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Section 22 of the Income-tax Act, 2025 – Deductions from House Property Income

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Under the new Income-tax Act, 2025, Section 22 deals with deductions available while computing income under the head “Income from House Property.” This section is broadly similar to the old Section 24 of the Income-tax Act, 1961.

📋 What deductions are allowed under Section 22?

Section 22 allows the following deductions from the annual value of a house property:

💰 1. Standard Deduction – 30%

A flat deduction of 30% of the annual value of the property is allowed, irrespective of actual expenses incurred.

“Deduction” = 30% × “Annual Value”

This deduction covers expenses such as:

  • Repairs
  • Maintenance
  • Painting
  • Collection charges

No separate claim can be made for these expenses.

🏦 2. Deduction for Interest on Home Loan

If the property is acquired, constructed, repaired, renewed, or reconstructed using borrowed capital, the interest payable on such loan is allowed as deduction.

📊 Maximum Deduction Limit

Particulars Deduction Limit
Self-occupied property ₹2,00,000
In certain other cases ₹30,000

The ₹2 lakh limit is available subject to prescribed conditions, such as completion of construction within the specified time period.

🏗️ 3. Pre-construction Interest

Interest paid before completion of construction is also allowed as deduction.

However, it cannot be claimed in one year. It is allowed in five equal instalments beginning from the year in which construction or acquisition is completed.

“Annual Deduction for Pre-construction Interest” = “Total Pre-construction Interest” / 5

📝 Practical Example

Suppose:

  • Annual rental income = ₹6,00,000
  • Municipal taxes paid = ₹20,000
  • Home loan interest = ₹1,80,000

🧮 Computation

Particulars Amount (₹)
Gross Annual Value 6,00,000
Less: Municipal Taxes (20,000)
Net Annual Value 5,80,000
Less: 30% Standard Deduction (1,74,000)
Less: Interest on Loan (1,80,000)
Income from House Property 2,26,000

⚠️ Important Conditions

  • Deduction for interest is available only if the taxpayer is the owner or co-owner of the property.
  • Interest certificate from the lender may be required.
  • If interest is payable outside India and tax has not been deducted where applicable, deduction may be disallowed.

🔄 Difference Between Old and New Law

Old Income-tax Act, 1961 Income-tax Act, 2025
Section 24 Section 22
Deduction from house property income Deduction from house property income
30% standard deduction allowed Continued
Home loan interest deduction allowed Continued

📅 Effective Date

The Income-tax Act, 2025 came into force from 1 April 2026.

Regular GST Scheme vs Composition Scheme – A Practical Guide for Small Businesses

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Goods and Services Tax (GST) in India offers different taxation schemes based on the size and nature of the business. One of the most common questions faced by small business owners is:
“Should I opt for the Regular GST Scheme or the Composition Scheme?”
Many traders, shopkeepers, restaurant owners, freelancers, and small manufacturers struggle to understand the practical difference between these two schemes. The confusion generally arises because both involve GST registration, but the compliance requirements, tax rates, and benefits are completely different.
This blog explains the difference between the Regular GST Scheme and the Composition Scheme in simple language along with practical examples and common issues faced by taxpayers.

📌 What is the Regular GST Scheme?

Under the Regular GST Scheme, a registered taxpayer collects GST from customers and deposits it with the government after adjusting Input Tax Credit (ITC).
This is the default GST scheme applicable to most businesses.
A taxpayer under the regular scheme can:
• Collect GST from customers
• Claim Input Tax Credit on purchases and expenses
• Issue Tax Invoices
• Sell goods across India
• Deal through e-commerce platforms
• File regular GST returns

📌 What is the Composition GST Scheme?

The Composition Scheme is a simplified taxation scheme introduced for small taxpayers to reduce compliance burden.
Instead of charging normal GST rates, the taxpayer pays tax at a fixed lower percentage on turnover.
However, the taxpayer:
• Cannot collect GST separately from customers
• Cannot claim Input Tax Credit
• Cannot issue Tax Invoices
• Faces restrictions on interstate sales and certain business activities
The scheme is mainly designed for small traders, restaurants, and manufacturers with limited turnover.

📊 Eligibility for Composition Scheme

A taxpayer can opt for the Composition Scheme only if the aggregate turnover is within the prescribed limit.

Particulars Composition Scheme
General turnover limit ₹1.5 crore
Special category states ₹75 lakh
Service providers (special scheme) Up to ₹50 lakh

🔄 Major Difference Between Regular and Composition Scheme

Basis Regular GST Scheme Composition Scheme
GST Collection GST charged separately GST cannot be charged separately
Input Tax Credit Available Not available
GST Rates Normal GST rates apply Fixed lower rate
Return Filing Monthly/Quarterly Quarterly
Invoice Type Tax Invoice Bill of Supply
Interstate Sales Allowed Restricted in most cases
E-commerce Selling Allowed Generally not allowed
Compliance Burden Higher Lower
Suitable For Growing businesses Small local businesses

🧾 Practical Example – Regular Scheme

Example 1: Mobile Shop under Regular GST
Suppose Mr. Arjun owns a mobile phone shop.

Purchase Details
• Mobile purchased for ₹10,00,000
• GST paid @18% = ₹1,80,000

Sales Details
• Mobile sold for ₹12,00,000
• GST charged @18% = ₹2,16,000

GST Liability

Particulars Amount
Output GST ₹2,16,000
Less: Input Tax Credit ₹1,80,000
Net GST Payable ₹36,000

Benefit
The business gets credit for GST paid on purchases, reducing overall tax cost.

🧾 Practical Example – Composition Scheme

Example 2: Grocery Shop under Composition Scheme
Suppose Mr. Raj operates a local grocery store and opts for the composition scheme.

