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June 4, 2023 / INCOME TAX

GST & Income Tax Restrictions on Cash Transactions

cash.

GST and Income Tax Restrictions on Cash Transactions

One must be cautious when engaging in any high-value cash transaction because the Income Tax Department has become extremely vigilant about cash transactions.
First, we must define High Value + Cash Transaction.
High-value transactions involve substantial sums of money.
First, we must understand the provisions of Income Tax and GST pertaining to Cash Transactions.

There is no provision in GST that restricts cash transactions, but in Income Tax, we have the following list of transactions that are restricted.

List of cash transaction restrictions under income tax law, one by one: –

Section 269T :- This section limits cash repayment of any loan, deposit, or specified sum to Rs. 20000/- or more.
Section 269ST :- Cash transaction restrictions :- The section was introduced by the Finance Act, 2017, and it prohibits a person from receiving an amount of Rs. 2 lakh or more.
- From a single person over the course of a day or,
- In the consists of a single transaction or,
- In the case of transactions involving a single event or occasion from an individual.
- Aside from an account payee cheque/draft or the use of an electronic clearing system via a bank account.
- Note: The above cash transaction limit applies to the receiver, not the payer. For the purposes of this Section, bearer cheques and self-cheques will also be considered CASH.
Section 269SS :- This section prohibits accepting any loan, deposit, or specified sum in cash unless the total amount (including previous deposits) is Rs. 20,000/- or more.
Section 269SU (W.E.F. 01-11-2019):- In addition for other electronic modes of payment, where any such person provides the payment facility, in case of total sales, turnover and gross receipt of a company in the preceding year is more than 50 crore Rupees, every person carrying on business shall provide the facility to accept payment by electronic method as prescribed, in addition to facility for other electronic modes. The common commissioner may impose a penalty of 5000 per day for infringement of the terms of Section 269SU, during which such failure continues following an announcement of an exhibition cause.
- √ Incentive Provisions
- √ Section 44AB –
  - Every person,-
  - Business Carrying, if its entire sales, turnover or gross receipts, as
  - the case may be, in business exceeds or exceeds 1 crore rupees in any previous year.”
  - The following proviso shall be inserted throughFinance Act 2020e.f. A/Y 2021-22:-
  - “Provided, in case of a person whose –
  - The aggregate of all amounts received in cash during the previous year, including amounts received for sales, turnover, or gross receipts, does not exceed 5% of the said amount, and
  - During the preceding year, the total of all cash payments, including expenditures, does not exceed 5% of the total payment,
  - This clause would be construed as if the words “one crore” had been replaced with “five crore rupees”
Section 44AD (presumptive Taxation) :- Normally, an eligible assessee who operates an eligible business subject to the rules of section 44AD must disclose net profit at 8% of turnover/gross revenues (up to turnover of 2 crore rupees). However, with effect from April 1, 2017, a proviso was added to provide for a reduced presumptive tax of 6% instead of 8% in respect of the amount of turnover or gross revenues received via account payee check or any other means provided therein.
Sections 43CA, 50C and 56:- Real-estate-related transactions. :- The laws above provide that the consideration for the transfer of any immovable property cannot be less than the stamp value determined by the stamp valuation authority. However, where the transaction is the consequence of a previously completed agreement, the value as per the agreement may be used if any advance payment was made through account payee check or any other specified means.

Compliances in respect of cash Transactions

Section 285BA – Section 285BA read with Rule 114E makes it mandatory for certain individuals to report information of cash receipts/deposits in excess of Rs. 200000/-..
Section 194N (w.e.f. 01-09-2019) – Every person, from,-

a) A post office or

b) A banking, or

c) A co-operative society that engages in the banking business,

who is responsible for paying any sum, or aggregate of sums, in cash, in excess of 1 crore to any person from one or more accounts maintained by the recipient with it during the previous year shall deduct an amount equal to 2% of the sum exceeding one crore rupees as income tax at the time of payment of such sum.

Section 80D:- If a health insurance premium or medical expense for the assessee, his parents, or dependent family members is paid in cash, no deduction from gross total income is allowed.
Section 80G :- If a donation exceeds Rs. 2000/- in cash, no deduction is allowed.
Section 80GGA :- If a donation for scientific research or rural development exceeds Rs. 10,000/-, it is not tax deductible.
Section 80GGB :- If paid in cash, an Indian Company’s contribution to any political party or electoral trust is NOT deductible.
Section 80GGC :- If paid in cash, a contribution made by anyone other than an Indian company to any political party or electoral trust is NOT deductible.
Section 80JJAA :- This Provision allows for a deduction of 30% of additional employee costs incurred in the course of such business in the previous year for the previous 3 assessment years, including the AY relevant to the PY in which such employment is provided. The deduction is subject to the conditions specified in the section, as well as the payment being made in any mode other than cash.
Section 13A : – There should be no donation in cash to political parties that exceeds Rs. 2000/-.
Section 35AD :- In case of cash beyond the value of Rs. 10000/-, the capital expense covered by U/S 35AD should NOT be permitted as deductions.
Section 36 :- Section 36(1) (ib) sets up a deduction limit on the employer’s premium amount paid in cash for his employees’ health insurance.
Section 40A (3) and 40A (3A) :- In order to deduct income from business and profession, payments or aggregates made to a person on a day other than a cheque payer or a demand drafts, or use of an electronic clearing system through a bank account exceeding Rs. 10 000/ – are NOT allowed for the purpose of calculating incomes on a business and vocational basis.
- For transportation charges this limit is expanded to Rs. 35,000/-. The Rule 6DD of the Revenue Tax Rules provides for few exceptions.
- Crux – NO PENALITY but expenses shall be DISALLOWED

Section 40A (3A) provides for the claim of any amount as expenditure in any specific year and for any future year the payment of cash in excess of Rs. 10000/- (transport charge of Rs. 35000/-) shall be made. The same applies to the revenue of the next year.

Section 43(1) :- When an assessee spends more than Rs. 10,000 on assets that are not purchased through banking channels, the cost of the asset is not included in the cost of the asset, which means that DEPRECIATION is not allowed on that cost.

October 17, 2020 / INCOME TAX

PERIOD OF HOLDING FOR CAPITAL GAINS AS PER THE INCOME-TAX ACT, 1961

A capital asset may either be a short-term or long-term capital asset, depending on the period of holding. Gains from alienation thereof would be short-term capital gains or long-term capital gains.

Under section 2(42A) of the Income-tax Act, 1961 (Act), a short-term capital asset means a capital asset held for not more than 36 months immediately preceding the date of its transfer. However, in the following cases, an asset held for a period of 12 months or less was regarded as a short-term asset:-

Equity or preference share in an Indian company (whether listed or not)

Units of a mutual fund (whether listed or not).
Any other listed security (debentures, government securities, etc).
Unit of the Unit Trust of India.
Zero coupon bonds.

