Category BLOG

Charitable trusts and non-profit institutions in India enjoy income tax exemptions under the Income Tax Act, provided they are registered under Section 12AB. These registrations were initially granted for a limited period, mostly up to March 31, 2026, which means renewal is now mandatory to continue availing benefits. The Finance Act, 2025 has introduced a 10-year validity for eligible trusts, replacing the earlier 5-year cycle.

Also read here

Section 12AB Registration – Meaning, Importance, and Latest Changes (2025 Update)

Who Needs to Renew Section 12AB Registration?

Every trust or institution registered under Section 12AB must apply for renewal at least six months before the expiry date of the current registration. For registrations expiring on March 31, 2026, the last date to apply is September 30, 2025.

Renewal is not optional; it is a legal requirement under Section 12A(1)(ac)(ii). Failure to renew may lead to cancellation of the registration and loss of tax benefits under Sections 11 and 12.

Eligibility for Renewal with 10-Year Validity

The Finance Act, 2025 has brought a major change in validity. If a trust meets certain conditions, the renewed registration will be valid for 10 years instead of 5. The key eligibility requirement is:

Income Threshold Test:

The trust’s total income, calculated without claiming exemptions under Sections 11 and 12, should not exceed ₹5 crore in each of the two previous years before the year of application.

This means, when applying for renewal in 2025, the income for FY 2023-24 and FY 2024-25 will be checked. If the income exceeds ₹5 crore in any of these two years, the trust will get a 5-year validity instead of 10.

Points to Remember:

• Total income is not the same as gross receipts.
• It must be computed as per the Income Tax Act, excluding the benefits under Sections 11 and 12.

Who Cannot Get 10-Year Validity?

• Trusts with income above ₹5 crore in either of the two preceding years.
• Provisional registrations under sub-clause (vi) of Section 12A(1)(ac) (they still get 3-year validity).
• Such trusts can apply again after the provisional period ends, but they will not automatically qualify for the 10-year period.

Documents Required for Section 12AB Renewal

To apply for renewal, trusts must submit an application in Form 10AB through the Income Tax portal. Along with the form, the following documents are generally required:

1. Trust Deed or Registration Certificate – A copy of the original trust deed or instrument of establishment.
2. Audited Financial Statements – For the two years immediately preceding the year of application (e.g., FY 2023-24 and FY 2024-25).
3. Income Computation – Showing total income without exemptions under Sections 11 and 12, proving the ₹5 crore threshold compliance.
4. PAN of the Trust/Institution – Mandatory for filing.
5. Details of Trustees/Office Bearers – Names, PAN, and addresses of all key persons.
6. Activity Report – A brief report of activities carried out during the preceding years.
7. Registration under Other Laws – Copies of registrations under laws like the Societies Registration Act or Companies Act (if applicable).
8. Compliance Certificates – Declarations confirming adherence to conditions under Section 12AB.

Practical Tips for Smooth Renewal

• Apply early: Do not wait for the last date. File at least six months before expiry.
• Keep accounts updated: Ensure audits for FY 2023-24 and FY 2024-25 are completed well before filing.
• Attach all required proofs: Missing documents can delay or reject the application.
• Check income calculations carefully: The ₹5 crore limit applies to total income, not receipts.

Conclusion

Renewal of Section 12AB registration is mandatory for all trusts and institutions to retain their tax exemptions. For those meeting the income threshold of ₹5 crore or less in each of the two preceding years, the Finance Act, 2025 offers a 10-year validity, providing long-term stability. Timely application through Form 10AB, supported by complete and accurate documentation, is crucial to avoid penalties and ensure uninterrupted benefits.

Section 12AB of the Income Tax Act plays a crucial role for charitable trusts and non-profit organisations in India. It ensures that such entities continue to enjoy income tax exemption on their income, provided they meet the prescribed conditions. With the introduction of the Finance Act, 2025, significant updates have been made to the registration framework, making it important for organisations to understand the meaning, importance, and latest changes under Section 12AB.

What is Section 12AB Registration?

Section 12AB registration is a legal requirement for charitable and religious trusts, NGOs, and similar institutions to claim tax exemption on income applied for charitable purposes under Sections 11 and 12 of the Income Tax Act. Without this registration, organisations will not be eligible for these benefits.

Earlier, registrations were granted under Section 12A or 12AA. However, the government introduced Section 12AB to streamline the process and increase transparency. Initially, the registration granted was valid for five years. But the Finance Act 2025 has introduced a new framework offering an extended validity period under certain conditions.

