Tag Income tax

Charitable and religious trusts must register under Section 12AB of the Income Tax Act in order to be eligible for income tax exemptions. Registrations were first granted with a limited validity, typically five years, when this option was first implemented.

In order to continue receiving tax benefits, many trusts must renew their registration before their current period comes to a completion. One significant change brought about by the Finance Act 2025 is that qualifying entities can now receive 10-year validity rather than 5-year.

Also read here

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

Eligibility and Documents Required for Section 12AB Renewal in 2025

Why Renewal is Mandatory

Prior to the expiration date, each trust or institution that has acquired Section 12AB registration must submit an application for renewal. This is a must. The trust will lose its tax exemption benefits under Sections 11 and 12 if the renewal is not completed within the allotted period.

According to the law, the application for renewal must be submitted at least six months before the expiration date. The renewal must be submitted by September 30, 2025, for registrations that expire on March 31, 2026.

Eligibility for 10-Year Validity

In substitution of the previous 5-year cycle, the Finance Act 2025 added a provision that permits some trusts to be renewed for ten years. To be eligible,

• The total revenue of the trust, as determined without the use of Sections 11 and 12, cannot be more than ₹5 crore in each of the two years before the application year.
• Not gross receipts, but total income is subject to this cap.

For instance, you can renew your trust for a 10-year period if its total revenue (before exemptions) was ₹4.5 crore in FY 2023–2024 and FY 2024–2025.

Step-by-Step Process for Renewal

Form 10AB must be filed on the Income Tax e-filing portal as part of the entirely online renewal process. The steps are as follows:

Step 1: Log in to the Portal

Go to the Income Tax e-filing portal and log in using the trust’s credentials.

Step 2: Select Form 10AB

Navigate to ‘e-File’ > ‘Income Tax Forms’ > ‘File Income Tax Forms’ and choose Form 10AB under the relevant section.

Step 3: Choose Correct Category

In the form, select the correct sub-clause under Section 12A(1)(ac) for renewal (usually sub-clause (ii) for standard renewal).

Step 4: Attach Documents

Upload the following documents:

• Audited financial statements for the last two financial years
• Computation of income showing compliance with the ₹5 crore limit
• Trust deed and registration certificate
• Activity report and compliance certificates

Step 5: Submit and Verify

Submit the form online and verify it using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).

Timelines and Processing

The application will be processed by the Commissioner of Income Tax (Exemptions) or the Principal Commissioner after it is submitted. The order must be issued within six months of the end of the quarter in which the application is filed, according to the statute. The registration will be renewed upon verification of authentic activity and completion of all necessary documentation.

Consequences of Non-Renewal

Sections 11 and 12 exemptions will be lost if the registration is not renewed by the deadline. A significant tax burden could arise from the trust’s revenue becoming taxable. Penalties for non-compliance are another possibility.

Tips for Preventing Penalties

• Apply as soon as possible: don’t hold off until the last minute. Apply seven to eight months prior to expiration.
• Verify that the documents are complete: Missing paperwork may cause permission to be delayed.
• Monitor the status of your application: Check the portal frequently for updates.

Conclusion

In order to continue receiving tax benefits, charity and religious organisations are required by law to renew their Section 12AB registration. If qualifying trusts meet the ₹5 crore income criterion, they can achieve long-term compliance with the new 10-year validity requirement. The secret to avoiding fines and preserving exemption benefits is the timely filing of Form 10AB with correct documentation.

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.

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.

The classification of income is one of the most important concepts to understand when it comes to filing income taxes in India. Five heads of income are created under the Income Tax Act of 1961, and each has its own set of calculation, deduction, and exemption rules. Accurate tax filing and the capability to claim proper benefits are ensured by knowing these heads.

1. Income from Salary

If you are an employee working under an employment contract, your earnings fall under this category. Sections 15 to 17 of the Income Tax Act govern this head.

What does it include?

• Basic salary
• Allowances (like HRA, Transport Allowance)
• Perquisites (such as rent-free accommodation and car facilities)
• Bonus, commission, pension, gratuity

Important points

• A standard deduction of ₹50,000 is available to all salaried individuals.
• Exemptions such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA) can reduce taxable income.
• Income is reported in Schedule S of your ITR form.