Change in period of holding of share and securities section 2(42A)

Per the existing provisions, short-term capital asset means a capital asset held by tax payer for not more than 36 months immediately preceding the date of its transfer. However, in the case of a share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India or a unit of a Mutual Fund or a zero coupon bond, the period of holding for qualifying it as short-term capital asset is not more than 12 months. Budget proposes that securities (other than a listed security) and units of mutual funds (other than equity oriented funds) [hereinafter referred to as ‘Securities’] shall be regarded as short term capital asset where the same are held for a period of less than 36 months.

Consequently, capital gains earned by resident & non-resident tax payers on transfer of Securities held for a period of more than 12 months but less than 36 months would be chargeable to tax @30% & 40% respectively (instead of 20% if the shares are not freely marketable or 10%1 if the shares are freely marketable, as applicable under the existing income tax provisions).

The Memorandum to the Finance (No. 2) Bill, 2014 explained that shorter period of holding of not more than 12 months for consideration as short-term capital asset was introduced for encouraging investment on stock market where prices of the securities are market determined. Question therefore arises whether withdrawal of the benefit suggest that investment in stock markets is the only avenue of foreign investment being considered favorably.

The Finance Minister in his speech mentioned that Government will endeavor not to introduce retrospective taxes. As the Budget got presented in July 2014 and the amendment to section 2(42A) was proposed to take effect from assessment year 2015-16 (i.e. April 1, 2014 onwards), the amendment could have a colour of retrospectively. However, to provide relief for taxpayers, the LokSabha (while passing the Finance (No. 2) Bill, 2014) introduced a deeming provision that such Securities shall continue to be long-term capital assets if they have been transferred during the period from 1 April, 2014 to 10 July, 2014 after holding them for a period of more than 12 months (instead of more than 36 months).

Taxability of long term capital gain: Long term capital gain shall be taxable at 20% under section 112 of income tax act. Benefit of indexation shall be available to the assessee under section 48 of income tax act 1961.There is no change in finance act 2014 and 2015 regard to indexation.

Taxability of Short term capital gain: Short term capital gain shall be taxable at normal rate i.e. 30% for resident and 40% for non resident. Continue reading “PERIOD OF HOLDING FOR CAPITAL GAINS AS PER THE INCOME-TAX ACT, 1961” →

July 14, 2021 / DTAA

Section 37(1) of the Income-tax Act, 1961 – Business expenditure – Allowability of Compensation

AO couldn’t question reasonableness of business exp. when its genuineness wasn’t doubted.

Where assessee made payment of compensation to CCL, a foreign company, for premature termination of Toll Manufacturing Agreement (TMA) entered into between parties, said payment being directly having nexus with business activity of assessee, was to be allowed as deduction under section 37(1)

Section 37(1) of the Income-tax Act, 1961 – Business expenditure – Allowability of Compensation [2015] – ITAT MUMBAI -Dystar India (P.) Ltd v. DCIT

Assessee and CCL entered into a Toll Manufacturing Agreement (TMA) whereby CCL agreed to undertake production of textile dyestuff for and on behalf of assessee company During year under consideration assessee debited certain amount towards short-notice payment on account of termination of TMA.

Assessee claimed that amount so paid was allowable as revenue expenditure Assessing officer rejected assessee’s claim holding that expenditure could not be held to be exclusive and necessarily for business of assessee.

ITAT Held that since genuineness of agreement between parties as well as payment of compensation was not doubted, and since payment in question had a direct nexus with business activity of assessee, it was to be allowed as business expenditure

Delay in filing e-TDS return due to technical default in software of department won’t attract penalty on assessee

Where assessee could not file e-TDS statements in Form Nos. 24Q and 26Q within prescribed time on account of technical defect in software of department accepting said statements, delay in filing statements being beyond control of assessee, impugned penalty order passed under section 272A(2)(k) deserved to be set aside

Section 272A of the Income-tax Act, 1961 – Penalty – For failure to answer question, sign statements etc. -Delay in filing statements [2015] – ITAT CUTTACK -State Bank of India v. JCIT

Assessee filed quarterly e-TDS statements in Form Nos. 24Q and 26Q for different quarters for relevant financial years.Assessing Officer taking a view that there was no reasonable explanation for delay in filing 24Q/26Q statements, imposed penalty under section 272A(2)(k)

It was noted that computer generated number for acknowledging receipt of such statements was not in hands of assessee insofar as generation of that number could not occur till such time PANs and information available on AS-26 were tallied by computer system itself.It was also undisputed that relevant software was only available to franchisees outsourced by department or NSDL being apex Nodal Agency

It was held by ITAT that since delay in filing statements being beyond control of assessee, impugned penalty order deserved to be set aside

Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-43520194

June 17, 2025 / Direct Tax

Cash Deposits under Presumptive Taxation-Attract Sec 68/69A?

Cash Deposits under Presumptive Taxation—Whether Attract Section 68 or 69A?

Cash deposits under presumptive taxation schemes (Sections 44AD, 44ADA, & 44AE) and their implications u/s68 of the Income Tax Act.

Section 44AD/ADA/AE allows eligible businesses and professionals to declare profits on a presumptive basis, thereby exempting them from maintaining books of accounts u/s44AA, provided they declare profits at the specified rate. The presumptive scheme aims to simplify tax compliance for small businesses, where cash transactions are typically higher, and enforcement of strict book-keeping is impractical.

Applicability in Presumptive Taxation Cases

Section 68 – Not Applicable, Precondition must comply with the Maintenance of Books: As per Section 68, additions can only be made if the sum is credited in the books of the assessee. In presumptive taxation cases under Sections 44AD/ADA/AE, books of account are not required to be maintained, hence Section 68 cannot be invoked.

Presumptive Taxation (Sec. 44AD/44ADA/44AE):

Presumptive Taxation Scheme under Section 44AD, 44AE and 44ADA

Assessees opting for presumptive taxation are not required to maintain books of account u/s44AA. Their income is deemed at a certain percentage of turnover (e.g., 8% or 6% for digital receipts under Sec. 44AD). Once presumptive income is accepted, no further verification of expenses, receipts, or deposits is generally warranted

Section 68 Requirements:

For Section 68 to apply There must be a credit entry in the books of account. The assessee must have failed to explain the nature and source of the credit. The Assessing Officer must not be satisfied with the explanation. No books = No Section 68 addition.

Interaction with Section 69A (Unexplained Money):

While Section 68 requires entries in books, Section 69A allows addition of unexplained money found in possession or control of the assessee. AO may invoke Section 69A if The cash deposits are significantly higher than gross receipts declared. There is independent evidence that such deposits are not business receipts. And Deposits are out of sync with the nature and scale of the business. However, burden lies on the AO to establish disconnect between deposits and business operations covered under presumptive tax scheme.

