April 1, 2017 would be eligible for benign or zero capital gains tax, irrespective of whether the investors’ sole purpose was tax avoidance.

In a fresh guidance note issued on January 21, the tax board said the anti-avoidance measure “Principal Purpose Test (PPT)” agreed to in March last year under a bilateral protocol, would be grandfathered in respect of Mauritius, Singapore and Cyrpus.

The PPT is a provision included in tax treaties between countries that have signed and ratified the ‘Multilateral Instrument’ (MLI), an action plan introduced by the Organisation for Economic Cooperation and Development to address tax avoidance in cross-border arrangements.

The income tax department has notified amendments in I-T rules to prescribe conditions for applicability of presumptive taxation regime for non-resident cruise ship operators.

As a measure to promote investment and employment, the government had in the July Budget, provided a presumptive taxation regime for non-residents, engaged in the business of operation of cruise ships.

Further, exemption has been provided for any income of a foreign company from lease rentals of cruise ships, received from a related company which operates such ship or ships in India.

The Central Board of Direct Taxes (CBDT) has said that the Principal Purpose Test (PPT), which allows for deeper scrutiny of treaty benefits claimed by investors, will apply prospectively.

A guidance note issued by the country's apex direct taxes body clarified that past investments made under tax treaties with countries including Mauritius, Cyprus and Singapore will not be subject to PPT, bringing relief to investors.

The PPT, a globally accepted rule, aims to prevent large companies from avoiding taxes by scrutinising business arrangements that have been made purely for tax benefits as their main purpose.

The transition of Indian tax administration to a digitised and faceless assessment system, introduced in 2019 by the Narendra Modi government, represented a ground-breaking move toward providing a non-intrusive, non-adversarial tax ecosystem. Spearheaded by the National e-Assessment Centre (NeAC), faceless tax assessments were meant to eliminate human interaction, reduce bias, and improve transparency and efficiency in tax administration. The system promised timely case disposal, team-based assessments, and the standardisation of procedures, offering a streamlined and fairer approach for taxpayers across the country.

The elementary difference was that in the older manual assessments, the mode of the interface was physical and personal, whereas the 'faceless assessment', true to its name, is electronic, minimising chances of corruption.

A major update to the Direct Tax Vivad Se Vishwas Scheme, 2024 was made to provide relief to a large number of left out taxpayers who could not otherwise apply for this scheme due to certain specified situations. In an order dated January 20, 2025 the Ministry of Finance has removed ‘the difficulties’ which arose due to certain situations and provided relief to taxpayers who wanted to apply for the Vivad Se Vishwas Scheme but could not do so earlier.

With these difficulties now being removed, more taxpayers would be able to settle their pending income tax disputes by applying for the Vivad Se Vishwas Scheme, 2024. This scheme, announced in Budget 2024 is aimed at closing the pending income tax dispute cases as the government forgoes the interest and penalty amount if the taxpayer pays the disputed amount of income tax.

The law mandates women have a right to get financial support from their spouse during separation or following a divorce. This financial support is called alimony, however, it's not as simple as it seems. It may be a one-time payment of a lump sum, or it may be in the form of regular payments or a combination of both. Often interim maintenance payment starts before divorce while it may also continue after divorce. Sometimes alimony is not pure financial support, rather it can be distribution of family assets also.

Each alimony case is distinct and personal to the case at hand. Regardless of this fact, alimony is a financial transaction and like all financial transactions are required to stand the scrutiny of income tax liability. So, do the beneficiaries receiving alimony need to pay income tax on it? The answer to this is tricky.

The Income Tax department wants you to use cash responsibly so that you don’t get into any trouble as far as compliance with income tax laws are concerned. The Income Tax department says you can’t claim any tax deduction if you use cash for transactions like donations to political parties, rural development, etc. Moreover, the law also mentions that if you use cash for conducting transactions, then in certain circumstances you can’t claim expenses as deductions against your income thereby inflating your income and thus increasing your tax liability.

"The brochure issued by the Income Tax Department points out various provisions wherein excess payment made by way of cash will be deemed as income. This also indicates how the government is focused on reduction of illicit cash payments and formalisation of the economy.

Due to the hike in dearness allowance (DA) of central government employees to 50%, the gratuity limit for central government employees has increased to Rs 25 lakh from Rs 20 lakh previously. The new gratuity limit is effective from January 1, 2024. The announcement of the new gratuity limit was made in a circular issued by the Department of Pension & Pensioners Welfare under the Ministry of Personnel, Public Grievances and Pensions. The circular was issued on May 30, 2024.