Why is Section 12AB Registration Important?

The importance of Section 12AB registration cannot be overstated for charitable entities. Here are a few reasons why:

1. Tax Exemption on Income: A valid registration under Section 12AB ensures that income applied for charitable or religious purposes is exempt from income tax, subject to compliance with the Act.
2. Eligibility for Donations under Section 80G: Many donors prefer contributing to institutions that are registered, as their donations qualify for tax deductions under Section 80G.
3. Legal Recognition and Credibility: Registration provides legal recognition to the trust or NGO, enhancing its credibility in the eyes of donors, government bodies, and stakeholders.
4. Compliance with Law: It is mandatory for all trusts and institutions to hold valid registration to continue availing benefits. Failure to renew or maintain registration may lead to denial of exemptions and penalties.

Latest Changes Introduced by the Finance Act, 2025

The Finance Act, 2025, has brought a major change in the validity period of registration. Here are the key updates:

1. 10-Year Validity for Eligible Entities

Earlier, registrations were valid for five years. Now, trusts and institutions meeting specific conditions can obtain registration for 10 years. This is a significant relief for organisations, as it reduces the frequency of renewals.

2. Conditions for 10-Year Validity

To qualify for the extended 10-year validity:

• The total income of the trust or institution, computed without giving effect to Sections 11 and 12, should not exceed ₹5 crore in each of the two financial years immediately preceding the application year.
• This calculation excludes exemptions under Sections 11 and 12, meaning organisations must calculate income before applying these benefits.

3. Application Timeline

Trusts with registration expiring on 31 March 2026 must apply for renewal by 30 September 2025. Applications should be filed through Form 10AB on the income tax portal.

Procedure and Compliance

The renewal process requires:

• Filing of Form 10AB under the appropriate sub-clause.
• Submission of supporting documents, including audited financial statements for the last two years, trust deed, activity reports, and income computation to prove eligibility.
• Processing by the Principal Commissioner or Commissioner of Income Tax (Exemptions).
• If the application meets all conditions, the registration order will be issued in Form 10AD with a 10-year validity.

Conclusion

Section 12AB registration remains an essential compliance requirement for charitable and religious institutions in India. The introduction of the 10-year validity framework under the Finance Act, 2025, is a welcome move, reducing administrative burden for genuine organisations. However, eligibility depends on meeting the ₹5 crore income threshold and ensuring timely application before the deadline. Charitable entities should maintain proper documentation and track compliance timelines to secure long-term benefits under this updated regime.

Tax planning often involves transferring assets or income to family members. While this may seem like a legitimate way to reduce tax liability, the Income Tax Act has provisions to prevent misuse. One such provision is the concept of “clubbing of income” under Section 64. This rule ensures that income transferred to certain relatives without adequate consideration is still taxed in the hands of the original owner.

What Is Clubbing of Income?

Incorporating someone else’s income—usually that of a close relative—into your own taxable income is known as “clubbing of income”. This is done in order to stop tax evasion through false transfers. Section 64 of the Income Tax Act explains various relationships and instances when clubbing restrictions apply.

It’s crucial to remember that not all family income is combined. The legislation specifies specific circumstances in which income must be included in the taxpayer’s overall income.

Key Scenarios Where Clubbing Applies

1. Transfer of Income Without Transferring the Asset (Section 60): If you transfer the income from an asset but retain ownership of the asset itself, the income remains taxable in your hands. For example, if you own a property and assign the rental income to someone else, you are still liable to pay tax on that income.
2. Revocable Transfers (Section 61): When an asset is transferred with a clause allowing the transferor to revoke it, any income from that asset is clubbed with the transferor’s income.
3. Income of Minor Children (Section 64(1A)): Income earned by a minor child is clubbed with the income of the parent who earns more. However, there are exceptions:
4. Income from manual work or application of skill by the child is not clubbed.
5. The income of a disabled child (as defined under Section 80U) is excluded.
6. An exemption of ₹1,500 per child is allowed under the old tax regime.
7. Spouse’s Income from a Concern with Substantial Interest (Section 64(1)(ii)): If your spouse earns income from a business or entity where you hold substantial interest (20% or more voting rights or profit share), that income may be clubbed with yours—unless your spouse has professional qualifications and the income is solely due to their expertise.
8. Transfer of Assets to Spouse (Section 64(1)(iv)): If you transfer an asset to your spouse without adequate consideration, the income from that asset is taxable in your hands. Exceptions include transfers before marriage, divorce settlements, and income from assets acquired through “pin money”.
9. Transfer to Daughter-in-Law (Section 64(1)(vi)): Assets transferred to a daughter-in-law without adequate consideration will result in clubbing of income in the hands of the transferor.
10. Indirect Transfers for Benefit of Spouse or Daughter-in-Law (Sections 64(1)(vii) and 64(1)(viii)): Even if the asset is transferred to someone else, but the benefit is intended for your spouse or daughter-in-law, the income will be clubbed with your income.
11. Transfer to Hindu Undivided Family (Section 64(2)): If a member of an HUF transfers personal property to the HUF without adequate consideration, income from that property is clubbed with the member’s income.