Example: If you earn ₹10,00,000 as a salary and claim an HRA exemption of ₹1,50,000, tax will be calculated on ₹8,50,000 after standard deduction.

2. Income from House Property

This head covers income earned from owning a house or building, even if you own land appurtenant to such property. It applies whether the property is self-occupied, let out, or deemed to be let out.

Types of property income:

• Self-occupied property – No rental income; however, deduction on home loan interest up to ₹2,00,000 is allowed.
• Let-out property – Actual rent received is taxable.
• Deemed let-out property – If you own more than two self-occupied houses, the rest are considered deemed let-out.

Deductions:

• Standard deduction of 30% on Net Annual Value
• Interest on home loan under Section 24(b)

Income under this head is shown in Schedule HP of your ITR.

3. Income from Profits and Gains of Business or Profession

If you run a business or practise a profession, your earnings come under this head. Sections 28 to 44 cover this category.

What does it include?

• Profits from trade, commerce, or manufacturing
• Professional income (lawyers, doctors, CAs, etc.)
• Benefits or perquisites arising from business
• Income from speculative transactions, F&O, and presumptive schemes like Sections 44AD, 44ADA, and 44AE

Deductions:

• Business expenses such as rent, salaries, and electricity bills
• Depreciation on assets

Taxpayers under this head must file ITR-3 or ITR-4 depending on whether they opt for presumptive taxation.

4. Income from Capital Gains

This head covers profits made by selling or transferring a capital asset such as land, buildings, shares, mutual funds, gold, etc. Sections 45 to 55 govern capital gains.

Types of capital gains:

• Short-Term Capital Gain (STCG) – If the asset is sold within a short holding period.
• Long-Term Capital Gain (LTCG) – If an asset is sold after a longer holding period.

Tax rates (as per amendments effective from 23rd July, 2024):

• Immovable Property: LTCG is taxed at 12.5% without indexation (previously 20% with indexation).
• Listed equity shares: STCG at 20%, LTCG at 12.5% without indexation

Capital gains must be reported in Schedule CG of the ITR.

5. Income from Other Sources

This is the residual category for income not covered under the above heads. It includes:

• Interest on savings, fixed deposits, or bonds
• Dividends from companies
• Lottery winnings, horse racing income
• Gifts exceeding ₹50,000 (subject to conditions)

This income is reported in Schedule OS of your ITR.

Why is classification important?

Correct classification under these five heads ensures:

• Proper application of tax rates and exemptions
• Avoidance of penalties and notices
• Maximisation of eligible deductions

Each head has unique rules for deductions. For example:

• Standard deduction applies to salary.
• Interest on a home loan applies to house property.
• Business expenses apply to business income.

Conclusion

Every taxpayer has to understand these five heads: Salary, House Property, Business/Profession, Capital Gains, and Other Sources. In addition to guaranteeing compliance with tax regulations, filing revenue under the appropriate heading facilitates the use of all possible deductions and exemptions.

It is always advised to consult a tax professional for complex instances, particularly in regard to the most recent changes to the Finance Act 2025 that altered the capital gains tax and other requirements.

Whether you are a professional, business owner, or salaried employee, managing taxes is an important part of your lifestyle. Not all strategies are the same, even though the majority of people aim to reduce their tax liability. Certain behaviours can get you into serious legal problems, while others are discouraged. Every taxpayer must be aware of the distinctions between tax evasion, tax avoidance, and tax planning.

1. Tax Evasion—The Illegal Way

The unlawful practice of intentionally evading taxes is known as tax evasion. This can involve fabricating invoices, hiding funds in overseas accounts, exaggerating costs, or underreporting revenue. It is a clear violation of the Income Tax Act and is punishable by law in India.

What Happens If You Avoid Paying Taxes?

Tax evasion has serious consequences:

• Strict penalties like fines of up to 300% of the tax amount are possible.
• Interest is charged on overdue taxes.
• imprisonment in severe circumstances, imprisonment may last up to seven years.
• Tax evasion damages your financial reputation, which influences future credit or loan approvals, in addition to attracting legal action.

2. Tax Avoidance—Legal but Questionable

Tax avoidance is the practice of lowering tax obligations by taking advantage of legal loopholes or gaps. It is ethically questionable because it adheres to the law while violating its intent.

