The government has proposed an amendment to the Finance Act 2025 to clearly state that target of search and seizure operations by the tax department will be “total undisclosed income,” instead of “total income.”
In the Finance Act 2024, when the block assessment regime for search and seizure cases was introduced, the term ‘total income’ was used. This has caused concerns among the stakeholders that in case of taxpayers face search and seizure proceedings, even the disclosed income will be subject to harsh penalties.
“Now, the government has added the new term ‘total undisclosed income’ to clarify that the target of search and seizure proceedings is to unearth and penalize the undisclosed income only. This will provide certainty to taxpayers in relation to income which is already disclosed by them,” said Amit Maheshwari, Tax Partner, AKM Global.
The amendment to Section 143(1) would now empower the Centralized Processing Centre to adjust income tax returns based on inconsistencies with prior-year filings, strengthening compliance oversight. By enabling automated checks for discrepancies, this measure is expected to enhance tax monitoring and reduce instances of tax evasion and misreporting, said Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Andersen.
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Additionally, a clarification in the newly introduced Section 44BBD, which provides a 25% presumptive income regime for electronics manufacturing, explicitly states that Sections 44DA and 115A shall not apply, thereby preventing disputes similar to those under Section 44BB related to the rate of applicable income tax.
Among other changes proposed, Section 9A related to fund manager in India of an offshore fund has been made less onerous as one of the conditions that more than 5% of the corpus should not have participation or investment from Indian residents has been changed. This applied even if the said 5% is owned directly or indirectly but the condition of owning this indirectly has been removed, said Maheshwari. Further, under the provisions of Finance Bill, 2025, the said condition was removed from the ambit of the Central Government to effect any amendments through a notification or otherwise but the same has been restored.
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