Turnover
• Annual turnover = ₹40 lakh
• Composition tax rate = 1%

Tax Liability

Particulars Amount
Turnover ₹40,00,000
Composition Tax @1% ₹40,000

Important Point
Mr. Raj cannot:
• Charge GST separately on bills
• Claim GST paid on purchases
• Provide Input Tax Credit to customers
The tax becomes a cost to the business itself.

❗ Why Small Business Owners Get Confused

Many people believe that the Composition Scheme means “No GST”.
This is incorrect.
A composition dealer is still registered under GST and is required to pay tax, but under simplified provisions.

⚠️ Common Practical Issues Faced by Taxpayers

1. Customers Demand GST Invoice

A composition dealer cannot issue a proper GST Tax Invoice.
This creates problems when customers are businesses because they cannot claim Input Tax Credit.

Practical Issue
A wholesaler purchasing from a composition dealer may prefer another supplier who provides GST credit.

2. GST Paid on Purchases Becomes Cost

Under the composition scheme, GST paid on purchases cannot be claimed back.

Example
If a trader purchases goods worth ₹5 lakh plus GST:
• Under Regular Scheme → GST can be claimed as ITC
• Under Composition Scheme → GST becomes expense

This reduces profit margin.

3. Interstate Sales Restriction

Many small businesses later want to sell through online platforms or supply goods outside their state.
Composition dealers generally cannot make interstate outward supplies.

Result
Businesses are forced to switch to the regular scheme during expansion.

4. Confusion Regarding GST Rates

Under the regular scheme, GST rates vary:
• 5%
• 12%
• 18%
• 28%

Under composition, a fixed lower percentage applies.
Small business owners often wrongly compare only the tax percentage without considering ITC benefits.

5. E-Commerce Restrictions

A composition dealer generally cannot sell through platforms like:
• Amazon
• Flipkart

This becomes a major limitation for growing businesses.

💡 When is the Regular Scheme Better?

The Regular GST Scheme is generally better when:
• Customers are businesses
• Input Tax Credit is significant
• Interstate sales are involved
• Business growth is expected
• E-commerce selling is planned

💡 When is the Composition Scheme Better?

The Composition Scheme may be suitable when:
• Business is small and local
• Customers are end consumers
• Compliance handling is difficult
• Margins are stable
• Limited purchases are made with GST impact

🧠 Real-Life Understanding for Common People

Regular Scheme
“Collect GST from customer, take credit of GST paid on purchases, and pay the balance to government.”

Composition Scheme
“Pay a small fixed percentage on turnover from your own pocket without claiming GST credit.”

📋 Important Compliance Difference

Compliance Regular Scheme Composition Scheme
GST Return Frequency Monthly/Quarterly Quarterly
Annual Return Applicable Applicable
Record Maintenance Detailed Comparatively simpler
E-Invoicing May apply Not applicable generally

🔁 Can a Taxpayer Switch Between Schemes?

Yes, eligible taxpayers can switch between the Regular Scheme and Composition Scheme subject to conditions and turnover limits.
However, proper intimation and compliance under GST provisions are necessary while switching.

✅ Conclusion

The decision between the Regular GST Scheme and the Composition Scheme should not be made merely by comparing tax rates.
A business owner must evaluate:
• Customer profile
• Input Tax Credit availability
• Future business expansion
• Interstate transactions
• Compliance capability
• Profit margins
For many small local businesses, the Composition Scheme provides ease of compliance. However, for growing businesses and B2B transactions, the Regular GST Scheme is usually more beneficial in the long run.
Understanding the practical impact of both schemes helps taxpayers avoid future compliance issues and make better business decisions under GST.

GST Registration in India – A Complete Guide for Businesses

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Starting a business in India comes with several compliance requirements, and one of the most important among them is GST registration. Whether you are a trader, service provider, freelancer, startup founder, or e-commerce seller, understanding GST registration is essential to ensure smooth business operations and avoid penalties.

This blog explains GST registration, eligibility, documents required, registration process, benefits, and practical concerns faced by taxpayers in simple language.

🧾 What is GST Registration?

GST registration refers to the process through which a business obtains a unique Goods and Services Tax Identification Number (GSTIN) under the GST law. Once registered, the business becomes legally authorized to collect GST from customers and claim input tax credit on purchases.

🔢 What is GSTIN?

GSTIN stands for Goods and Services Tax Identification Number. It is a 15-digit identification number issued to registered businesses under GST. The GSTIN is linked with the PAN of the business and is state-specific.

📋 Who Needs GST Registration?

GST registration becomes mandatory in certain cases. A business must register under GST if its turnover crosses the prescribed threshold limit or if it falls under specific categories notified under GST law.

💰 Threshold Limits for GST Registration

Type of Business Threshold Limit
Suppliers of Goods (Normal States) ₹40 Lakhs
Service Providers (Normal States) ₹20 Lakhs
Suppliers in Special Category States ₹10–20 Lakhs

Special category states generally include North-Eastern and hilly states.

⚖️ Cases Where GST Registration is Mandatory Regardless of Turnover

Certain businesses are required to obtain GST registration even if their turnover is below the threshold limit:
• E-commerce sellers selling through platforms such as Amazon or Flipkart
• Businesses making inter-state taxable supplies
• Non-resident taxable persons
• Casual taxable persons
• Persons liable to pay tax under reverse charge
• Exporters and freelancers providing services outside India in certain situations

🎯 Benefits of GST Registration

🏛️ 1. Legal Recognition of Business

A registered business receives a valid GSTIN, which increases business credibility and helps in dealing with vendors and customers.

💳 2. Input Tax Credit (ITC)

Registered businesses can claim credit for GST paid on purchases and expenses, reducing the overall tax burden.

🚚 3. Smooth Interstate Business

GST registration allows businesses to sell goods and services across India without major indirect tax complications.

🛒 4. E-commerce Participation

Most e-commerce platforms require sellers to have GST registration before onboarding.

