The Finance Bill, 2025 has notified the amendment in the Chapter XIV-B of the Income-tax Act, 1961 and has redefined the approach to block assessments and emphasizing the determination of undisclosed income. These changes mark a pivotal shift in the income tax framework, focusing on transparency and targeted taxation.
Assessment of Undisclosed Income
The assessment of total income has now been replaced with the assessment of total undisclosed income. The modification ensures that search and requisition operations primarily identify unreported earnings. Additionally, any pending proceedings within the block period are now abated and included in the block assessment. This allows the Assessing Officer (AO) to compute undisclosed income using search findings, requisitioned evidence, and other relevant materials. However, regular income will continue to be assessed through conventional bookkeeping records.
Key Amendments to Specific Sections
Section 158BA
- The term ‘total income’ has been replaced with ‘total undisclosed income’ in the marginal heading and subsections (1) and (7), clarifying the focus on undisclosed earnings.
Section 158BB
- The computation of total undisclosed income now follows a structured approach, distinguishing between disclosed and undisclosed income.
- The block period’s total undisclosed income will include:
- Undisclosed income declared in the return under section 158BC.
- Undisclosed income determined by the AO under subsection (2).
- Certain categories of income are explicitly excluded from undisclosed income, including:
- Income determined or assessed under specific provisions such as sections 143(1), 143(3), 144, 147, 153A, 153C, and prior block assessments.
- Income declared in returns filed under section 139 or in response to notices under section 142(1) before the search.
- Income computed using regularly maintained books of accounts.
- Income covered under special provisions such as sections 115A(5), 115G, and 194P(1).
Section 158BC
- The taxpayer must furnish the block return within the specified time, not exceeding 60 days.
- If the due date for a previous year’s return has not expired, an additional 30 days may be granted for auditing books of accounts under the fifth proviso of section 158BC(1)(a).
- Conditions for seeking an extension include prior audit obligations under section 44AB, maintenance of accounts in the normal course, and a written request for extension.
Section 158BD
- The block period for another person covered under this section has been explicitly defined, ensuring consistency with the specified person’s block period.
- Abatement provisions have been clarified to account for cases where valuables or documents indicating undisclosed income are seized.
Section 158BE
- The time limit for completing a block assessment has been set at twelve months from the quarter in which the last search or requisition authorization was executed.
- If an additional 30-day extension is granted for block return filing, the time limit extends to thirteen months.
Section 113
- The tax rate of 60% will now apply specifically to total undisclosed income rather than total income, aligning with the structural modifications in Chapter XIV-B.
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