Examples to Illustrate Clubbing

Consider Mr A, who gifts ₹6 lakh to his wife. She invests it in a fixed deposit and earns ₹5,000 interest annually. Since the asset was transferred without consideration, the interest income is clubbed with Mr A’s income.

In another case, Mr B owns 21% shares in a company where his wife is employed. If she lacks the qualifications for her role, her salary may be clubbed with Mr B’s income.

How to Avoid Clubbing Provisions

While the law is strict, there are legitimate ways to plan your finances without triggering clubbing:

• Gifting to Parents: Gifts to parents are not taxable, and income earned from such gifts is taxed in their hands.
• Marriage Gifts: Gifts received during marriage are exempt, and income from those gifts is not clubbed.
• Investing in PPF: Interest from PPF is tax-exempt. Even if invested in the name of a spouse or minor child, clubbing provisions do not apply.

Conclusion

The purpose of income clubbing is to guarantee equitable taxation. It dissuades fraudulent agreements intended to change tax obligations. You can more effectively arrange your finances and prevent unforeseen tax burdens by being aware of these regulations. It’s a good idea to understand the clubbing consequences before transferring assets or income to family members.

A long-running tax controversy affecting India’s telecom infrastructure reached a decisive point in 2025 when the Supreme Court considered whether towers, shelters and related prefabricated structures used by mobile operators qualify as goods eligible for credit. The litigation resolved conflicting high court views and applied established legal tests for movability. The Court held that many such structures are movable in character and, depending on facts, can qualify as capital goods or inputs for credit purposes. The ruling clarifies the law for both pre-GST CENVAT and contemporary input tax credit disputes.

Background

Telecom operators buy towers, shelters and prefabricated cabins which are bolted or fastened at sites to carry antennas and electronic equipment. Revenue authorities had denied credit on the ground that, once fixed, these assets become immovable and therefore do not qualify under the CENVAT/input tax credit rules. Conflicting judgements from high courts created uncertainty: some benches treated such affixed structures as immovable; others recognised their relocatable character. The Supreme Court therefore examined the essential question of whether fixation transforms the goods into immovable property for credit law purposes.

The Court’s Tests and Reasoning

The Court applied well-established, multi-factor tests to determine movability:

• Permanency test: whether the structure was intended to be permanently attached to land.
• Intention and purpose test: whether attachment was intended to benefit land or the installed equipment and service.
• Functionality test: whether the fixation was used solely to serve the machinery or equipment that produces the taxable service.
• Marketability test: whether the article can be treated and traded as goods in the market.

Applying these tests to telecom towers and shelters, the Court concluded that where the structures are designed for functional support of telecom equipment, are bolted for stability and can be dismantled, relocated and reused, they retain the character of movable goods. The Court therefore accepted that such assets can qualify as capital goods or inputs under the relevant credit rules, subject to satisfying statutory conditions.

Key Legal Findings

• Fixation by bolts or fastenings, standing alone, does not automatically convert an item into immovable property.
• The commercial reality and intended use are central: if the erection serves the telecom equipment rather than improving land, movability is likely.
• Where those tests are satisfied, availability of CENVAT or input tax credit follows the ordinary rules; denial purely on the basis of affixation cannot be sustained.

Immediate and Practical Impact

The ruling removes a major legal obstacle for telecom companies seeking credit on towers and similar items. It strengthens the basis for claims that were earlier denied solely on the “immovable” theory. However, the judgement does not create automatic refunds. Affected taxpayers must follow statutory claim or refund procedures, consider limitation timelines, and address fact-specific record requirements when seeking relief. Tax authorities and tribunals will need to reassess denials in light of the movability analysis.