📈 5. Better Business Expansion Opportunities

Large companies and corporate clients usually prefer dealing with GST-registered vendors.

📂 Documents Required for GST Registration

The following documents are generally required while applying for GST registration:

Documents Purpose
PAN Card Identity of business
Aadhaar Card Verification
Business Registration Certificate Proof of business constitution
Address Proof of Business Verification of business location
Bank Statement / Cancelled Cheque Banking details
Photograph of Promoters/Partners Identity proof
Digital Signature For companies and LLPs
Authorization Letter / Board Resolution Authorized signatory proof

🛠️ Step-by-Step GST Registration Process

🌐 Step 1 – Visit GST Portal

The applicant needs to access the GST portal and select “New Registration”.

✍️ Step 2 – Fill Part A

Basic details such as:
• PAN
• Mobile Number
• Email ID
• State
• Legal Name of Business
are required.

🔐 Step 3 – OTP Verification

OTP verification is completed through mobile number and email ID.

🆔 Step 4 – Temporary Reference Number (TRN)

After verification, a TRN is generated for continuing the application.

🏢 Step 5 – Fill Detailed Application

Business details, promoter information, place of business, bank details, and goods/services information are entered.

📤 Step 6 – Upload Documents

Relevant supporting documents are uploaded.

✅ Step 7 – Verification and Submission

Application is submitted using DSC, EVC, or Aadhaar authentication.

🧾 Step 8 – ARN Generation

An Application Reference Number (ARN) is generated for tracking the application status.

🎉 Step 9 – GSTIN Allotment

After verification by the department, GSTIN and GST Registration Certificate are issued.

💡 Practical Example

Suppose Rahul starts a digital marketing agency in Delhi and his annual turnover reaches ₹22 lakhs. Since he is providing services and his turnover exceeds ₹20 lakhs, GST registration becomes mandatory.

After registration:
• Rahul can charge GST on invoices.
• He can claim ITC on office rent, software subscriptions, and laptops purchased for business.
• He can provide services to clients across India more smoothly.

🤝 Voluntary GST Registration

Even if turnover is below the prescribed limit, businesses may opt for voluntary GST registration. This is beneficial for startups and growing businesses that want:
• Input tax credit benefits
• Better market reputation
• Easier dealings with corporates and online marketplaces

⚠️ Common Challenges Faced During GST Registration

📄 1. Document Mismatch

Differences in PAN, Aadhaar, or address details often lead to notices or rejection.

🏠 2. Address Proof Issues

Many small businesses operate from rented premises and may not have proper documentation such as NOC or rent agreement.

⏳ 3. Delay in Approval

Applications may remain pending due to verification queries from the GST department.

🤔 4. Confusion About Mandatory Registration

Freelancers, exporters, and online sellers are often confused about whether GST registration is compulsory for them.

💻 5. Technical Portal Errors

Users sometimes face issues related to OTP verification, DSC errors, or portal login failures.

🚨 Penalty for Not Taking GST Registration

If a business is required to obtain GST registration but fails to do so, penalties may apply. Additionally:
• Input tax credit cannot be claimed
• GST notices may be issued
• Business operations can face compliance risks

👨‍💻 GST Registration for Freelancers and Online Sellers

Freelancers providing services to foreign clients, e-commerce sellers, and online service providers often need GST registration even when turnover is relatively low due to inter-state or export-related provisions.

✨ Final Thoughts

GST registration is not just a legal requirement; it also helps businesses operate professionally and efficiently. Proper registration ensures smoother compliance, better credibility, and access to tax benefits such as input tax credit.

For startups, freelancers, and small business owners, understanding GST registration at an early stage can prevent future compliance issues and penalties. Businesses should regularly evaluate their turnover, nature of supply, and operational model to determine whether GST registration is mandatory or beneficial.

Section 393 of the Income Tax Act, 2025 – A Simplified Framework for TDS Provisions

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The introduction of the new Income-tax Act, 2025 has brought several structural changes to India’s taxation system. One of the most notable reforms is the consolidation of Tax Deducted at Source (TDS) provisions under a single section — Section 393.

Earlier, the Income-tax Act, 1961 contained multiple TDS sections such as 194A, 194C, 194H, 194J and many more. This often-made compliance difficult for taxpayers, businesses, accountants and deductors. To simplify the law and improve ease of reference, the government has now grouped most non-salary TDS provisions under one unified section.

🔍 What is Section 393?

Section 393 of the Income-tax Act, 2025 deals with deduction of tax at source on various non-salary payments. The section becomes applicable from 1 April 2026 and replaces several scattered TDS provisions that existed under the Income-tax Act, 1961.

The objective behind introducing this section is to:
• simplify tax compliance,
• create a uniform structure for TDS deductions,
• improve readability of the law,
• and allow easier addition of future TDS provisions without disturbing the sequence of sections.

The government has retained salary-related TDS provisions separately under Section 392, while Section 393 mainly governs non-salary transactions.

📅 Applicability of Section 393

Section 393 applies to transactions carried out on or after 1 April 2026. Any transaction completed before this date will continue to be governed by the provisions of the Income-tax Act, 1961.

The section broadly covers:

Payments made to residents
Payments made to non-residents
Certain common payments applicable to all taxpayers

This structure makes the law more organised and easier to interpret compared to the earlier framework.

🧾 Payments Covered Under Section 393

The section includes TDS provisions on a wide range of transactions. Some major categories are:

💼 1. Commission or Brokerage

TDS is applicable on commission and brokerage payments subject to prescribed limits and conditions.

🏠 2. Rent Payments

Rental income paid for land, building, machinery or equipment falls within the scope of Section 393.

🏢 3. Transfer of Immovable Property

TDS provisions relating to purchase or transfer of certain immovable properties are also covered.

💰 4. Interest Income

Interest on securities, bank deposits and other specified interest payments attract TDS under this section.