Tax Avoidance Examples

• establishing complicated corporate arrangements to transfer revenue to areas with lower tax rates.
• aggressively reducing taxable income through accounting methods.
• using tax-free jurisdictions to route transactions.
• Tax officials frequently look at tax avoidance even though it is not unlawful. Governments gradually close these loopholes, and those taxpayers who depend on them may be subject to stricter rules.

3. Tax Planning—The Correct Way to Save Taxes

Tax planning is both permitted and encouraged, in opposition to the other two. It involves using legal provisions to lower tax liabilities in a systematic and moral way. This includes using the Income Tax Act’s exclusions, deductions, and incentives.

Common Tax Planning Examples

• investing money into the National Pension System (NPS), Equity-Linked Savings Scheme (ELSS), or Public Provident Fund (PPF).
• claiming investments and insurance deductions under Section 80C or 80D.
• Using capital gains reinvestment or house rent allowance (HRA) exemptions.
• In addition to lowering your tax liability, careful tax planning also helps you accumulate wealth and maintain legal compliance.

Their Difference—A Quick Comparison

Aspect	Tax Planning	Tax Avoidance	Tax Evasion
Legality	Completely legal and encouraged	Legal but frequently considered unethical	Illegal and punishable
Intent	To reduce and simplify tax liability through lawful methods	To utilise loopholes for tax reduction	To hide income and avoid taxes
Methods Used	Deductions, exemptions, tax-saving investments	Complex structures, routing income	Misreporting income, fake documents
Ethical View	Ethical and transparent	Questionable	Unethical and fraudulent
Consequences	Saves taxes legally, no penalties	May lead to audits or law modifications	Heavy fines, interest, and imprisonment
Example	Investing in PPF or ELSS	Shifting profits to tax havens	Not declaring rental or foreign income

Why understanding the difference is important

The differences among these three methods are not merely theoretical; they also have real-world applications. For example, tax planning can increase your credit score, boost your profile, and help you get higher interest rates, but tax evasion might destroy your chances of acquiring a home loan because it affects your financial record.

Understanding these distinctions enables you to make wise choices, stay out of problems with the law, and have a clean financial record.

How to Manage Taxes Responsibly

To properly handle your taxes and maintain compliance:

• Keep thorough records of your earnings and expenses.
• Every year, submit your income tax returns on time.
• To lower liabilities, make wise tax-saving investments.
• For most effective planning, speak with a tax consultant.

Conclusion

Tax evasion, avoidance, and planning all intend to lower taxes, but they differ in their morality, legality, and consequences. Evading taxes is against the law and should be avoided at all costs. Although tax avoidance is legal, it frequently falls into an uncertain area and can have unintended consequences.

The most efficient, moral, and legal approach to maximise your taxes is through tax planning.

By making the right choice, you can make improvements to your long-term financial security by saving money and maintaining a solid financial record. You can confidently reach your financial objectives and avoid legal dangers by using responsible tax strategies.

Many people pay more tax than they actually owe, either because of advance tax, TDS deductions, or calculation errors. When this happens, the extra amount you paid can be claimed back as an income tax refund. The process is completely online and easy to follow if you know the right steps.

What is an income tax refund?

An income tax refund is the money returned by the Income Tax Department when the tax you paid is more than your actual liability. This usually happens if:

• Too much TDS was deducted by your employer or bank.
• You paid advance tax or self-assessment tax that turned out to be higher than the actual amount due.
• You claimed deductions or exemptions later that reduce your taxable income.
• There is double taxation on your income in India and another country.

The rules for tax refunds are given under Sections 237 to 245 of the Income Tax Act, 1961.

Who Can Claim a Tax Refund?

You are eligible for a refund in the following cases:

• Advance tax paid exceeds your actual liability.
• Self-assessment tax is more than the payable amount.
• TDS deducted is more than your final tax calculation.
• An error occurred in the tax assessment, and you corrected it.
• You declared deductions or investments later (e.g., under Section 80C).
• Your income was taxed both in India and abroad (covered under DTAA).