Further Relevance

While the decision is most directly relevant to telecom infrastructure, it has wider significance. Industries that use prefabricated units, modular cabins, plant supports or relocatable structures may now rely on the movability framework to argue credit entitlement. Administrative guidance and careful documentation on design, removability and intended use will be key for such claims.

Conclusion

Bharti Airtel’s litigation clarifies that legal treatment of an asset for credit purposes depends on substance over form. The Court reconciled statutory tests with commercial realities and provided a workable framework for distinguishing movable infrastructure from immovable construction. The ruling thus reduces legal uncertainty for telecom investment and offers a precedent other sectors can adapt, while also signalling that refund and credit claims remain subject to procedural conditions and limitation rules.

The Supreme Court’s order in Union of India vs. Bharti Airtel Ltd. and Others [CIVIL APPEAL NO. 2021 (ARISING OUT OF S.L.P. (C) NO. 8654 OF 2020) dated October 28, 2021] is a landmark on the limits of post-filing rectification under the Goods and Services Tax regime. Bharti Airtel sought a refund of roughly ₹923 crore for excess tax allegedly paid during the initial months of GST implementation in July–September 2017, citing technical failures of the return-matching system. The Delhi High Court had permitted rectification, but the Supreme Court set aside that relief and refused the refund, reinforcing the finality of self-assessed GSTR-3B returns and the statutory regime governing ITC claims.

The Initial Issues and Airtel’s Claim

When GST launched, certain electronic return processes were not fully operational. Inward-supply statements that would later assist ITC reconciliation did not immediately function as intended. Taxpayers filed summary returns in GSTR-3B on a self-assessment basis, sometimes making conservative estimates of ITC. Airtel said these constraints led to excess tax payment and sought rectification of earlier GSTR-3B filings to secure a refund of about ₹923 crore for the July–September 2017 period. The Delhi High Court initially allowed rectification and directed revenue authorities to verify revised returns.

Supreme Court’s Core Reasoning

On 28 October 2021, the Supreme Court overturned the Delhi High Court’s order and declined to allow unilateral rectification of GSTR-3B so as to claim the refund. The Court’s principal points were these:

• GSTR-3B is a self-assessment return and, once filed, carries statutory finality subject to the processes and timelines set out in the law and rules. Allowing retrospective reworking outside those processes poses risks to the GST electronic architecture and to third parties in the supply chain.
• Portal problems, while regrettable, do not displace the statutory mechanism. The Court treated the delayed availability of supplier statements as a practical difficulty that required administrative or legislative solutions, not judicially ordered, wide-ranging rewriting of statutory returns.
• The difference between a genuine correctable error and a post-facto attempt to alter self-assessed liability was stressed. The former falls within prescribed remedy windows; the latter cannot be used to undermine the GST return system.

Legal Principles Acknowledged

The judgement reaffirmed three structural principles of the GST regime: the primacy of self-assessment, the finality of GSTR-3B subject to statutory remedies, and the role of electronic ledger discipline for utilisation of input tax credit. The Court indicated that compliance and reconciliation must occur within the statutory scheme rather than by ad hoc judicial direction to reopen returns beyond permitted procedures.

Practical Impact on Businesses

The ruling curtailed the remedy available to taxpayers who had relied on post-launch administrative remedies. Businesses with similar transitional claims must rely on the statutory dispute and rectification mechanisms, audits, assessments, and refund procedures rather than expect broad return rectification. The decision underlines the need for contemporaneous reconciliation and careful self-assessment when filing summary returns.

Conclusion

A dispute regarding the extent to which courts can allow retrospective rectification of self-assessed GST returns was decided in Bharti Airtel v. Union of India. The Supreme Court strengthened the GST self-assessment structure’s discipline by rejecting the rectification-based refund claim and maintaining statutory finality. It also indicated that legislative or administrative solutions are better for systemic technical issues. The decision acts as a reminder to taxpayers to keep thorough reconciliations and to settle disputes using the proper legislative procedures.

Filing your Income Tax Return (ITR) is a crucial task for every taxpayer in India. But let’s face it—mistakes happen. Whether it’s a missed income, forgotten deductions, or a small miscalculation, these errors can affect your tax liability. The good news is that the Income Tax Act, 1961, allows taxpayers to correct these mistakes through a Revised Return under Section 139(5).

What is a Revised Return?