👨‍💼 5. Contractor and Professional Payments

Payments made to contractors, professionals and technical consultants are included under the consolidated TDS framework.

📈 6. Dividend Income

Dividend payments distributed by companies may require deduction of tax at source.

📊 7. Capital Market and Other Transactions

Income relating to mutual funds, securities and certain financial transactions are also included.

✅ Major Advantages of the New TDS Framework

✔️ Simplified Structure

Instead of remembering numerous TDS sections separately, taxpayers can now refer to a single umbrella provision.

✔️ Better Compliance

A consolidated system reduces confusion and minimises the risk of errors while deducting or depositing TDS.

✔️ Easier Future Amendments

The government can introduce new TDS categories without disturbing the numbering structure of the law.

✔️ Improved Accessibility

Professionals, businesses and taxpayers can understand TDS provisions more efficiently due to the tabular and organised format.

🚫 Important Exemptions Under Section 393

Although TDS generally applies once specified thresholds are crossed, the law also provides certain exemptions where tax deduction is not required.

Some important exemptions include:
• commission paid by telecom companies such as BSNL and MTNL to public call office franchisees,
• rent paid to specified REITs,
• exempt compensation received on compulsory acquisition of land,
• certain interest payments to banks, insurance companies and co-operative societies,
• specific contractor payments for personal purposes,
• dividend payments to specified insurance entities.

These exemptions help reduce unnecessary compliance burden in eligible cases.

📉 Nil or Lower TDS Deduction Facility

Section 393 also allows taxpayers to apply for deduction of tax at a lower rate or for nil deduction in eligible situations.

Under the new framework, taxpayers may submit the prescribed application electronically and obtain a certificate for lower or nil deduction of TDS. This benefit may apply to certain incomes such as:
• interest income,
• rent,
• dividend income,
• insurance commission,
• mutual fund income,
• life insurance policy proceeds,
• accumulated provident fund balance.

⏰ TDS Deduction Timing

The general rule under Section 393 states that TDS should be deducted at the earlier of:
• the time of credit of income to the payee’s account, or
• the time of actual payment.

This principle continues from the earlier tax regime and remains an important compliance requirement for deductors.

🔄 Transition from the Old Act to the New Act

Several existing TDS sections under the Income-tax Act, 1961 are now mapped into Section 393. For example:

Earlier Provision (1961 Act) New Provision (2025 Act)
Section 194A – Interest Section 393
Section 194C – Contractors Section 393
Section 194H – Commission Section 393
Section 194I – Rent Section 393
Section 194J – Professional Fees Section 393

This restructuring mainly changes the organisation of the law rather than the core TDS concept itself.

📋 TDS Rates and Threshold Limits Under Section 393
Nature of Payment TDS Rate Threshold Limit
Insurance Commission Rates in force ₹20,000
Commission or Brokerage 2% ₹20,000
Rent – Machinery/Plant/Equipment 2% ₹50,000 per month
Rent – Land/Building/Furniture 10% ₹50,000 per month
Transfer of Immovable Property 1% / 10% ₹50 lakh or specified limits
Income from Mutual Funds / Business Trust 10% ₹10,000
Interest on Securities Rates in force ₹10,000 onwards
Interest other than Securities Rates in force ₹10,000 to ₹1,00,000
Payments to Contractors 1% / 2% ₹30,000 single payment or ₹1,00,000 aggregate
Professional or Technical Fees 10% ₹50,000
Dividend Income 10% No basic threshold in certain cases
Purchase of Goods 0.1% ₹50 lakh
E-commerce Transactions 1% As prescribed
Virtual Digital Assets (Crypto etc.) 1% As prescribed
Lottery / Crossword Winnings Rates in force ₹10,000 per transaction
Online Gaming Winnings Rates in force As prescribed
Horse Race Winnings Rates in force ₹10,000 per transaction
Lottery Commission 2% ₹20,000
Cash Withdrawals 2% ₹1 crore / ₹3 crore (as applicable)
Payments to Partners (Salary, Interest, Bonus etc.) 10% ₹20,000

Note: “Rates in force” means the applicable rate prescribed under the Finance Act for the relevant financial year. Threshold limits and rates may also vary depending on PAN availability, residential status and specific conditions mentioned under the Act.

⚠️ Important Compliance Point

Under Section 393, TDS must generally be deducted at the earlier of:
• credit of income to the payee’s account, or
• actual payment.

This rule continues from the earlier TDS framework and remains one of the most important compliance requirements for deductors.

🏁 Conclusion

Income-tax Act, 2025 aims to make tax laws more structured, concise and user-friendly. Section 393 is a major step in that direction as it combines multiple non-salary TDS provisions into one comprehensive framework.

For businesses, finance professionals and taxpayers, this consolidation is expected to improve compliance efficiency and reduce confusion arising from multiple TDS sections. Although the fundamental principles of TDS remain largely unchanged, the new presentation and simplified structure may significantly enhance ease of understanding and implementation from FY 2026-27 onwards.

Section 123 of the Income Tax Act, 2025 – Detailed Guide to Tax Saving Deductions 

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The Income Tax Act, 2025 has introduced a revised structure for various provisions under the Indian taxation system. One of the most important changes for individual taxpayers is the replacement of Section 80C of the Income Tax Act, 1961 with Section 123 under the new Act.

Section 123 continues to provide deductions for specified investments, savings schemes, insurance premiums, and certain expenses incurred by taxpayers. Although the numbering and drafting style have changed under the Income Tax Act, 2025, the fundamental objective of encouraging long-term savings and disciplined financial planning remains unchanged.

For salaried individuals and small taxpayers, Section 123 is expected to remain one of the most widely used deduction provisions under the Income Tax Act, 2025.

📌 What is Section 123 of the Income Tax Act, 2025?