Step-by-Step Process to Claim Your Tax Refund

The Income Tax Department has made the refund process simple and digital through the Income Tax e-filing portal (www.incometax.gov.in). Follow these steps:

Step 1: File Your Income Tax Return (ITR)

You must file your ITR before the deadline (usually July 31 unless extended). While filing, enter all income details, deductions, and exemptions. For example, investments in PPF, ELSS, or life insurance can be claimed under Section 80C up to ₹1.5 lakh.

Step 2: System Calculates Refund

After you submit the details, the system automatically compares your tax liability with the taxes you have paid. If you paid extra, the refund amount will be shown on the ITR form.

Step 3: Verify Your ITR

Once the return is filed, you need to verify it online using Aadhaar OTP, net banking, or by sending a signed physical copy (ITR-V) to CPC Bengaluru. Without verification, the return is not processed, and no refund will be issued.

Step 4: Processing and Intimation

The Centralised Processing Centre (CPC) checks your return and sends an intimation under Section 143(1) to your registered email. It will mention:

• No refund is due.
• The refund was accepted and will be credited soon.
• Claim rejected or additional tax payable.

Step 5: Refund Credited to Bank Account

If your claim is approved, the refund will be directly credited to your bank account linked with your PAN and pre-validated on the portal. Always check that your account details are correct to avoid delays.

How to Track Your Refund Status?

You can easily check the status of your refund:

• On the e-filing portal: Login → “View Returns/Forms” → “Refund/Demand Status.”
• On the NSDL Refund Portal: Enter your PAN and assessment year.

Interest on Income Tax Refund

Under Section 244A, if the refund is delayed, you will get simple interest at 6% per year (0.5% per month). The interest is calculated:

• From 1st April of the assessment year till the refund date if you filed on time.
• From the filing date if you filed late.

This interest is taxable under “Income from Other Sources.”

Conclusion

Getting an income tax refund in India is simple if you file your return on time and provide correct details. The entire process is online, quick, and transparent. If you are eligible for a refund, make sure to claim it promptly and track the status regularly. Filing accurate returns not only ensures refunds but also keeps you compliant with tax laws.

Taxes are the basis of a nation’s economy since they generate the money required for welfare and development initiatives. Both individuals and companies are subject to taxation in India under the Income Tax Act, 1961.

Despite having direct taxes, corporate tax and personal income tax have different regulations and apply to different entities. For the purpose of financial planning and compliance, it is crucial to understand the differences between these two.

WHAT IS CORPORATE TAX?

Corporate tax is the tax charged on the profits of companies registered under the Companies Act, 2013. It applies to both domestic and foreign companies that earn income in India. Corporate tax is calculated on the net taxable income, which is total revenue minus permissible expenses, depreciation, and deductions.

In India, the corporate tax rate has undergone significant changes in recent years. As of August 2025, the basic rates are

• Domestic Companies:

22% (plus surcharge and cess) for companies not claiming exemptions or incentives under Section 115BAA.

15% for new manufacturing companies incorporated after October 1, 2019, and commencing production before March 31, 2025, under Section 115BAB.

• Foreign Companies:

Taxed at 40% on income earned in India, plus applicable surcharge and cess.

Additional components like Minimum Alternate Tax (MAT) at 15% (Section 115JB) may apply if the company’s tax liability is lower than the prescribed threshold.

Corporate tax applies to:

• All Indian companies (small, medium, and large).
• Foreign companies operating through a permanent establishment in India.

The revenue collected through corporate taxes is a major source of funds for the government and is used to finance infrastructure, social welfare, and public services.

WHAT IS PERSONAL INCOME TAX?

Personal income tax is the tax imposed on the income of individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), and similar entities. It is payable on income from all sources combined, such as salary, house property, business or profession, capital gains, and other sources.

In India, individuals can choose between two tax regimes:

• Old Regime: Offers higher tax rates but allows deductions and exemptions under various sections like 80C, 80D, HRA, and LTA.
• New Regime: Provides lower tax rates with fewer deductions and exemptions.

As of FY 2025-26, under the new tax regime (which is now the default option), the slab rates for individuals are

• ₹0 – ₹300,000: Nil
• ₹300,001 – ₹700,000: 5%
• ₹700,001 – ₹1,000,000: 10%
• ₹10,00,001 – ₹12,00,000: 15%
• ₹12,00,001 – ₹15,00,000: 20%
• Above ₹15,00,000: 30%

For individuals, the tax is levied on the total income after allowing deductions and exemptions (if opted under the old regime). For example, if someone earns ₹10,00,000 and has deductions of ₹1,50,000 under Section 80C, the taxable income will be ₹8,50,000.

