The Finance Bill, 2025 seeks to amend the Income Tax Act, 1962. These changes will come into effect from the date of enactment of the Finance Bill, 2025.
Changes in Taxation of Trusts and Institutions
Amendment to Section 12AB: Trusts and institutions with a total income not exceeding ₹5 crores (excluding exemptions under Sections 11 and 12) will now receive registration for 10 years instead of the previous 5 years. This change provides long-term certainty and reduces the administrative burden on charitable entities.
Amendment to Section 13: Individuals contributing more than ₹10 lakh to a trust will now fall under the definition of specified persons for compliance purposes. This amendment strengthens monitoring mechanisms and ensures greater accountability in financial transactions involving trusts.
Capital Gains and Investment Incentives
Amendment to Section 23FE: The exemption on long-term capital gains for sovereign wealth funds and pension funds has been extended until 2030. This move aims to encourage continued foreign investment in India’s infrastructure and development projects.
Amendment to Section 50AA: A clarification has been introduced regarding the treatment of short-term capital gains on specified assets, ensuring a more uniform approach to taxation and reducing ambiguity.
Expansion of Tax Benefits under Section 34B: The scope of Section 34B tax benefits has been broadened to include ships, in addition to aircraft. This change is expected to provide a boost to the maritime sector by making capital investments more attractive.
TDS and TCS Amendments
Section 194J: The threshold limit for TDS deduction on professional fees has been increased from ₹30,000 to ₹50,000. This relaxation will reduce the compliance burden for small businesses and professionals.
Section 194K: The threshold limit for TDS on mutual fund income has been increased from ₹5,000 to ₹10,000, benefiting retail investors and reducing minor deductions on small-scale investments.
Section 194LA: The TDS threshold for compensation on compulsory land acquisition has been raised from ₹2.5 lakh to ₹5 lakh, providing relief to landowners receiving compensation.
Section 194LBC: TDS on income from securitization trusts has now been standardized at 10%, streamlining tax compliance and ensuring uniform treatment across transactions.
Section 206C: The tax collected at source (TCS) on timber and forest produce has been reduced from 2.5% to 2%, easing the financial burden on businesses engaged in forestry and timber trade.
Penalty and Compliance Updates
Section 270AA: This section now provides relief to taxpayers who accept tax assessments without litigation, promoting voluntary compliance and reducing prolonged disputes.
Section 271AAB & 271BB: Modifications have been introduced in penalty provisions for undisclosed income to ensure a more structured and transparent penalty regime.
Omission of Section 206AB: The removal of this section simplifies compliance related to higher TDS rates for non-filers, reducing complexities in tax deductions and easing the burden on businesses and individuals.
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