Section 123 of the Income Tax Act, 2025 allows eligible taxpayers to claim deductions from their gross total income for investments and payments made in approved financial instruments and schemes.

This section is broadly equivalent to Section 80C of the Income Tax Act, 1961. The government has reorganised and renumbered the provisions while retaining most of the existing tax benefits.

🎯 The purpose of Section 123 is to:

• Promote long-term savings habits
• Encourage retirement planning
• Increase participation in government-backed savings schemes
• Support life insurance and pension coverage
• Encourage investment in tax-saving instruments

👥 Who Can Claim Deduction Under Section 123?

The deduction under Section 123 can be claimed by:
• Individuals
• Hindu Undivided Families (HUFs)

Partnership firms, LLPs, and companies are generally not eligible to claim deductions under this section.

The deduction can be claimed only if the investment or payment has been made during the relevant financial year.

💵 Maximum Deduction Available Under Section 123

The maximum deduction allowed under Section 123 is:

✅ ₹1,50,000 per financial year

This overall limit includes all eligible investments and payments covered under the section.

For example:

Investment Type Amount Invested
PPF Contribution ₹50,000
ELSS Investment ₹40,000
Life Insurance Premium ₹35,000
Tax Saver FD ₹25,000
Total Deduction ₹1,50,000

Even if total eligible investments exceed ₹1.5 lakh, the deduction will be restricted to ₹1.5 lakh only.

🏦 Eligible Investments and Payments Under Section 123

Section 123 covers a wide range of tax-saving investments and expenses. Some of the major eligible deductions are explained below.

1️⃣ Public Provident Fund (PPF)

Contributions made to a PPF account qualify for deduction under Section 123.

🔹 Key features:

• Government-backed savings scheme
• Long-term investment option
• Interest earned is tax-free subject to applicable provisions
• Suitable for conservative investors

2️⃣ Employee Provident Fund (EPF)

Employee contributions to EPF are eligible for deduction under Section 123.

This is commonly claimed by salaried employees whose EPF deductions are automatically reflected in salary structures.

3️⃣ Life Insurance Premium 🛡️

Premium paid towards life insurance policies for:
• Self
• Spouse
• Children

is eligible for deduction subject to prescribed conditions.

The deduction is generally available only if the premium does not exceed the prescribed percentage of the sum assured.

4️⃣ Equity Linked Savings Scheme (ELSS) 📈

Investments made in ELSS mutual funds qualify for deduction under Section 123.

✨ Features of ELSS:

• Market-linked returns
• Shortest lock-in period among tax-saving instruments
• Potential for higher long-term returns

ELSS is preferred by taxpayers seeking equity exposure along with tax benefits.

5️⃣ National Savings Certificate (NSC) 📜

Investment in NSC issued by the government is also eligible for deduction.

It is considered a low-risk fixed-income investment option.

6️⃣ Sukanya Samriddhi Yojana (SSY) 👧

Deposits made in Sukanya Samriddhi accounts for girl children qualify for deduction under Section 123.

The scheme aims to encourage long-term savings for the education and marriage expenses of daughters.

7️⃣ Tax Saving Fixed Deposits 🏛️

Fixed deposits with a lock-in period of five years with scheduled banks are eligible for deduction.

These deposits provide guaranteed returns and are preferred by risk-averse taxpayers.

8️⃣ Home Loan Principal Repayment 🏠

Repayment of the principal amount of a housing loan qualifies for deduction under Section 123.

The deduction is available for:
• Purchase of residential property
• Construction of residential property

However, certain conditions regarding ownership and holding period must be satisfied.

9️⃣ Tuition Fees for Children 🎓

Tuition fees paid for full-time education of children in India are eligible for deduction.

The deduction is available for up to two children.

Only tuition fees qualify; expenses such as transportation, hostel fees, donations, and development charges are generally excluded.

🔟 Senior Citizens Savings Scheme (SCSS) 👴👵

Deposits made under SCSS are also eligible for deduction under Section 123.

This scheme is specifically designed for senior citizens and offers stable returns.

📚 Schedule XV Under the Income Tax Act, 2025

Under the Income Tax Act, 2025, many eligible deductions and investments have been shifted to schedules for easier reference.

The detailed list of investments eligible under Section 123 is now contained in:

📖 Schedule XV of the Income Tax Act, 2025

This structural change aims to simplify legal drafting and improve readability of the Act.

⚖️ Difference Between Section 80C and Section 123

Particulars Section 80C – Income Tax Act, 1961 Section 123 – Income Tax Act, 2025
Applicable Law Income Tax Act, 1961 Income Tax Act, 2025
Deduction Limit ₹1.5 lakh ₹1.5 lakh
Eligible Taxpayers Individuals & HUFs Individuals & HUFs
Nature of Benefit Tax-saving deduction Tax-saving deduction
Eligible Investments Mentioned in the section itself Referenced through Schedule XV
Objective Encourage savings Encourage savings

⚠️ Important Conditions for Claiming Deduction

Taxpayers should keep the following conditions in mind while claiming deduction under Section 123:

• Investments must be made during the relevant financial year
• Proper investment proofs and payment receipts should be maintained
• The total deduction cannot exceed ₹1.5 lakh
• Certain investments carry lock-in periods
• Early withdrawal from specified schemes may lead to reversal of benefits
• The deduction may not be available under certain tax regimes, subject to applicable provisions

📊 Tax Planning Benefits of Section 123

💸 Reducing Taxable Income

A deduction of ₹1.5 lakh can significantly reduce overall tax liability.

📈 Encouraging Long-Term Savings

Most eligible instruments promote disciplined financial planning.

👴 Building Retirement Corpus

Schemes like EPF, PPF, and SCSS support retirement security.