Section 68 vs Section 69A – Key Conditions

Particulars	Section 68	Section 69A
Trigger	Unexplained cash credit in books of account	Unexplained ownership/possession of money, bullion, etc. not recorded in books (if maintained)
Books Required?	Yes – Must be in the books of the assessee	Not necessarily; applies even where books are not maintained
Assessee’s Explanation?	Required about nature & source of credit	Required about ownership/source of assets or money
Burden of Proof	Initially on assessee	Initially on department to prove possession is unexplained

Key Judicial Principles Reaffirmed Pronouncements:

Section 68 requires “books of account” maintained by the assessee:

Anand Ram Raitani v CIT: “Existence of books of account is a condition precedent for invoking Section 68.”
CIT v. Surinder Pal Anand: Once presumptive income is accepted, AO cannot demand explanation for cash deposits if books are not maintained.
Nand Lal Popli v DCIT: AO cannot require detailed linkage of bank deposits with business receipts under presumptive regime.

Bank Passbook ≠ Books of Account (Sec 2(12A)): Bank Passbook is maintained by the bank, not the assessee., Not admissible as “books” for Section 68 purposes. CIT v Taj Borewell [2007] 291 ITR 232 (Mad): Balance sheets and P&L are by-products, not books.

Loose Sheets ≠ Books of Account: Common Cause v UOI [2017] 394 ITR 220 (SC): Loose papers are not sufficient for additions; inadmissible as evidence.

Question : Can bank deposits be treated as unexplained cash credit (u/s 68) when income is declared under presumptive taxation?

And: No, additions u/s68 generally cannot be made for bank deposits if the assessee has declared income under presumptive taxation (Sections 44AD, 44ADA, or 44AE) and is not required to maintain books of account, unless there is clear evidence that the deposits are from non-business sources or unexplained funds.

Practical Interpretation in Case Can Bank Deposits Be Treated as Unexplained Cash Credit (u/s 68) :

if cash deposits in the bank account can be reasonably linked to business receipts, no addition should be made u/s68. If books of accounts are not maintained, a pre-condition of Section 68 fails. However, if deposits are clearly from unexplained or unrelated sources, or significantly exceed turnover, the AO may investigate under other sections (e.g., Section 69 – unexplained investments).

Suggested Defense Strategy in Scrutiny Cases Involving Presumptive Taxation (Sections 44AD/44ADA/44AE)

Reiterate Eligibility under Section 44AD/44ADA/44AE:

Clearly establish that the assessee qualifies for presumptive taxation under the relevant section, based on the nature of business/profession and the turnover/receipts being within the prescribed threshold. Submit a brief factual summary including PAN, nature of business, and turnover figures.

Highlight Exemption from Maintaining Books of Account:

Refer to Section 44AA read with Section 44AD/ADA/AE, which relieves eligible assessees from the obligation to maintain regular books of accounts, provided income is declared at the prescribed presumptive rate. Assert that no books of account were maintained, and this is in full compliance with the law.

Bank Deposits Relate to Gross Receipts:

Cash deposits made into the bank account are part of the regular business activity and represent gross receipts, out of which presumptive income has been offered to tax. Where feasible, provide a turnover reconciliation or estimate based on deposit patterns (without implying the existence of formal books).

Favorable to Assessee Leading Judicial Precedents:

Support your position with the following rulings:

CIT v. Surinder Pal Anand: Once presumptive income is accepted, individual entries in bank deposits need not be explained. Addition u/s 68 not sustainable in absence of books when income declared u/s44AD.
Nand Lal Popli v. DCIT: AO cannot demand books or link every deposit to specific sales when return is under Section 44AD. Presumptive tax regime does not require explanation of cash deposits unless they are clearly from non-business sources
Anand Ram Raitani v. CIT: Books of account are a prerequisite for invoking Section 68.
Thomas Eapen v. ITO: Presumptive income presumes receipts; AO cannot require granular proof absent maintained books. Section 68 inapplicable where books are not maintained and turnover is not disputed.
CIT v. Pradeep Shantilal Patel : Assessee cannot be required to explain each bank deposit once turnover and presumptive income are accepted.

Challenge Any Additions u/s 68:

Highlight that Section 68 is inapplicable, as it applies only where credits are found in books of accounts maintained by the assessee. As no such books exist, any cash deposits reflected in the bank passbook, which is not defined as “books” under Section 2(12A), cannot trigger Section 68.

If the AO invokes Section 69A, demand material evidence.

Section 69A – Can Be Invoked, But With Caveats Used When AO claims that deposits are not from business, but from undisclosed sources (e.g., gifts, loans, or personal transactions). No explanation or nexus to declared turnover is provided. But AO must bring material evidence to prove that deposits do not form part of gross receipts. Merely questioning cash deposits is not sufficient—burden of proof shifts to the AO after assessee declares presumptive income.

Clarify that Section 69A requires independent evidence that the amounts deposited are not business receipts. Unless the Assessing Officer demonstrates that the cash deposits are wholly unrelated to business activity, no addition can be made under Section 69A. Burden of disproving business nexus lies with the AO, not the assessee.

Scenario	Section Attracted?	Explanation

Assessee files return under 44AD/ADA/AE

Section 68 Not Applicable

No books maintained; hence, no valid entry to attract Section 68

Cash deposits reasonably linked to business

Section 69A Not Attracted

Unless AO proves otherwise with evidence

Cash deposits are disproportionate or unrelated

Section 69A May Apply

Only with supporting material or adverse inference

Presumptive Taxation Does Not Exempt Disclosure of Key Financials

ITAT Pune’s ruling in Kamalesh Kantilal Patel v. ITO : ITAT held that opting for the presumptive scheme does not absolve the assessee from maintaining or disclosing details of Cash & bank balances, Sundry debtors, Stock-in-trade, Receivables (as claimed for cash inflow). This ruling softens the blanket protection usually accorded under Section 44AD against scrutiny of individual transactions, especially when unusual cash deposits are involved. Suggested Compliance for Presumptive Filers

Area	Traditional View	ITAT Pune’s View
Disclosure under 44AD	Not required to maintain books or detailed disclosures	Still expected to disclose basic financials when cash scrutiny arises
Section 68/69A Applicability	Generally not invoked due to lack of books	Can still apply if cash inflow not reconciled with known business sources
Evidence of Deposits	Often presumed as business receipts	Must be corroborated by documentation if amount is large/unusual

Conclusion:

When income is declared under presumptive taxation, and the turnover is not disputed, Section 68 cannot be invoked solely based on bank deposits, unless there’s clear evidence of undisclosed income or non-business receipts. The presumptive scheme simplifies compliance, and income is taxed without needing to track each transaction, provided general consistency with declared turnover is maintained. following Practical Conclusion

Aspect	Summary
Section 68 Applicability	Not applicable without books of account.
Section 69A Applicability	Only applicable if deposits are proven unrelated to business receipts.
Burden of Proof	Lies on AO to demonstrate nexus break between deposits and business.
Bank Passbook	Not “books” u/s2(12A), hence not a basis for Sec. 68.
Loose Sheets	Not valid books – inadmissible for Sec. 68.
Presumptive Turnover Accepted	No further addition for cash deposits unless non-business nature is established.