According to the department's office memorandum, "Department of Expenditure vide their OM No. 1/1/2024-E-II(B) dated 12.03.2024 has issued instructions regarding enhancement of Dearness Allowance Rates from 46% to 50% of the Basic Pay with effect from 1st January, 2024. Accordingly, as per the government's decisions in implementation of the recommendations of the Seventh CPC, the maximum limit of Retirement Gratuity and Death Gratuity under the Central Civil Services (Pension) Rules, 2021, would be increased by 25% i.e., from Rs 20 lakh to Rs 25 lakh, with effect from 1st January 2024."

The Delhi High Court on Wednesday held that South Korean multinational Samsung Electronics Co's wholly-owned subsidiary's premises in India do not represent a fixed place permanent establishment (PE) and, therefore, it cannot be taxed by Indian tax authorities.

Rejecting a batch of petitions by the Income Tax department, a division bench led by Justice Yashwant Varma upheld the Income Tax Appellate Tribunal's order.

"We find ourselves in complete agreement with the opinion expressed by the tribunal, since the secondment of employees has not been found to be for the furtherance of the business or enterprise of the respondent. Those seconded employees were not discharging functions or performing activities connected with the global enterprise of the respondent.

In a significant ruling, a quasi-judicial body has upheld the Income Tax (I-T) department's ability to attach properties under the anti-benami law even if the actual owner of the property is not identified. The ruling, issued by the Adjudicating Authority set up under the Prohibition of Benami Property Transactions (PBPT) Act, 1988, confirms that the law provides a mechanism to deal with cases where the actual owners or the person who paid for the property cannot be traced.

The decision relates to an ongoing case in which the Lucknow unit of the Income Tax department attached several properties in the Kakori area of Lucknow, valued at over Rs 3.47 crore, in 2023. These properties were purchased by real estate groups using large amounts of unaccounted cash, a common sign of benami transactions, where the property is held in someone else's name but the true owner is different.

The Centre’s direct tax collections, after refunds, grew 15.9% year-on-year to Rs 16.9 lakh crore till January 12 in the current financial year, data released by the finance ministry showed on Monday.

The growth in mop-up so far surpassed the direct tax collection growth pegged in the Budget, at 12.8%, mainly due to sharper net non-corporate tax (mainly personal income tax) collections.

As on January 12, the mop-up from net non-corporate taxes stood at over Rs 8.74 lakh crore, up 21.6% year-on-year, and net corporate tax collections were around Rs 7.68 lakh crore, up 8.2% on year.

The Budget had presumed personal income tax collections to grow 14% on year, and corporate tax to grow by 12%.

The Income Tax Department has recently released a brochure emphasising the importance of avoiding cash transactions to mitigate tax penalties. This initiative aims to educate taxpayers about the potential financial repercussions of cash dealings, which can lead to severe penalties under the Income Tax Act.

“Say No To Cash Transactions. Individuals prefer to receive, pay, and transfer cash when the amounts of transactional value (money) involved are marginal to small,” the Income Tax Department in a brochure released on January 2, 2025 said.

The brochure advises taxpayers to refrain from using cash for daily transactions, particularly those involving significant amounts. The department noted that many individuals often resort to cash payments for convenience, but this practice can lead to unintentional violations of tax regulations.

In her budget speech 2024, finance minister, Nirmala Sitharaman said, “To dispose of the backlog of first appeals, I plan to deploy more officers to hear and decide such appeals, especially those with large tax effect.”

As per the Central Action Plan (Financial year 2024-25), the approximate pendency as of April 1, 2024 was 3.01 lakh appeals (that were filed before April 1, 2022) at the level of CIT (Appeals). The aggregate number of appeals to be disposed of as of March 31, 2024 were 5.49 lakh.

The government has taken several steps to ease litigation. Budget 2024, announced an increase in the threshold limits for filing of appeals by the Income-tax (I-T) department, plan for increasing the strength of Appellate Commissioners to reduce the backlog of appeals, and introduction of Vivad Se Vishwas Scheme to settle pending appeals. But a lot more could be done, especially to improve the Faceless Appeals Scheme and suggestions are pouring in from various trade associations and tax experts.

Finally good news is there for those taxpayers who are eligible to claim section 87A tax rebate but were prevented from claiming it post July 5, 2024. The Income Tax Department has now updated the excel utilities for ITR Forms 2 and 3 to exercise the option to update tax rebate under section 87A for FY 2023-24 (AY 2024-25). The department also said the HTML utilities will be made available shortly. This information was mentioned by the Income Tax Department in the late hours of yesterday.