🧩 Diversifying Investments

Taxpayers can allocate funds across:
• Fixed income instruments
• Equity-linked investments
• Insurance products
• Government-backed schemes

❌ Common Mistakes Taxpayers Should Avoid

Some common issues while claiming deduction under Section 123 include:

• Claiming deduction for non-eligible payments
• Including registration charges or donations incorrectly
• Claiming tuition fees for more than two children
• Investing after the financial year-end
• Ignoring lock-in conditions
• Failing to maintain supporting documents

Careful documentation and timely investments can help avoid disputes during assessment or verification.

🏛️ Applicability of Section 123 Under the New Tax Regime

Taxpayers should carefully evaluate whether deductions under Section 123 are available under the tax regime they choose.

Under the new framework, certain deductions may not be available if the taxpayer opts for concessional tax regimes. Therefore, taxpayers should compare tax liability under both regimes before making investment decisions.

✅ Conclusion

Section 123 of the Income Tax Act, 2025 continues the legacy of Section 80C by providing deductions for a wide range of investments and savings instruments. While the section number and drafting structure have changed, the core tax-saving benefits remain substantially similar.

The provision continues to play an important role in tax planning for salaried individuals, professionals, and families by encouraging systematic savings, insurance coverage, retirement planning, and long-term wealth creation.

Taxpayers should understand the revised section references under the Income Tax Act, 2025 and maintain proper investment records to ensure smooth compliance and maximum tax benefits.

Financial Year Closing (FY 2025–26)

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As the financial year 2025-26 approaches its close, it is important for businesses to review their financials, tax positions, and compliance status to ensure a smooth year-end closing. This advisory note outlines the key action points to avoid disallowances, penalties, and notices under the Income-tax Act, 1961.

🧾 Income Tax – Key Year-End Actions

✔ Expense Booking
• Ensure all expenses related to FY 2025-26 are recorded before 31 March
• Accrue expenses such as:
o Rent
o Professional fees
o Interest
o Audit fees
o Electricity / internet

✔ Check Disallowances
Review critical sections to avoid tax disallowance:
• Section 40A(3): Cash payments above ₹10,000
• Section 43B: PF, ESI, GST, bonus payable
• TDS-related disallowances

✔ TDS Compliance
• Deduct TDS on all applicable payments:
o Salary (Section 192)
o Contractor (194C)
o Professional fees (194J)
o Rent (194I)
• Ensure TDS is deducted and deposited on time
• Reconcile TDS with books

✔ Advance Tax
• Pay remaining advance tax before 31 March
• Avoid interest under sections 234B & 234C

👥 Payroll & HR Compliance

✔ Salary & Bonus
• Book salary for March
• Record bonus / incentives
• Check leave encashment provision

✔ Employee Deductions
• Verify:
o PF / ESI
o TDS calculation
o Investment proofs (80C, 80D, etc.)

🧮 GST Compliance

✔ Reconciliation
• Match:
o Books vs GSTR-1
o Books vs GSTR-3B
o ITC vs GSTR-2B

✔ ITC Review
• Reverse ineligible ITC
• Ensure vendor compliance

📚 Accounting & Financial Review

✔ Books Finalisation
• Complete bank reconciliation
• Verify debtors & creditors
• Review provisions & accruals

✔ Fixed Assets
• Record additions / deletions
• Calculate depreciation

🤝 Vendor & Contract Compliance

✔ Vendor Review
• Collect pending invoices
• Verify vendor GST & PAN
• Ensure TDS compliance

✔ Agreements
• Review ongoing contracts
• Check expiry / renewal terms

💰 Cash & Banking Controls

• Avoid cash transactions beyond prescribed limits
• Ensure proper documentation of all transactions
• Review loans & advances

📂 Documentation & Audit Readiness

Prepare for audit by maintaining:
✔ Invoices & bills
✔ Agreements
✔ Bank statements
✔ TDS records
✔ GST returns
✔ Payroll records

📅 Important Due Dates (March-End Focus)

Compliance | Due Date
Advance Tax (Final Installment) | 15 March
TDS Deposit (March) | 30 April
TDS Return (Q4) | 31 May
Form 16 Issue | 15 June

⚠️ Key Risks if Not Completed

Failure to complete year-end activities may result in:
• Expense disallowances
• Interest & penalties
• Income tax notices
• GST mismatches
• Audit qualifications

🏁 Conclusion

A timely and structured financial year closing ensures compliance, reduces tax risks, and strengthens financial reporting. Businesses should proactively review all tax, accounting, payroll, and regulatory aspects before 31 March to avoid last-minute issues.

For a smooth closure, it is advisable to seek professional assistance for compliance review, tax planning, and audit preparation.

For any assistance with FY closing, compliance review, or tax planning, feel free to connect with us.

Income Tax Closing Checklist for FY 2025–26 – What Every Business Must Complete Before 31 March

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As the financial year comes to an end, businesses must ensure that all Income Tax related activities are properly completed before 31 March to avoid penalties, notices, and unnecessary tax liability. Proper year-end planning helps in tax saving, compliance, and smooth audit preparation.

At Komplytek, we help businesses complete their financial year closing with accurate accounting, tax planning, and compliance management.

Below is a complete Income Tax Closing Checklist for FY 2025–26.

📊 Review Profit & Loss Account

• Verify all income is recorded
• Check expense booking
• Identify disallowed expenses
• Check extraordinary / one-time entries

✔ Helps in correct tax calculation
✔ Avoids mismatch during audit

🧾 Verify All Expenses Are Booked Before 31 March

Ensure booking of:
• Rent
• Salary & bonus
• Professional fees
• Interest
• Electricity / internet / office expenses
• Consultancy charges

👉 Expenses not booked before year end may not be allowed for deduction.