Most individuals pay tax based on progressive tax slabs, meaning higher income attracts higher rates.

Corporate vs Personal Income Tax: The Key Differences

Although both taxes serve the same purpose—raising revenue for the government—they differ in several ways:

• Taxpayer: Corporate tax is paid by companies, while personal income tax is paid by individuals and certain other entities like HUFs.
• Tax Rate: Corporate tax rates are fixed, whereas personal income tax follows a slab system under progressive taxation.
• Deductions: Companies can claim business-related expenses and incentives, while individuals claim personal deductions like investments under Section 80C or medical expenses under 80D (if the old regime is chosen).
• Compliance: Companies must file detailed financial statements and tax audit reports along with their ITR (Form ITR-6 for most companies). Individuals file simpler returns like ITR-1 or ITR-2, depending on their income sources.
• Minimum Tax: Companies are subject to MAT, while individuals are not.

WHY UNDERSTANDING THE DIFFERENCE MATTERS

For business owners, tax planning must address both personal and corporate tax obligations. For example, if you draw a salary from your own company, it will be taxed under personal income tax, while your company’s profits will face corporate tax. Understanding both ensures proper compliance, avoids penalties, and helps optimize your tax liability through legitimate deductions and planning.

CONCLUSION

The two main foundations of India’s direct taxation system are personal income tax and corporate tax. Individuals’ income is subject to personal income tax, whilst companies’ profits are subject to corporate tax. Each has its own set of regulations, fees, and standards for compliance. Being informed is essential due to the constant changes made to the Finance Acts, such as the latest modifications to business tax benefits and the updated slab structure for individuals. It is always advised to consult a tax professional for appropriate filing and tax preparation.

Filing an Income Tax Return (ITR) is an essential part of every taxpayer’s compliance with Indian tax laws. Even with careful preparation, mistakes may occur—whether it’s forgetting to include interest income, entering wrong bank details, or claiming deductions incorrectly. Fortunately, the Income Tax Act, 1961, provides taxpayers with an opportunity to correct such mistakes by filing a revised ITR. This facility ensures that unintentional errors do not lead to penalties, delayed refunds, or unnecessary scrutiny.

What is a revised ITR?

A revised ITR is a new return filed to replace an original ITR that contains errors or omissions. Under Section 139(5) of the Income Tax Act, taxpayers are allowed to correct any incorrect details in their original return.

• It can be filed even if the original ITR was filed after the due date, as long as it is within the permitted timeline.
• For Assessment Year (AY) 2025-26, the revised return can be filed on or before 31st December 2025, or before the completion of assessment, whichever is earlier.
• Once filed, the revised ITR replaces the original return completely, so accuracy is crucial.

Also Read ITR Filing : Who must file?

ITR Filing : Who Must File?

When Should You Revise Your ITR?

You should consider revising your return if you find any of the following:

• Incorrect personal details like name, PAN, Aadhaar, or bank account number.
• Missed income reporting—for example, interest on fixed deposits, capital gains, or freelance earnings.
• Wrong deduction or exemption claims, such as incorrect entries under Sections 80C, 80D, etc.
• Mismatch in tax credits with Form 26AS, AIS (Annual Information Statement), or TIS.
• Any omission or error that impacts your tax liability or refund claim.

Timely correction ensures compliance and prevents notices from the tax department.

Step-by-Step Process to File a Revised ITR

Filing a revised ITR is simple. The process is similar to filing an original return, with an additional step of selecting the “Revised Return” option. Here are the following steps:

1. Log in to the Income Tax e-Filing Portal.

Go to https://eportal.incometax.gov.in/iec/foservices/#/login and log in using your PAN and password.

2. Select the Correct Assessment Year

Choose AY 2025-26 (for income earned in FY 2024-25) to ensure you are revising the correct return.

3. Download or Use the Correct ITR Form

Pick the ITR form applicable to your income type (ITR-1, ITR-2, ITR-3, etc.). You can use either the online mode or offline utility (JSON/Excel).