A revised return is essentially an updated version of your original ITR. It allows taxpayers to fix mistakes or omissions in their original filing. The main benefit? Accuracy in reporting income and deductions while avoiding future legal hassles. Section 139(5) empowers taxpayers to submit a revised return anytime before the assessment is completed, ensuring their records are correct.

Conditions For a Revised Return

• Correction of Errors

Did you accidentally report ₹5,000 instead of ₹50,000 as income? Or claim a deduction incorrectly? Filing a revised return ensures your mistakes are rectified and your tax liability is correctly calculated.

• Missed Reporting of Income

Sometimes, taxpayers forget to report income from small sources, like freelance work or interest from savings accounts. Including these in a revised return keeps your records accurate.

• Changes in Tax Calculation

Changes in tax laws or applicable deductions might impact your payable tax. A revised return ensures your liability reflects these changes accurately.

Section 139(5) of the Income Tax Act

Section 139(5) allows a taxpayer to file a revised return if they discover an error or omission in their original return. It applies to all taxpayers, whether salaried individuals, self-employed, or businesses.

Conditions

• Must be filed before the completion of assessment.
• No restrictions on the number of revisions.
• A revised return replaces the original return and becomes the final one.

Last Date to File a Revised Return

The general deadline for filing a revised return is 31st December of the assessment year or before the completion of assessment, whichever is earlier. For example, for FY 2024-25 (AY 2025-26), the last date is 31st December 2025.

Important Points to Note

• Replacement of Original Return

Once a revised return is filed, the original return is completely replaced and considered null.

• Revised Return After Refund

Even if you have received a refund from your original return, filing a revised return is allowed.

• Changing ITR Form

Need to change the form type? A revised return accommodates that as well.

• Multiple Revisions Allowed

There’s no limit to the number of revisions, giving you flexibility to correct multiple errors.

• Assessment Completion Restrictions

After the assessing officer completes the assessment under Section 143(3), revisions are not permitted.

Step-by-Step Guide to Filing Revised ITR

1. Visit the portal.
2. Select ‘Directly Revise Return’.
3. Enter original return details.
4. Update and submit.

Penalties and Implications

No Penalty for Timely Revision

As long as the revised return is filed within the due date, no penalty is imposed.

Late Filing and Section 234F

If the original return is late, filing a revised return will still require late fees up to ₹5,000.

Advantages of Filing a Revised Return

• Prevent future notices from IT authorities.
• Ensure all eligible deductions and income adjustments are included.
• Prevent complications due to inaccurate reporting.

Common Mistakes to Avoid

• Missing the revision deadline
• Entering incorrect details in the revised return
• Forgetting to e-verify after submission

Conclusion

Filing a revised ITR under Section 139(5) is a taxpayer-friendly provision that ensures accuracy, compliance, and maximum benefits. Mistakes are normal, but with revised returns, you can fix them and avoid future complications. Always remember the deadline, verify your return, and consult with a CA for a smooth filing process.

Contact for Professional consultancy : +91-9267970588 or taxacumen.consultancy@gmail.com

Futures and Options (F&O) trading has become a common activity for many investors in India. While it offers potential for profit, it also brings with it specific tax and compliance requirements. For AY 2025-26, it is crucial to understand how turnover is calculated, when a tax audit is required, and how presumptive taxation works for F&O traders.

Also read Tax Rules for Futures and Options here

Tax Rules for Futures & Options Trading

1. How to Calculate Turnover for F&O Transactions

The turnover calculation in F&O trading is not the same as in regular businesses. For income tax purposes, turnover is determined using the “absolute profit/loss method”. This method considers the aggregate of absolute differences (both positive and negative) from all trades.

Futures: Turnover equals the total of the absolute values of favourable and unfavourable differences from trades.

Options: Turnover includes:

• Absolute profit or loss from squared-off or exercised transactions.
• Premiums received on option sales (but these are not counted separately if already included in profit/loss).
• Differences from reverse trades, if any.

Exampl (Futures): Buy 50 Nifty futures at ₹16,800 and sell at ₹16,250. Difference = ₹550 per lot × 50 units = ₹27,500 (absolute value).

Example (Options): Buy 150 Nifty 16000 CE at ₹325, sell at ₹220. Loss = (₹220 – ₹325) × 150 = ₹15,750. Turnover = ₹15,750 (absolute value).

Note: The turnover calculation method is prescribed in the ICAI Guidance Note on Tax Audit under Section 44AB (Revised 2025).