🏦 Check TDS Deduction & Deposit

• Verify TDS deducted on all applicable payments
• Deposit TDS before due date
• Match with TRACES / Form 26Q / 24Q
• Check vendor TDS mismatch

Important for:
• Salary
• Contractor payments
• Professional fees
• Rent
• Commission

Late deduction may lead to:
• Disallowance of expense
• Interest & penalty

💰 Verify Advance Tax Payment

Check whether advance tax is properly paid:
• June installment
• September installment
• December installment
• March installment

👉 If short paid → Pay before 31 March to avoid interest u/s 234B & 234C.

🏢 Depreciation Calculation on Fixed Assets

• Update asset register
• Add new assets purchased
• Remove sold assets
• Calculate depreciation as per Income Tax Act

✔ Reducing taxable income
✔ Correct balance sheet reporting

🔗 Check Related Party Transactions

Verify transactions with:
• Directors
• Partners
• Group companies
• Relatives
• Sister concerns

Ensure:
• Proper documentation
• Reasonable pricing
• Compliance with Income Tax rules

Required for audit & transfer pricing cases.

📉 Verify Loans, Advances & Interest

Check:
• Loan balances
• Interest provision
• Interest TDS
• Confirmation from parties

Mismatch may lead to notice during assessment.

🔍 Reconcile Books with Bank & GST

• Bank reconciliation
• GST reconciliation
• TDS reconciliation
• Debtors / creditors confirmation

Important for:
• Income tax return
• Audit
• GST return
• Financial statements

⚖ Check Disallowances Under Income Tax Act

Review expenses not allowed fully, such as:
• Cash payments above limit
• Late TDS deposit
• Personal expenses
• Penalty / fines
• Unapproved provisions

Proper review helps in correct tax calculation.

📑 Prepare for Tax Audit (If Applicable)

Check applicability of audit u/s 44AB.

Keep ready:
• Books of accounts
• Invoices
• Bank statements
• TDS details
• GST returns
• Agreements / contracts

Proper preparation avoids last-minute issues.

💡 Plan Tax Saving Before 31 March

Possible planning:
• Bonus / incentive booking
• Asset purchase
• Expense provisioning
• Investment planning
• Salary restructuring

Tax planning must be done before year end.

✅ Final Review Before Closing Books

Before closing accounts ensure:
✔ All entries passed
✔ All taxes calculated
✔ All reconciliations done
✔ All compliances checked

This ensures smooth filing of:
• Income Tax Return
• Tax Audit Report
• GST Return
• Financial Statements

🏁 Conclusion

Financial year closing is not just accounting work — it is the most important time for tax planning, compliance, and financial control.

With proper guidance from Komplytek businesses can complete Income Tax closing smoothly and avoid penalties, notices, and extra tax burden.

If your business needs support in:
✔ Income Tax Closing
✔ Tax Planning
✔ Audit Preparation
✔ Accounting Finalisation
✔ Virtual CFO Services

Komplytek team is ready to help.

Key Changes in Income Tax Rules for FY 2024–25 (Assessment Year 2025–26)

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Key Changes in Income Tax Rules for FY 2024–25 (Assessment Year 2025-26)

The financial year 2024–25 brings several crucial changes to India’s income tax landscape that every taxpayer, whether salaried, self-employed, or a senior citizen, should be aware of. From revised tax slabs and enhanced standard deductions to updated ITR forms and extended filing deadlines, the government has aimed to simplify compliance while offering moderate relief to individuals. This blog summarizes the key updates and what they mean for your tax planning in the year ahead.

📊 Tax Slab Revisions (New Tax Regime)

Annual Income Range Tax Rate
Up to ₹3,00,000 Nil
₹3,00,001 – ₹7,00,000 5%
₹7,00,001 – ₹10,00,000 10%
₹10,00,001 – ₹12,00,000 15%
₹12,00,001 – ₹15,00,000 20%
Above ₹15,00,000 30%

💰 Standard Deduction Hike

  • Increased from ₹50,000 to ₹75,000 for salaried individuals under both regimes.

  • Family pension deduction also rose to ₹25,000.

🧾 Rebate Uplift Under the New Regime

With the enhanced ₹75,000 standard deduction and rebates, individuals earning up to around ₹7.75 lakh pay no tax.

📑 Revised ITR Forms & Utilities

  • Changes in ITR 1/ITR 4 Excel utilities require more detailed disclosures.

  • ITR 1 to ITR 4 forms have nine updates, expanding eligibility and adding new validations.

🗓️ Extended ITR Filing Date

Deadline extended from 31 July to 15 September 2025 for FY 2024–25 returns due to ITR restructuring.

🏠 HRA & Capital Gains Reporting

HRA claims and capital gains calculations face stricter scrutiny—complete documentation is essential to avoid notices.

💼 TDS/TCS and Procedural Relief (Budget 2025 Updates)

  • TDS on senior citizens’ interest doubled from ₹50,000 to ₹1 lakh.

  • TDS on rent increased from ₹2.4 lakh to ₹6 lakh.

  • NSC withdrawals (post-Aug 29, 2024) are now tax-exempt.

  • ITR correction window extended from 2 to 4 years.

❓ Frequently Asked Questions (FAQs)

✅ Do I still need to fill in salary details if it’s pre-filled?
Yes. While salary components may be pre-filled from Form 16, taxpayers must verify and edit details like Basic, HRA, Perquisites, and Bonus as per actuals.

✅ Is there any change in deduction claims under Sections 80C to 80U?
Yes. You now have to enter each deduction separately, such as LIC, PPF, ELSS, health insurance, education loan, etc., making it more structured and transparent.

✅ Can I still revise my return if I find a mistake later?
Yes. As per the latest rule, the ITR correction window is now extended to 4 years (under specified conditions), giving more time to rectify errors post-filing.