Taxpayer must keep backup documents—receipts, debtor ledgers, stock summaries—even if books are not “maintained” formally. Taxpayer must ensure PAN and ID details of cash advance refund parties are fkept. Taxpayer must ile Schedule AL (Asset and Liability Statement) in ITR where applicable. In case of large or irregular cash deposits, proactively maintain:

- Summary of receivables/payables.
- Capital account movements.
- Bank reconciliation statements.

June 15, 2025 / Chartered Accountant

Key Changes for taxpayers filing under Old Tax Regime

Key Changes implemented for taxpayers filing under Old Tax Regime

Significant changes the Income Tax Department in India has implemented for taxpayers filing under the Old Tax Regime. The IT Department has started auto-verifying claims using an integrated backend system mapped with PAN and Aadhaar. Sources for Cross-Verification: Taxpayer must maintain data will now be checked from like Insurance companies, Banks, Vahan (mParivahan app) & Employers & Government platforms.

Filing under the old tax regime now means more responsibility, more scrutiny, and better documentation. These changes are designed to increase transparency and curb bogus claims. Taxpayer must check Form 26AS and AIS (Annual Information Statement) to verify what data the IT department already has before filing.

Key Changes in the Old Regime Filing:

Now Income tax Form 16 is No Longer Sufficient

Earlier: Salaried taxpayers could rely solely on Form 16 for ITR-1 filing without uploading any proof for deductions (e.g., LIC, ELSS, HRA, health insurance).
Now: You must upload documentary evidence to claim deductions under:
- Section 80C – LIC, ELSS, PPF, Tuition fees
- Section 80D – Medical insurance
HRA – Rent receipts + landlord PAN (if rent > ₹1 lakh/year)

No more lump sum declarations. E.g., Declaring ₹1.5 lakh under Section 80C without itemization is no longer allowed.
Detailed break-up required for PPF, ELSS, LIC & Other 80C instruments
Real-time checks and alerts Automated verification, Instant error detection & Immediate notifications for mismatches.

Additional Details You Now Need to Provide:

Taxpayer must maintain the mandatory proof uploads if claiming deductions:

In case have Insurance (under section 80C, 80D) than must have Policy number, Insurer name & Investment date

- 80C: Policy/statement of LIC, ELSS, PPF, etc.
- 80D: Health insurance policy and payment proof
- 80DD/80U (Disability-related):
  - Form 10-IA acknowledgment number
  - PAN/Aadhaar of dependent
  - UDID (if available)

In case have Loans (80E, 80EE, 80EEA, 80EEB) than Bank name, Loan account number, Sanction date & Outstanding balance on 31 March. 80E (Education loan): Loan sanction letter, bank details, interest certificate

In case House Rent Allowance (HRA) must have Employer details, Rent paid proof, Landlord PAN (mandatory if rent > ₹1 lakh/year). HRA: Rent receipts, landlord PAN, employer details

In case EV Loan Deductions Taxpayer have Vehicle registration number, Loan details & Verified via Parivahan app
LTCG Reporting in ITR-1 Now Allowed : Taxpayer can now report Long Term Capital Gains (LTCG) up to ₹1.25 lakh from equity shares or mutual funds directly in ITR-1. Profits after 23 July 2025 will be tax-free, as per new exemption rule.
Cross-Verification System in Place : All deductions will now be auto-verified against backend data from Banks, Insurance Companies, mParivahan (Vehicle loan info), Employers & Govt. portals
Any mismatch can result in Instant error flags, Notifications for corrections & Rejection of claims

If you don’t have proof, the deduction can be rejected, and tax may become payable.

Where Taxpayer File Also Matters:

Filing through a third-party portal: Form 16 is mandatory to upload.
Filing via income tax portal (https://www.incometax.gov.in): Form 16 upload not required, but must be kept for cross-verification. Pre-filled data will include TDS, salary details, etc.

ITR Filing Due Date Extended : New Deadline (for non-audit cases): 15 September 2025 (Earlier: 31 July 2025)

Important Takeaway for Income Tax Taxpayers & CA or Tax Consultants Point:

Taxpayers must Keep all investment proofs ready & ensure data matches across PAN/Aadhaar-linked sources. Taxpayers must maintain detailed records—generic entries won’t be accepted. & Prepare for more scrutiny under old regime filings in AY 2025–26 and beyond.
In summary taxpayer must collect and keep ready before ITR filing:

- Insurance policy certificates
- ELSS/Mutual Fund statements
- Rent receipts + Landlord PAN
- Health insurance premium payment slips
- Education loan sanction letter + interest certificate
- Disability deduction forms and proofs
- Vehicle loan documents, if claiming EV deduction

ITR Form Selection Based on Head of Income

Head of Income	Typical Examples	Applicable ITR Forms	Notes / Reason
Salary	Wages, pension (excluding family pension), annuity, gratuity, perquisites	ITR-1, ITR-2, ITR-3, ITR-4	Based on other incomes and taxpayer type
House Property	Rental income, deemed rental, self-occupied deduction	ITR-1 (1 property), ITR-2 (multiple), ITR-3, ITR-4	Depends on ownership and business link
Other Rental Income	Letting of plant, machinery, furniture	ITR-2, ITR-3, ITR-4, ITR-5, ITR-6	If not part of business, taxed under “Other Sources”
Capital Gains	Shares, mutual funds, gold, property, LTCG/STCG	ITR-2, ITR-3, ITR-5, ITR-6	ITR-1 not permitted if any capital gain exists
Business/Profession	Income from freelancing, consulting, profession	ITR-3, ITR-4, ITR-5	ITR-4 for presumptive income, ITR-3 for normal books
Other Sources	Interest, dividends, pension, gifts, lottery, etc.	ITR-1, ITR-2, ITR-3, ITR-4	Depends on taxpayer type and whether business-linked
Virtual Incomes	Crypto, NFT trades or gains	ITR-2, ITR-3, ITR-5	ITR-2 for investments; ITR-3 if business
Intellectual Property (Royalties)	Books, music, copyrights	ITR-2, ITR-3, ITR-5	ITR-2 if not business; ITR-3 if business income
Commission & Brokerage	Real estate, insurance commissions, etc.	ITR-3, ITR-5	Always business income
Foreign Employment	Salary from abroad, ESOPs	ITR-2, ITR-3	ITR-2 if salary only; ITR-3 if business
Stock Market Trading	Intraday/F&O	ITR-3, ITR-5, ITR-6	Treated as business income
Lottery, Betting, Gambling	Winnings	ITR-2, ITR-3	Taxed at flat 30%; no deductions allowed
Crowdfunding	Received from platforms	ITR-2, ITR-3, ITR-5, ITR-6	If taxable, declared under “Other Sources” or business
Barter Transactions	Goods/services without money	ITR-3, ITR-5, ITR-6	Declared under business income
Share of Profit (Partnership)	From partnership firm	ITR-3	ITR-3 required even if exempt
Director’s Remuneration	Salary or sitting fees	ITR-2, ITR-3	ITR-3 mandatory for director in company
Exempt Income	Agriculture income, PPF interest, LIC maturity	ITR-1, ITR-2, ITR-3, ITR-4	Must be reported if above limits, even if exempt

ITR Form Selection Guidance:

ITR-1: For salaried individuals (no capital gains, 1 house property, income ≤ ₹50L)
ITR-2: For individuals with capital gains or more than one house property, foreign income/assets
ITR-3: For individuals/HUFs with business or profession income (incl. directors, partners)
ITR-4: For presumptive income (Sections 44AD/ADA/AE)
ITR-5: For partnership firms, LLPs, AOPs, BOIs
ITR-6: For companies (excluding those claiming exemption u/s 11)

June 3, 2025 / TDS

TDS on Purchase of TDS on Real Estate Transactions

Overview on TDS on Purchase of TDS on Real Estate Transactions

What is TDS on Property Purchases?