The only catch is you have to manually edit the tax rebate column in the ITR excel utility and then validate it in order to claim section 87A tax rebate. If you leave the tax rebate column to be auto filled then you won’t get 87A tax rebate, say experts who tried all possible permutations and combinations. However, this manual editing option although seems to work for the time being needs more clarity, says experts.

The Indian government and its law enforcement agencies get detailed information about financial accounts held by Indian residents in foreign countries through two sources. The information includes: (i) Account holder's name, address, and tax identification number (TIN); (ii) Account number and balance; (iii) Details of foreign income such as interest, dividends, and other financial proceeds.

FATCA and CRS are the two sources of information that help the Indian income tax department to know the global income of its resident taxpayers. This also helps the department identify taxpayers who may not have disclosed their foreign assets and income.
CRS stands for the Common Reporting Standard and FATCA stands for the Foreign Account Tax Compliance Act.

Family trusts, often used to ring-fence wealth and enable smoother succession planning by ageing patriarchs of Indian households, will not have the freedom to add cousins, nephews, niece, or other `non-relatives’ as ‘beneficiaries’ in future.

If a trust deed gives trustees the liberty to include such persons even years later, the trust could be taxed today on all properties, securities and funds that have been transferred to it, according to a judicial pronouncement this week.

A discretionary trust is formed by the settlor (often the head of the family who transfers the assets). Immediate family members are named as beneficiaries, and independent professionals or a trusteeship company serve as trustees responsible for distributing a trust's earnings from like interest, rent, and capital gains to the beneficiaries in proportions that are not predetermined.

The Central Board of Direct Taxes (CBDT) is set to enhance its operations in 2025 by adopting a so-called 'PRUDENT' approach, as highlighted by chairman Ravi Agrawal in his end-of-year address to the Income Tax Department.

"Let the PRUDENT approach, with all its seven elements, continue to guide us as we navigate the complexities of our work. This ensures that we not only compete with ourselves but also continually set new standards in public service. Let us recognise our strengths, identify areas for improvement, and remain adaptable to meet the challenges of this ever-changing landscape," Agrawal said in his address.

According to Agrawal, the acronym PRUDENT stands for specific traits: 'P' for professionalism, 'R' for being responsible and responsive, 'U' means understanding transactions and businesses, 'D' represents dedication and due diligence, 'E' represents effective enforcement, 'N' stands for for non-intrusive administration and 'T' reflects technology-based tax administration.

Income Tax Return Filing: The normal income tax return filing deadline for AY 2024-25 ended on July 31, 2024. The deadline to file a belated ITR with a penalty amount of Rs 5,000 will end on December 31, 2024. Even after the July 31 deadline, the Income Tax Department gave different categories of taxpayers specific deadlines to furnish ITRs. For example, the tax department extended the ITR filing date for those requiring audit of their accounts from 31st October, 2024 to 15th November, 2024.

Here, we will talk about five key changes in income tax rules with respect to filing of tax returns by taxpayers.

Enhanced tax transparency with new Form 26AS
The introduction of the new Form 26AS provides comprehensive information to taxpayers, including details of tax deductions or collections at source, specified financial transactions (SFTs), payment of taxes, demands, and refunds.

The Income Tax Department has extended the deadline of Vivad Se Vishwas Scheme 2024 from December 31, 2024 to January 31, 2025. This scheme helps taxpayers to settle an ongoing dispute by paying a lower amount of income tax. Had the deadline been not extended the taxpayers would have been required to pay 10% extra tax for applying for the scheme. Deadline extension comes as a big relief for taxpayers who are yet to apply for Vivad Se Vishwas Scheme 2024.

“The Central Board of Direct Taxes (CBDT), in exercise of its powers under sub-section (2) of section 97 of the Direct Tax Vivad Se Vishwas Scheme, 2024 (‘the Scheme’) extends the due date for determining amount payable as per column (3) of the Table specified in section 90 Of the Scheme from 31 December, 2024 to 31 January, 2025,” The Income Tax Department said in a circular dated December 30, 2024.

Sometimes the income tax department makes mistakes while processing the ITR and these are the mistakes which can be seen in plain sight like in AIS, TDS certificates, etc. To rectify these minor mistakes, which are apparent from the records, the taxpayer has to file a rectification application with either the CPC or AO depending on who has access right to the ITR.

However, if the ITR’s access rights remained with the centralised processing centre (CPC) only then you could file an online rectification application for correcting such mistakes. However, if the ITR’s access rights were transferred to the AO then an rectification request could not be filed online and taxpayer needed to do it in paper form.