2. Tax Audit Applicability under Section 44AB

A tax audit becomes applicable if your F&O business turnover or conditions cross the prescribed limits under Section 44AB:

• Basic Limit: If turnover exceeds ₹1 crore in a financial year, a tax audit is required.
• Enhanced Limit for Digital Transactions: If at least 95% of your receipts and payments are through digital mode, the limit goes up to ₹10 crore. This is common for F&O traders, as transactions are generally digital.

Apart from turnover, a tax audit is also required under Section 44AB(e) in the following situations:

• If you opt for presumptive taxation under Section 44AD and then declare profits lower than the prescribed rate (6% or 8%) or report a loss, and your income exceeds the basic exemption limit.

Exemption: No audit is required if your turnover is below ₹2 crore (or ₹3 crore as per new provisions) and you declare income under presumptive taxation at 6% or 8%, as applicable.

3. Presumptive Taxation under Section 44AD

To reduce compliance burden, small traders can opt for presumptive taxation under Section 44AD. Here’s how it works for F&O traders:

Eligibility: Individuals, Hindu Undivided Families (HUFs), and partnership firms (except LLPs) with turnover up to ₹2 crore (or ₹3 crore in certain cases).

Deemed Profit Rates:

• 6% of turnover if most transactions are through digital modes.
• 8% of turnover for other transactions.

Under this scheme:

• You do not have to maintain detailed books of accounts.
• No tax audit is required if income is declared at the prescribed rate and turnover is within the limit.

Important Condition: If you opt out of presumptive taxation in any year after having opted in earlier, you cannot rejoin for the next five years. This is called the five-year lockout rule. If you opt out, and your income exceeds the basic exemption limit with profits below 6% or 8%, a tax audit becomes mandatory under Section 44AB(e).

4. Why Compliance Matters for F&O Traders

F&O trading is treated as a business activity, and incorrect reporting can lead to penalties or notices. Proper calculation of turnover ensures you know whether a tax audit is required. If you are eligible for presumptive taxation, it can simplify your compliance significantly, but you must plan carefully to avoid being locked out for five years.

Conclusion

For AY 2025–26, turnover for F&O trades is based on the absolute difference method and not the actual contract value. A tax audit is mandatory if turnover crosses the specified limits or if you opt out of presumptive taxation and show lower profits. Section 44AD offers relief for eligible traders through presumptive taxation, but the five-year lockout rule makes it crucial to decide wisely. Staying updated with ICAI guidelines and maintaining accurate records will help you remain compliant and avoid unnecessary complications.

Trading in Futures & Options (F&O) has grown significantly in India. As this activity becomes more popular, it’s important for traders to understand how F&O income is taxed and what compliance steps are required. Here is a simple guide for Reporting F & O Income in ITR.

1. How F&O Income is Considered

F&O transactions are classified as non-speculative business income. The Income Tax Act excludes derivative trades done on recognised stock exchanges from being considered speculative. That means your F&O gains are treated like business profits not capital gains and taxed accordingly under the head “Profits and Gains of Business or Profession”.

2. Tax on Gains and Losses

You pay tax on your F&O income based on the applicable slab rate for business income, depending on your total taxable income for the year.

If you suffer a loss that is eligible to be adjusted against other business income, and in some cases, other heads except salary. If you can’t fully utilise the loss in the current year, you can carry it forward for up to eight assessment years. Also, the Securities Transaction Tax (STT) you’ve paid on your trades can be claimed as a business expense.

3. How to Calculate Your Trade Turnover

Turnover in F&O isn’t just the total value of your trades. Instead, it’s based on absolute profits and absolute losses. For options, premiums received may be included depending on how net profit was calculated.

For example:

• If you earn ₹40,000 profit and ₹30,000 loss across trades, your turnover is ₹70,000.
• An example of an F&O transaction: large gains and losses add up to form your turnover basis.

This figure matters because it decides whether you’re subject to a tax audit.

4. When Does a Tax Audit Apply?

A tax audit becomes mandatory under the following circumstances:

• Your F&O turnover exceeds ₹10 crore.
• If turnover falls between ₹1 crore and ₹10 crore, an audit applies only if cash transactions are more than 5% of your totals.
• If you previously opted into the presumptive taxation scheme and then opt out, declaring profit below the threshold (6% for digital or 8% for cash) while your income exceeds the exemption limit.

Using the presumptive option under Section 44AD can simplify things, but if you report lower profit or opt out, you may be required to get audited.