TDS (Tax Deducted at Source) is a tax mechanism under Section 194-IA of the Income Tax Act, applicable when purchasing immovable property (excluding agricultural land).

Applicable if the consideration value or stamp duty value (whichever is higher) is ₹50 lakhs or more.
TDS to be deducted at 1% of the sale consideration by the buyer and deposited with the government.

Purpose of TDS on Real Estate Transactions

The taxpayer must ensures tax compliance during high-value transactions.
Prevents tax evasion by deducting tax at the source.
Buyer is responsible for deduction and deposit.
Seller can claim the TDS as credit while filing ITR.

When is TDS Applicable?

When sale consideration or stamp duty value ≥ ₹50,00,000
On residential and commercial properties
Even if payment is made in installments
Applies whether single or multiple buyers/sellers are involved

Who Deducts the TDS?

Buyer of the property deducts TDS at 1% of sale consideration
TDS must be deposited within 30 days from the end of the month in which it was deducted
Form 26QB must be filed, and Form 16B issued to the seller within 15 days

TDS Rate

1% for Indian resident sellers (with valid PAN)
20% or higher for NRIs, based on capital gains, surcharge & cess
TDS @ 20% if seller does not furnish PAN

Example of TDS Calculation

Scenario: Mr. A buys a flat from Mr. B for ₹80,00,000 AND ₹20,00,000 paid as advance on 1st August 2023 , ₹60,00,000 paid on 15th August 2023 (registration date)

TDS Deduction:

Total TDS = INR 80,000 (1% of INR 80,00,000)
INR 20,000 deducted on 1st August (to be deposited by 30th September 2023)
Rs. 60,000 deducted on 15th August (to be deposited by 31st October 2023)

Form 16B must be issued within 15 days of TDS deposit.

Exemptions from TDS on Property Purchase :

TDS is not required under the following situations:

Sale Consideration and Stamp Duty Value < INR 50,00,000
Transfer from NRI to another NRI via Inheritance or Gift
Property purchased from Central/State Government or specified authority
Purchase from a recognised financial institution or housing finance company
In case Purchase from resident Indian relative below INR 50 lakhs and stamp duty < INR 50,000
Transfer of Agricultural Land

Documents Required for TDS Filing

Following information and details for deposit of TDS on purchases of property in Delhi: the following details are Required for TDS deposit on property sale (Form 26QB):

Property Details

- Type of Property: Residential, commercial, land, etc.
- Full Address: Including state, district, PIN code
- Date of Agreement/Transfer
- Total Sale Consideration (in INR)
- Payment Mode: Lump sum or in installments
- Amount Paid or Credited till Date

Buyer Details (Deductor)

- Full Name
- PAN (Mandatory, verified with ITD)
- Complete Address
- Email ID
- Mobile Number
- Residential Status: Resident or Non-Resident
- Share of Property Ownership (if multiple buyers)
- Date of Payment or Credit

Seller Details (Deductee)

- Full Name
- PAN (Mandatory, else TDS @ 20% under Sec 206AA)
- Complete Address
- Email ID
- Mobile Number
- Residential Status: Resident or NRI
- Share of Property Ownership (if multiple sellers)

Transaction Details

- TDS Amount: 1% of sale consideration (if seller is Resident and PAN is available)
- Date of TDS Deduction
- Payment Method: Net banking, debit card, or challan for offline payment

Bank Details (for Payment)

- Bank account (from which payment is made)
- the Bank selected for e-payment via Net Banking (or challan if paying physically)

Additional Notes:

Item	Note
Form 26QB	Filed per buyer-seller combination. For 2 buyers and 2 sellers, file 4 forms.
PAN Verification	Ensure PANs of both buyer and seller are correct – errors will lead to TDS mismatch.
Tax Payment Due Date	TDS must be deposited within 30 days from the end of the month in which payment is made.
TDS Certificate	Buyer must download and issue Form 16B to the seller from TRACES within 15 days of Form 26QB due date.

How to Rectify Mistakes in TDS Filing

Buyers can correct errors in Form 26QB via the TRACES portal:

Common mistakes that can be rectified Incorrect PAN of buyer/seller, Wrong property details, Incorrect TDS amount or challan details
Correction Process: Log in to TRACES → Request for Correction → Submit Online Correction and Digital Signature Certificate (DSC) may be required
Excess TDS Deduction: Seller can claim a refund while filing the ITR

Common Mistakes to Avoid

Not Deducting TDS on Time

- When: At the time of payment to the seller
- Consequence: Interest @ 1% per month + Penalties

Incorrect TDS Calculation

- Mistake: Calculating TDS on loan amount only
- Correct Method: Deduct 1% on entire sale value, not just the financed portion

Missing Payment Deadline

- Deadline: Within 30 days from the end of the month in which TDS is deducted
- Interest for Delay: 1.5% per month till payment

Not Issuing Form 16B

- Buyers mustDownload Form 16B from TRACES after TDS deposit and Provide it to the seller for claiming TDS credit

Incorrect PAN Details

- A wrong PAN of buyer or seller leads to Higher TDS @ 20% or Rejection of credit in seller’s ITR. and we should always verify PAN before filing Form 26QB

Failing to File TDS Return

- Form 26QB serves as the TDS return for property purchases
- Not filing it may result in Penalty under Section 234E: ₹200/day till the return is filed (max up to TDS amount)

Practical Tips For Sellers:

Share correct PAN and verify TDS credit in Form 26AS.
Apply for Lower Deduction Certificate if eligible (especially NRIs).
Keep copies of all related documents.

Practical Tips For Buyers:

Deduct and deposit TDS within 30 days of payment.
Fill details accurately in Form 26QB or 27Q.
Consult a tax advisor for complex transactions or NRI sellers.

Consequences of Delay or Default

Default Type	Penalty/Interest
Late payment of TDS	1% per month (or part) from date of deduction to date of payment
The Late filing of Form 26QB	INR 200 per day (max up to TDS amount)
Non-payment or incorrect filing	Penalty of ₹10,000 to ₹1,00,000 under Section 271H (waivable if paid within 1 year)

Conclusion

TDS compliance under Section 194-IA is mandatory for all property purchases (₹50 lakhs+). Taxpayer Ensure Timely deduction and deposit via Challan 26QB, Generation and issuance of Form 16B, Accuracy in PAN and transaction details and Non-compliance can lead to interest, penalties, or legal complications.

