It’s a Monday morning, and a tax lawyer is advising a non-resident client on technology services for an electronics manufacturing facility in India. The conversation is mired in complexity—Permanent Establishment rules, Section 44DA versus Section 115A, and DTAA provisions. The client is confused, and the lawyer wishes for a simpler path. This scenario is about to change dramatically with the Finance Act, 2025. For CAs and tax lawyers, staying ahead is critical. Here are five game-changing amendments you need to know.
1. The Sun Sets on Equalisation Levy
The controversial Equalisation Levy is being completely withdrawn, effective April 1, 2025. Introduced in 2016 to tax the digital economy, it initially targeted online advertising and expanded to include e-commerce supplies. Its removal simplifies India’s digital tax regime for non-resident service providers. For your practice, this means no more tracking this complex levy for non-resident clients, making it easier to advise on cross-border transactions.
2. A New Presumptive Path: Section 44BBD for Non-Residents
The Finance Act introduces Section 44BBD, a presumptive taxation scheme for non-residents providing services or technology to electronics manufacturing facilities. A flat 25% of specified amounts is deemed as profit. Crucially, this section overrides Sections 44DA and 115A, offering a simplified taxation method.
Old Regime vs. New Presumptive Regime (44BBD)
| Feature | Old Regime (44DA/115A) | New Presumptive Regime (44BBD) |
|---|---|---|
| Tax Calculation | Complex net income basis (if PE exists) or flat rate on gross (if no PE) | Simple: 25% of specified amounts deemed as profit |
| Disallowances | Subject to disallowances under Section 44DA | Not subject to disallowances under Section 44DA |
| Concessional Rate | Section 115A’s concessional rate could apply | Section 115A’s rate is not applicable |
This simplified system will make it easier for professionals to advise foreign technology partners, especially in the absence of Permanent Establishment (PE) status.
3. Block Assessments Get a Much-Needed Overhaul
The procedure for assessments in search cases under Chapter XIV-B has been revamped with retrospective effect from September 1, 2024. The Bill shifts the terminology from “total income” to “total undisclosed income,” clarifying legislative intent. It introduces a direct method for computing undisclosed income, simplifying the process. Moreover, the Assessing Officer can grant a 30-day extension for filing returns in certain audit cases, offering flexibility during high-pressure search assessments.
4. ITRs Get Smarter: Adjustments for Inconsistencies
The Finance Act inserts a new sub-clause (iia) in Section 143(1)(a), empowering the Centralised Processing Centre to make adjustments for inconsistencies in returns compared to preceding years. This could involve mismatches in income figures, deductions, exemptions, or capital gains across different assessment years. While the Board will prescribe specific parameters, this is a major step towards automated, data-driven tax administration. For practitioners, this means heightened scrutiny on year-on-year consistency in client filings.
5. Big Boost for IFSC: Streamlining Foreign Investment
The Finance Act introduces several amendments promoting India’s International Financial Services Centre (IFSC). Securities invested by funds under IFSC regulations are now explicitly treated as capital assets under Section 2(14). Additionally, the definition of ‘resultant fund’ under Section 47(viiad) has been expanded to include retail funds and ETFs, making the tax-neutral relocation of foreign funds to IFSC seamless. These changes reduce friction for foreign funds and asset managers, signaling a strong policy push to establish IFSC as a premier global financial hub.
Stay Ahead of the Curve with Vidur AI
Keeping track of these amendments and advising clients accurately is no small task. This is where Vidur AI transforms your practice. Imagine an AI assistant that flags legislative changes in real-time and provides instant impact analysis. With Vidur AI, you can:
- Access instant legal research on complex provisions like block assessments or the Equalisation Levy.
- Draft client advisories and opinions on these new amendments in minutes, not hours.
- Analyze case law to understand judicial interpretations affected by these changes.
- Track updates and never miss a critical amendment again.
In a dynamic legal landscape, staying informed isn’t just an advantage; it’s a necessity. Let Vidur AI be your partner in navigating the complexities of tax law, so you can focus on what you do best: providing strategic, high-value advice to your clients. Try Vidur AI today!