5. Maintaining Books and Records

If your business income exceeds ₹2.5 lakh or turnover surpasses ₹25 lakh in any preceding three years, you’re required to maintain proper books of accounts.

Even at lower turnover, if you’ve opted out of presumptive taxation or declared low profits, maintaining records becomes necessary.

6. Reporting on Income Tax Return

If you trade F&O:

• Use ITR-3 if you report business income traditionally.
• If using presumptive taxation with allowable rates, ITR-4 may be applicable (though it is not widely used by active F&O traders).
• Report turnover, expenses like STT and broking, and profit/loss under “Business or Profession” schedules.

Conclusion

F&O trading income is taxed as business income, requiring proper calculation of profits, losses, and turnover. Maintaining accurate records, understanding thresholds for tax audits, and picking the right ITR form are vital for staying compliant and avoiding penalties.

Anti-profiteering is, essentially, about fairness. If a company experiences tax savings, the customers should likewise experience savings.

There are two clear instances where this applies:

1. Reduction in Tax Rates – When GST is reduced on a good or service, the price should be reduced accordingly.

Example: If the GST charged on shampoos is reduced from 28% to 18%, the manufacturer needs to reduce the MRP.

2. Benefit of Input Tax Credit (ITC) – Under GST, more items qualify for ITC than before, and businesses should lower costs, which should be passed on to customers through lower prices.

Example: A real estate builder saving on input costs related to construction should pass on those savings to the buyers.

If companies do not do this, it is deemed “profiteering”.

How NAA Worked and Its Role

To ensure compliance, the National Anti-Profiteering Authority (NAA) was established with wide powers. The process typically involved:

1. Complaint Filing – Consumers or stakeholders could approach the State Screening Committees or Standing Committee with evidence.
2. Investigation – The Director General of Anti-Profiteering (DGAP) examined invoices, pricing, ITC records, and profit margins.
3. Rulings by NAA – If profiteering was established, the authority could:
4. Order reduction in prices.
5. Refund overcharged amounts with 18% interest.
6. Direct deposit into the Consumer Welfare Fund if consumer identification was not possible.
7. Impose penalties or even cancel GST registration in extreme cases.

This structure made NAA one of the most powerful enforcement mechanisms under GST.

Key NAA Rulings That Shaped Compliance

Over the years, several rulings clarified how anti-profiteering provisions would be applied:

• FMCG Sector: Hindustan Unilever was asked to deposit over Rs. 230 crores in the Consumer Welfare Fund after investigations revealed that benefits of GST rate cuts weren’t fully passed to consumers.
• Real Estate: Builders were pulled up for failing to reduce property prices despite availing ITC benefits. NAA directed them to adjust base prices for homebuyers.
• Restaurants: After GST on restaurant services was reduced from 18% to 5% (without ITC), many eateries did not reduce menu prices. NAA ordered them to refund or deposit excess collections.
• E-commerce and Services: App-based cab services and online platforms faced scrutiny when GST rate cuts were not reflected in customer pricing.

These cases sent a clear signal: profiteering would not be tolerated, and businesses had to be meticulous in implementing tax benefits.

Impact on Businesses

While the law’s intent was consumer welfare, businesses faced both challenges and lessons.

• Compliance Burden: Calculating “commensurate” price reduction was not always simple. Different cost structures, product mixes, and pricing models made it complex.
• Fear of Litigation: Even genuine business decisions were sometimes questioned. Investigations were lengthy and reputationally damaging.
• Constant Price Adjustments: Companies had to frequently revise MRPs and system configurations with every GST rate change.
• Deterrence Effect: On the positive side, businesses became more transparent in pricing and cautious about unjustified markups.

From 1st October 2024, all cases shifted to the GST Appellate Tribunal (GSTAT), and with the sunset clause effective 1st April 2025, no new complaints will be accepted. This marks the end of a regulatory-heavy phase and a transition to market-driven pricing.

Conclusion

Anti-profiteering under GST was a unique experiment in consumer protection. By enforcing Section 171 of the CGST Act and related rules, the NAA made sure that businesses couldn’t pocket tax benefits meant for customers.

Yes, it added compliance pressure and at times created friction between regulators and businesses. But it also built a culture of accountability, forcing companies to think twice before ignoring consumer interests.

With the sunset clause in force, the chapter of strict anti-profiteering oversight is closing. Yet, its legacy will shape pricing strategies, business ethics, and consumer expectations in the GST regime for years to come.