Taxpayer needed Just upload TDS return along with the TDS certificate, and we’ll do all the TDS on property-related working. Filing is quick, secure, and accurate. Filing Your TDS on property for FY 2025-26? Do it in just 5 minutes—FREE on www.CAINDELHIINDI.com! Avoid penalties and technical delays—file your TDS Return on sale or purchase of property now on www.caindelhiindia.com Our platform is user-friendly, fast, and complete For error-free transactions and peace of mind. Our chartered accountant or tax advisor/expert is here to help. Email: singh@carajput.com or Call/WhatsApp: 9555 555 480

May 24, 2025 / Direct Tax

Resident but Not Ordinarily Resident tax status in India

Resident but Not Ordinarily Resident (RNOR) tax status in India

Who is a Resident but Not Ordinarily Resident (RNOR)?

RNOR Status: The Hidden Tax Advantage for Returning NRIs. RNOR is a special tax classification under Indian income tax law. It applies to returning NRIs and provides a bridge between full non-resident and resident status—offering limited-time tax exemptions on foreign income. RNOR (Resident but Not Ordinarily Resident) status — a transitional tax status under Indian Income Tax Law designed for returning NRIs (Non-Resident Indians).

Qualifies for RNOR : To qualify as RNOR (Resident but Not Ordinarily Resident), you must satisfy both steps:

Step 1: You must be a Resident : Reside in India ≥182 days in the current financial year OR Reside 60 days in the year of return AND 365 days over the past 4 years
Step 2: Meet ONE of the following: Non-resident in 9 of the last 10 years OR Reside in India for ≤729 days in the last 7 years

Additional Specific RNOR Conditions: Indian citizens/PIOs with income >₹15 lakh in India and stay of 120–182 days in a financial year. Deemed residents whose global income is not taxed in any other country.

In summary : RNOR – Resident but Not Ordinarily Resident

Residential-status-of-Individuals-Section-6

Person can become an RNOR if person :

Were a non-resident in 9 out of 10 preceding years, or
Stayed in India for ≤729 days during the last 7 financial years, or
Are a citizen/PIO with Indian income > ₹15 lakh and stay in India between 120–181 days, and are not liable to tax in another country.
Duration: RNOR status is available for up to 3 years after returning to India.

RNOR Income Tax Rules Summary

Type of Income	Taxability in India
Income earned in or received in India	Taxable
Income accruing in India, regardless of where received	Taxable
Foreign business income controlled from India	Taxable
Other income earned and received abroad	Not Taxable
Remittance to India of foreign income from earlier years	Not Taxable

RNOR Tax Benefits

No Tax on Foreign Income : Income from the following is not taxable in India during RNOR status:

Salary earned abroad
Foreign rental income
Foreign interest/dividends
Capital gains on overseas assets
Exception: If the income is from a business controlled in India, it may be taxable.

NRE/NRO Account Interest Exemption

Interest on NRE/NRO accounts is tax-free for up to 2 years after return. After 2 years, interest becomes taxable unless moved to RFC account

Capital Gains Flexibility

No tax on capital gains from overseas investments. Offers flexibility in managing foreign assets without Indian tax burden

Foreign income remains exempt from Indian taxation details are mention as below :

Rental income from property located abroad
Dividends and interest earned on foreign securities and deposits
Withdrawals from offshore retirement accounts (e.g., 401(k), IRA)
Capital gains from sale of foreign assets
Interest from NRE/FCNR deposits (if converted to RFC account)

How to Claim RNOR (Resident but Not Ordinarily Resident) Status

Declare residential status correctly under Section 6 of the Income-tax Act when filing your ITR. Keep documentation: passport stamps, visa, and travel history.
On RNOR (Resident but Not Ordinarily Resident ) status change than Notify banks. Thereafter RNOR has to Convert NRE/FCNR to RFC accounts. And RNOR has to Submit Form 67 (if claiming tax credit under DTAA). RNOR has to Maintain records of days spent in India.

Actionable Checklist for RNORs

Declare RNOR status correctly under Section 6 of Income Tax Act in ITR
Maintain travel records, passport stamps, and visa history
Notify banks to convert NRE/FCNR to RFC accounts
File Form 67 to claim foreign tax credit under DTAA, if applicable
Keep documentation to prove foreign income origin and receipt location
Benefits of RNOR (Resident but Not Ordinarily Resident) Status
1. Foreign income not taxed in India.
2. Interest on RFC accounts is tax-free.
3. Can use foreign tax credits via Form 67.

How Long Can You Be Resident but Not Ordinarily Resident (RNOR)?

RNOR status typically lasts 2 to 3 years.
Returning late in the financial year may help extend Resident but Not Ordinarily Resident (RNOR) eligibility.

In summary we can say that RNOR status can be retain up to 3 financial years after returning to India (subject to meeting conditions annually) and Returning later in the financial year can help you qualify for a longer RNOR period. Additional RNOR Considerations

- Life Insurance Plans for RNORs
- RNORs can buy NRI life insurance policies in India
- Premiums can be paid from India or abroad
- Enjoy life cover + tax benefits under Section 80C & 10(10D) (subject to conditions)

Don’t Confuse Income tax act Tax Residency with FEMA act Residency

Tax Residency = Based on days in India
FEMA Residency = Based on intention (settling vs. visiting)
You may be RNOR (tax resident) but FEMA non-resident, and must report NRE/FCNR accounts and foreign assets. You can be tax resident but FEMA non-resident — then report NRE/FCNR accounts and foreign assets.

RFC Account : RFC (Resident Foreign Currency) account is for returning NRIs

Can hold foreign currency (USD, GBP, EUR etc.)
Interest earned is tax-free during RNOR status
Helps manage foreign assets without currency conversion losses

RFC (Resident Foreign Currency) Eligibility:

Returned to India after at least 1 year abroad
Permanent relocation to India
Return after April 18, 1992

After RNOR Status Expires then : Once you become a Resident and Ordinarily Resident (ROR) then Your global income becomes taxable in India and DTAA (Double Taxation Avoidance Agreement) may help reduce double taxation. So Track Your Residency,

Keep records of passport stamps
Calculate stay carefully to avoid unintended resident status

Automatic RNOR Classification: RNOR don’t need to apply. RNOR status is determined based on Travel history, Number of days stayed in India, Income thresholds

Taxability Comparison: NRI vs RNOR vs Resident

Type of Income	NRI	RNOR	Resident
Income earned or received in India	Taxable	Taxable	Taxable
Foreign income (earned & received outside India)	Not taxable	Not taxable	Taxable
Foreign business income controlled from India	Not taxable	Taxable	Taxable
Salary received in India for foreign services (e.g., Govt job)	Taxable	Taxable	Taxable

We as tax expert consultants know that your RNOR rules are time-sensitive and complex; we as tax advisors can help with:

- RFC/NRE/NRO account restructuring
- Capital gains planning
- DTAA claims via Form 67
- ITR filing with correct residential status