4. Correct the Errors

Update the details that were missed or incorrectly reported in the original ITR.

5. Enter Original ITR Details

In the revised ITR, you must enter the acknowledgement number and date of filing of the original return. This links the revised return to the earlier one.

6. Validate and Submit

Once corrections are made, validate the form, complete e-verification (via Aadhaar OTP, net banking, etc.), and submit. The revised ITR will replace the previous one.

Other Ways to Correct Mistakes

Not every mistake requires filing a revised ITR. Some errors can be corrected using other provisions:

• Rectification Request under Section 154—Suitable for minor mistakes like incorrect tax credit entries or small calculation errors. This can be filed directly on the e-filing portal.
• Updated Return under Section 139(8A) – If you failed to report income or missed filing the original ITR, you can submit an updated return within 48 months from the end of the relevant assessment year. However, this comes with an additional tax liability.

Conclusion

Filing a revised ITR under Section 139(5) is a valuable facility for taxpayers to correct genuine mistakes without penalties. The key is to detect errors early and file the revised return within the permitted time. By keeping your documents ready, reviewing every entry, and using the portal efficiently, you can ensure a smooth filing experience.

Mistakes are natural, but with timely action and accurate reporting, you can stay compliant and avoid unnecessary complications with the Income Tax Department.

Business trusts such as Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) have become popular investment options in India because they allow investors to earn income from infrastructure and real estate projects. These trusts pool funds from investors, invest them in assets, and distribute the income generated to the unit holders. However, taxation of this income is a crucial aspect that every investor should understand.

What is a business trust?

A business trust is a special type of trust registered under SEBI regulations. It works as a pass-through entity, which means that the trust collects income from its investments and distributes it to its unit holders without paying tax at the trust level in most cases. Instead, the tax liability falls on the unit holders, subject to the provisions of the Income Tax Act, 1961.

Business trusts mainly earn income from three sources:

1. Interest Income – earned from debt investments in Special Purpose Vehicles (SPVs).
2. Dividend Income – received from SPVs where the trust holds shares.
3. Rental Income – in the case of REITs, from leasing out real estate properties.

Taxation of Unit Holders

The taxation of unit holders depends on the type of income distributed by the trust. The key provisions under the Income Tax Act (specifically Sections 10(23FC), 10(23FCA), 115UA, and 194LBA) govern this area.

1. Interest Income

• Interest distributed by the business trust is taxable in the hands of unit holders.
• For residents, it is taxed at the applicable slab rate.
• For non-residents, it is taxed at 5% (plus applicable surcharge and cess).

2. Dividend Income

• A dividend is exempt if the SPV has not opted for the concessional tax regime under Section 115BAA.
• If the SPV has opted for Section 115BAA, the dividend becomes taxable in the hands of the unit holder.

3. Rental Income (from REITs)

• Any rental income received from leasing of property is taxable in the hands of the unit holders at their respective slab rates.

4. Capital Gains on Transfer of Units

• Short-Term Capital Gain (STCG) on listed units (held for less than 36 months) is taxed at 15% under Section 111A.
• Long-Term Capital Gain (LTCG) on listed units (held for more than 36 months) is taxed at 10% (without indexation) under Section 112A if gains exceed ₹1 lakh.

TDS Provisions

• Section 194LBA requires the trust to deduct tax at source (TDS) before distributing income:

Interest: 10% for residents, 5% for non-residents.

Dividend: 10% for residents; for non-residents, rates as per DTAA.

Rental Income: 10% for residents; for non-residents, rates as per DTAA.

Why This Taxation System?

The pass-through structure is designed to avoid double taxation and make business trusts an attractive investment vehicle. If both the trust and the unit holders were taxed on the same income, it would reduce returns for investors. Therefore, the law ensures that most of the tax burden shifts to the unit holders.

Conclusion

Understanding the taxation of business trust income is important for investors to plan their taxes effectively. While business trusts provide steady income opportunities, investors should remember that different income streams attract different tax treatments. Staying updated on the latest provisions and judicial rulings is essential for compliance and effective tax planning.

Connect with us +91-9267970588 or taxacumen.consultancy@gmail.com to get professional advice on such income from business trust.