One of the biggest changes to India’s direct tax structure since the Income-Tax Act of 1961 is the Income-Tax Act of 2025. This law, which was signed into law by the president on August 21, 2025, is to simplify tax laws, lower the number of tax disputes, and bring Indian taxes into accordance with the digital economy. Businesses and taxpayers will have some time to adjust to the new law, which will take effect on April 1, 2026.

Why a New Income Tax Act?

The older Income-Tax Act, 1961, had grown into a highly complex law over the decades. With more than 700 sections, countless provisos, and constant amendments, it often created confusion for taxpayers and gave rise to litigation. Recognising these issues, the government undertook a complete review of the law to make it shorter, clearer, and easier to follow.

Another reason was the changing nature of the economy. Today, taxation is not limited to traditional business income or property but also extends to digital assets, global transactions, and cross-border structures. The new law is designed to cover these modern realities.

Key Highlights of the Income-Tax Act, 2025

1. Simplification and Ease of Compliance

The new Act introduces a more structured framework for compliance. Forms, reporting requirements, and timelines have been rationalised. Tax authorities, too, are expected to follow clearer procedures, reducing discretionary interpretations.

2. Introduction of “Tax Year”

One of the most notable changes is the replacement of the dual concepts of Financial Year (FY) and Assessment Year (AY). Instead, a single “Tax Year” running from 1st April to 31st March will apply. This change removes long-standing confusion among taxpayers.

3. Expanded Scope of Virtual Digital Assets (VDAs)

The definition of virtual digital assets has been broadened. It now covers:

• Cryptocurrencies like Bitcoin or Ethereum,
• Non-fungible tokens (NFTs),
• Any other digital assets the government specifies.

Importantly, undisclosed income now includes VDAs, which means stricter scrutiny of crypto and digital transactions.

4. Access to Digital Data in Search Operations

The Act recognises the importance of digital platforms in today’s economy. During a search or investigation, taxpayers are required to provide access to:

• Social media accounts,
• Cloud storage,
• Trading or investment apps,
• Email servers or other virtual platforms.

This ensures that hidden or unreported assets in the digital space are not left outside the tax net.

5. Tax Recovery and Appeals

The appeal process has been restructured for greater clarity. The Dispute Resolution Panel (DRP) continues to play a role, particularly for non-residents, foreign companies, and transfer pricing cases. A new provision requires the DRP to issue reasoned directions, specifying how it reached its decision. This should improve transparency and reduce arbitrariness.

6. Content Simplification

While the new Act has 536 sections spread over 23 chapters and 16 schedules, its content is shorter and easier to read compared to the 1961 Act. Redundant explanations and provisos have been removed, creating a more straightforward text.

What Remains Unchanged?

Despite these sweeping reforms, many core provisions are retained to maintain continuity:

• The scope of income and the rules for determining residential status remain broadly the same.
• Tax slabs, capital gains rules, and limits follow the adjustments already announced in the Union Budget 2025.
• TDS and TCS provisions continue but have been consolidated under common sections for easier reference.

This balance ensures taxpayers are not overwhelmed by an entirely unfamiliar system.

Expected Benefits of the New Act

• Reduced Complexity: Fewer overlapping provisions and simplified language.
• Increased Compliance: Easier forms and clarity on obligations will help voluntary compliance.
• Lower Litigation: With clearer laws, fewer cases should reach tax tribunals or courts.
• Alignment with Global Practices: By covering VDAs and digital economy transactions, India’s tax law is more in tune with international systems.

Impact on the Public

1. For Individuals

Closer monitoring of digital and overseas transactions.

Crypto investors and those engaged in online trading should maintain detailed records.

• For Businesses

Stricter requirements for digital compliance in reporting and audits.

Increased responsibility to maintain electronic data, which may add to operational costs.

• For Tax Authorities

Greater powers in search and recovery, especially regarding digital assets.

A streamlined law that reduces administrative burdens and focuses on enforcement.

Conclusion

A significant move towards updating India’s tax system is the Income-Tax Act, 2025. It seeks to give taxpayers greater assurance by simplifying rules, resolving the difficulties raised by the digital economy, and instituting a single tax year. Long-term effects should include fewer disputes, increased transparency, and a system that is more taxpayer-friendly, even though compliance costs may initially increase, particularly in digital reporting.

To guarantee seamless compliance in the upcoming years, both individuals and businesses should begin familiarising themselves with the changes as the Act goes into effect on April 1, 2026.