May 16, 2025 / Direct Tax

Tax benefits decoded : Old vs new income tax regimes for FY 2025–26

Income Tax benefits decoded comparison of the old vs new income tax regimes for FY 2025–26

“Tax benefits decoded” offers a detailed comparison of the old vs new income tax regimes for FY 2025–26, helping taxpayers evaluate which regime is more beneficial based on their deductions and exemptions. Key Allowances Comparison: Old vs New Regime

Allowance	Old Regime	New Regime	Cap / Notes	Documents Required
HRA	Yes	No	Per formula, max 50% of basic	Rent receipt, rental agreement, landlord’s PAN
Home loan interest	Yes	No	₹2 lakh for self-occupied property	Interest certificate
LTA	Yes	No	2 trips in 4 years	Travel tickets and boarding pass
Car lease	Yes	No	—	Lease agreement
Car fuel/maintenance	Yes	No	Taxable ₹1,800–2,400 (personal use)	Fuel bills, maintenance bills
Driver salary	Yes	No	₹900/month perquisite (personal use)	Salary slips, driver employment agreement
Telephone	Yes	No	—	Post-paid bills in employee’s name
Meal card	Yes	No	₹50 per meal	Usage statement
NPS	Yes	Yes	Old: 10% of basic (employee + employer), New: 14% of basic (employer only)	Transaction statement

Note: Some benefits like HRA and home loan interest are conditionally available in the new regime.

Regime Comparison Table – Breakeven Analysis (FY 2025–26)

Gross Salary	Breakeven Deduction	Tax Under Both Regimes
₹7 lakh	₹1.5 lakh	0 under both regimes
₹8 lakh	₹2.5 lakh	0 under both regimes
₹10 lakh	₹4.5 lakh	₹81,900
₹14 lakh	₹5.18 lakh	₹81,900
₹16 lakh	₹5.68 lakh	₹1,13,100
₹20 lakh	₹7.08 lakh	₹1,92,400
₹24 lakh	₹7.87 lakh	₹2,92,500
₹25 lakh	₹8 lakh	₹3,09,000
₹30 lakh	₹8 lakh	₹4,75,800
₹50 lakh	₹8 lakh	₹10,99,800
₹1 crore	₹8 lakh	₹29,25,780
₹1.5 crore	₹8 lakh	₹48,52,700
₹2 crore	₹8 lakh	₹66,46,770
₹2.5 crore	₹8 lakh	₹91,74,750
₹5 crore	₹8 lakh	₹1,89,24,750

How to Choose the Best Regime?

If deductions + exemptions > breakeven → Opt for Old Regime ✅
If deductions + exemptions ≤ breakeven → Opt for New Regime ✅

Illustrative Example:

Gross Salary = ₹40 lakh and Deductions Claimed = ₹12.5 lakh

Category	Amount (₹)
HRA	10,00,000
PPF/ELSS (80C)	1,50,000
NPS (80CCD)	50,000
Medical (80D*)	50,000
Total	12,50,000

Since ₹12.5 lakh > ₹8 lakh breakeven for ₹40 lakh salary → Old Regime is better

Breakeven thresholds already include common deductions. So only additional benefits like HRA, home loan, etc., should be used to evaluate the better option.

May 14, 2025 / Direct Tax

Presumptive taxation scheme: Cash deposits in bank A/c

Income Disclosed under Presumptive taxation scheme (Sections 44AD, 44ADA, or 44AE): Cash deposits in bank A/c

Cash deposits in bank A/c in cases where income is declared under presumptive taxation scheme (Sections 44AD, 44ADA, or 44AE):

Section 68 of the Income Tax Act can only be invoked when There is a credit entry in the books of accounts maintained by the assessee. The assessee fails to offer a satisfactory explanation for the nature and source of such credit.

Presumptive-Taxation-Scheme.

However, under presumptive taxation Sections 44AD, 44ADA, or 44AE : The assessee is not required to maintain books of account as per Section 44AA if they declare income at the prescribed presumptive rates. Hence, in the absence of books of accounts, the primary condition to invoke section 68 fails.

No books = No Section 68: If the assessee is eligible and has opted for presumptive taxation (e.g., under Section 44AD), and has not maintained books, Section 68 cannot be invoked for cash deposits.
Cash deposits ≠ unexplained income : if they can reasonably be attributed to business receipts (sales, collections, etc.). The total turnover is accepted, and the profit is offered at presumptive rates.

Judicial Support in the Treatment of Cases of Cash Deposits in Bank Accounts under the Presumptive Taxation Scheme:

Courts and tribunals have consistently ruled in favour of assessees in such cases: COMMISSIONER OF INCOME TAX Surinder Pal Anand (2010) – P&H HC: Held that once income is offered u/s 44AD and no books are maintained, no addition u/s 68 is possible.
Nand Lal Popli v. Dy. COMMISSIONER OF INCOME TAX (2016) – Income Tax Appellate Tribunal Chandigarh: Confirmed that individual deposits in bank accounts need not be explained if income is returned under the presumptive scheme.
Thomas Eapen v. income tax officer (2020) – India’s Income Tax Appellate Tribunal Cochin: Reaffirmed that cash deposits that are reasonably attributable to business cannot be added u/ 68.

When Caution Is Needed: If cash deposits are disproportionately large or appear not commensurate with declared turnover, the Assessing Officer may Treat some part as undisclosed turnover, not unexplained cash credit u/s 68. Initiate inquiry u/s 69/69A (unexplained investments or money), but even this has limitations if presumptive tax provisions apply.

If books of accounts are voluntarily maintained and entries appear suspicious, then Section 68 may apply.

Assessee declares income u/s 44AD; cash deposit disclosure must clearly have no nexus with gross receipts of business.

CIT v. Surinder Pal Anand [2011] 242 CTR 061 (P&H HC)—this judgment firmly establishes that once an assessee declares income under Section 44AD, they cannot be expected to explain each and every cash deposit individually, unless those deposits clearly have no nexus with the gross receipts of the business. Two Key Points to Differentiate:

Punjab & Haryana High Court in Surinder Pal Anand: Binding precedent within its jurisdiction (and persuasive in other jurisdictions unless overruled). Held that presumptive taxation (Sec 44AD) overrides the requirement to maintain detailed books or explain every deposit. Unless deposits are clearly unrelated to business (e.g., personal gifts, loans, or investments), Section 68 additions aren’t valid.
Pune Income Tax Appellate Tribunal View—Disclosure still expected: The Pune Income Tax Appellate Tribunal in some cases (e.g., ITO v. Raghunath T. Jadhav) has held Even under presumptive taxation, if the assessee voluntarily discloses details of cash, bank balances, stock, and receivables, then he cannot escape scrutiny on inconsistencies or large unexplained balances. This does not contradict the law, but rather applies when:
- The assessee maintains books or submits detailed financial statements.
- AO questions consistency, plausibility, or nexus with declared turnover.