9 Key Updates in ITR-1 to ITR-4 for FY 2024–25

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9 Key Updates in ITR-1 to ITR-4 for FY 2024–25

1. Expanded Eligibility for ITR-1

Now allowed for individuals with:

  • Family pension (not just salary/pension income)

  • Income from other sources like interest/dividends (if not exceeding ₹50 lakh)

Still not permitted for:

  • Capital gains

  • Foreign income/assets

  • Agricultural income > ₹5,000

2. Residential Status Auto-Validation

Auto-calculated based on:

  • Number of days stayed in India

  • Date of arrival/departure (linked with AIS/TIS)

✔️ Ensures NRI/resident status is correctly determined and reported.

3. Enhanced Pre-filled Data

More fields pre-filled using PAN & AIS:

  • Salary, interest, and dividend income

  • TDS, advance tax

  • Capital gains (if any from broker uploads)

✔️ Reduces manual errors and mismatches.

4. More Detailed Salary Breakup (ITR-1)

Now mandatory to show:

  • Basic pay

  • HRA

  • Perquisites

  • Bonus/incentives

📝 Matches Form 16 format for increased accuracy.

5. Cash vs Digital Receipts Declaration (ITR-4)

For businesses under presumptive income scheme (44ADA/44AE), must declare:

  • Total receipts

  • Breakup: Cash vs. Digital/Online

🔍 Promotes transparency in business income reporting.

6. Bank Account Disclosures Expanded

Now mandatory to disclose:

  • All active and dormant accounts

  • Bank names, IFSC codes

🏦 Aids refund reconciliation and interest/cash reporting.

7. Section-wise Deductions Required (80C to 80U)

Must mention each deduction clearly:

  • 80C: LIC, PPF, ELSS, etc.

  • 80D: Health insurance

  • 80E: Education loan interest

  • 80G: Donations

📌 Ensures accurate capping (e.g., ₹1.5 lakh under 80C).

8. New Validations for Capital Gains Reporting (ITR-2 & 3)

Structured disclosures needed:

  • Date of acquisition & sale

  • Type of asset (shares, property, etc.)

  • Indexed cost & LTCG exemption (if any)

📊 System matches broker data from AIS for accuracy.

9. Foreign Income & Asset Reporting (ITR-2 & ITR-3)

Revised Schedule FA includes:

  • Foreign bank accounts

  • Shares/stocks

  • Properties abroad

🌍 Must report even if there’s no income.
⚠️ Non-disclosure can attract penalties under the Black Money Act.

TDS In case of Non-Resident – Section 195

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tds

An assesses total income earned during the previous year is taxable in the assessment year, i.e., the year following the financial year. However, tax has to be paid in the previous year itself in the form of TDS, TCS, and advance tax.

TDS refers to tax deduction at source, which is required to be deducted by the person at the time of making payments like salary, rent, commission, professional fees, interest etc. and deposit the same with the government on or before the due date. A fixed percentage is defined in the Income Tax Act 1961 for the purpose of TDS.

Here we are looking at the TDS in the case of payment to a non-resident.

Section 195

Section 195 is applicable to any individual (resident or non-resident) who is making payment of interest or any other amount chargeable to tax (except payments under section 194 LB, section 194 LC, and salary payments outside India) to an individual non-resident or foreign company. Such a person is liable to deduct tax at the rate specified by the Income Tax Act 1961. This helps to reduce the revenue loss by deducting the tax while making the payment to a non-resident. Furthermore, the payer is required to furnish the details of payment in the form as prescribed by the Central Board of Direct Taxes.

For the purpose of this section, “payer” can be any person. Here, “any person” includes both residents and non-residents. The residential status of a payee can be determined as per section 6 of the Income Tax Act 1961.

Section 194 LB of the Income Tax Act 1961 deals with the provisions relating to income by way of interest from the Infrastructure Debt Fund.

Section 194LC of the Income Tax Act 1961 deals with the provisions relating to income by way of interest from an Indian company or business trust.

Time of Deduction

Any person who is making payment to a non-resident individual or foreign company is required to deduct TDS at the time of credit of such income to the payee’s account or whichever comes first, at the time of payment.

Rates for the Deduction of TDS

The following are the TDS rates given under section 195:

 

Particulars Rate of TDS
Income from investments made by NRI 20%
Long-term capital gain income for NRIs as defined by section 115E 10%
Income from long-term capital gain (Listed shares and Securities as per section 112A) 10%
Additional long-term capital gain    20%
Short-term capital gain as per section 111A           15%
Interest imposed on foreign currency loans       20%
Royalty or fees for technical services payable by the Government or an Indian Concern          10%
Winning from lotteries, crossword puzzles, horse races, card games, and any other such Games            30%
Any other income source                30%

 

The above rates are given as per Finance Act 2022 and a cess of 4% & surcharge is added as applicable.

The payee can choose between the rates specified in the Finance Act 2022 and the rates specified in the Double Taxation Avoidance Agreement (DTAA), whichever is more advantageous to the payee. Furthermore, no surcharges or less are required to be added to the DTAA rates.

However, if the payee fails to furnish the PAN to the payer, then the payer will be required to deduct TDS at higher rates as per section 206AA.

Threshold limit to deduct TDS

There is no threshold limit for deducting TDS. TDS shall be deducted on all types of payments as prescribed under section 195.

Why should you choose Komplytek?

The auditing service provided by Komplytek entails reviewing all of the client’s financial information and ascertaining its accuracy. We provide unparalleled audit services, including assessing internal controls, testing financial data, and gauging fraud dangers. We also seek to deliver accurate financial accounts and manage the company’s financial assets. In order to enhance your company operations, we give factual observations with the highest honesty.

Komplytek is at your service if you are seeking high-caliber feedback on your company procedures. In addition to trustworthy, high-quality evaluation services, we provide our clients with high-quality audit methods. Our experts are up-to-date with the latest technologies in the audit practice. Our tax and audit assurance services include:

  1. Internal Audit before finalization of books
  2. Statutory Audit
  3. Stock Audit
  4. Assets Audit
  5. Any client-specific financial audits or compliance audits.