Reconciling the Two Positions:

Legal Position	Surinder Pal Anand (P&H HC)	Pune ITAT
Applicability of Section 68	Not applicable without books	May apply if books/details are voluntarily submitted
Requirement to explain deposits	Not required under Sec 44AD unless clearly unlinked	Required if voluntarily providing details shows inconsistencies
Presumption under Section 44AD	Strong protection to assessee	Assessee’s own disclosure can weaken protection if unexplained

Practical Implication:

If an assessee files ITR u/s 44AD and does not maintain books, then Section 68 cannot be invoked unless there’s evidence that cash deposits are not linked to business. But if the assessee submits additional details like a balance sheet or cash flow (even voluntarily), and inconsistencies arise, the Assessing Officer may question the same—not strictly u/s 68, but possibly u/s 69/69A (unexplained money/investments), Or by treating such receipts as unaccounted turnover and taxing presumptive profit on the enhanced turnover.

In Summary:

Surinder Pal Anand protects assessees under pure presumptive taxation without books.
Pune Income Tax Appellate Tribunal rulings caution that once the assessee opens the door by furnishing additional disclosures, they are liable to explain anomalies. Therefore, the strategic choice lies with the assessee — either rely entirely on presumptive taxation and avoid disclosures or be prepared to explain figures if voluntarily furnished.
In cases where an assessee opts for presumptive taxation u/s 44AD, 44ADA, or 44AE and does not maintain books of accounts, cash deposits in the bank—if reasonably attributable to business turnover—cannot be taxed u/s 68.

May 4, 2025 / Direct Tax

Taxation on income from shares & MF for FY 2024-25

Taxation on income from shares and mutual funds under various sections for FY 2024-25

Categories of Mutual Funds:

Equity-Oriented Funds (EOFs) – >65% investment in equity shares of domestic companies.
Specified Mutual Funds – <35% in equity (as per Finance Act 2023) / >65% in debt or debt-oriented FOFs (as per Finance (No.2) Act 2024, applicable from FY 2025-26).
Other Mutual Funds – All others not classified above (e.g., Hybrid, Gold ETFs, International FOFs, etc.).

Equity-Oriented Funds (EOFs)

STT applicable
LTCG: Held >12 months
STCG: Held ≤12 months

Investor Type	STCG	LTCG (above ₹1.25 lakh)	Dividend Income Tax	TDS on Capital Gains	TDS on Dividend
Resident Individuals / HUF	15% (before 23 Jul); 20% (after)	10% (before 23 Jul); 12.5% (after)	As per slab	Nil	10% (if dividend > ₹5,000/year)
Domestic Companies	Same as above	Same as above	As per slab	Nil	10%
NRIs	Same as above	Same as above (no indexation benefit)	20%	20% or DTAA rate	20% or DTAA

Specified Mutual Funds

Applicable if:
- Invests <35% in equity (Finance Act 2023), or
- >65% in debt/MMI (from FY 2025-26)
Gains treated as Short-Term Capital Gains irrespective of holding period (Section 50AA)

Investor Type	Tax on Gains	Dividend Income Tax	TDS on Gains	TDS on Dividend
Resident Individual / HUF	As per slab	As per slab	Nil	10%
Domestic Companies	15% / 22% / 25% / 30% depending on regime	As per slab	Nil	10%
NRIs	30%	20%	20% or DTAA	20% or DTAA

Other Mutual Funds (e.g., Debt Funds, Gold ETFs, International FOFs – not EOF or Specified MF)

Investor Type	STCG (Held ≤3 yrs / 12/24 months)	LTCG (Listed: >12 months; Unlisted: >24 months; before 23 Jul: >36 months)	Dividend Income Tax	TDS on Gains	TDS on Dividend
Resident Individual / HUF	As per slab	20% (with indexation before 23 Jul); 12.5% after	As per slab	Nil	10%
Domestic Companies	15% / 22% / 25% / 30%	20% / 12.5%	As per slab	Nil	10%
NRIs	30%	Listed: 20%; Unlisted: 10%; 12.5% (post 23 Jul)	20%	20% or DTAA	20% or DTAA

Section 111A

Eligible Assessee: Any Assessee
Securities Covered: Equity shares, units of equity-oriented mutual fund, units of business trust
Tax on Short-term Capital Gains (STCG):
- 15% if asset transferred before 23-07-2024
- 20% if transferred on/after 23-07-2024 (note: this is a new update)
Adjustment under Chapter VI-A: ❌ Not allowed
Exemption Limit: Only for resident individuals and HUF

Section 112A

Eligible Assessee: Any Assessee
Securities Covered: Equity shares, equity-oriented mutual fund units, units of business trust
Tax on Long-term Capital Gains (LTCG):
- 10% if transferred before 23-07-2024
- 12.5% if transferred on/after 23-07-2024
  (on gains exceeding ₹1 lakh)
Adjustment under Chapter VI-A: ❌ Not allowed
Exemption Limit: Only for resident individuals and HUF

Section 115A

Eligible Assessee: Non-resident and foreign company
Tax on Income:
- 10%-20% on dividend/income
- 20% on royalty/FTS (fees for technical services)
Capital Gains Tax: Not specified
Chapter VI-A Deduction: ❌ Not allowed (except under Section 80G for donations in some cases)

Section 115AB

Eligible Assessee: Overseas financial organizations (offshore funds)
Securities Covered: Units of mutual funds purchased in foreign currency
Tax on Income: 10%
LTCG Tax:
- 10% if transferred before 23-07-2024
- 12.5% if on/after 23-07-2024
Deduction u/s VI-A: ❌ Not allowed

Section 115AC

Eligible Assessee: Non-resident
Securities Covered: FCCBs, FCEBs, GDRs, etc.
Tax on Income:
- 10% on interest income
- 10% on dividend income
LTCG Tax:
- Same as above (10% / 12.5% based on date)
Chapter VI-A Deduction: ❌ Not allowed

Section 115AD

Eligible Assessee: Foreign Portfolio Investors (FPIs), Specified Funds
Securities Covered:
- Equity shares, equity-oriented mutual funds, business trusts (except debt-oriented mutual funds)
Income Tax Rate:
- 20% for FPIs,
- 10% for Specified Funds
LTCG Tax:
- 10% (before 23-07-2024)
- 12.5% (on/after 23-07-2024 if under section 112A)
- Else, 10% in other cases
STCG Tax:
- 15% if before 23-07-2024
- 20% if after 23-07-2024 (if under 111A)
- Else, 30%

Notes on Indexation & Holding Period Changes:

Indexation benefit for LTCG on debt MFs abolished post 1-Apr-2023 for Specified MFs.
LTCG holding period revised:
- EOF: >12 months
- Listed Other MFs: >12 months (after 23 Jul)
- Unlisted Other MFs: >24 months (after 23 Jul)
- If sold before 23 Jul 2024: >36 months

Securities Transaction Tax (STT)

Applicable only on Equity-Oriented Funds:

Sale on exchange (delivery based): 0.001%
Sale to Mutual Fund (repurchase): 0.001%
Non-delivery-based sale: 0.025%

Surcharge Rates on Tax (Add Health & Education Cess @ 4% on tax + surcharge)