Direct Taxation

July 2025

Introduction

by Anjali Darak

Manager - Direct Tax

As the Indian tax season kicks into gear, Non-Resident Indians (NRIs) need to pay close attention to evolving regulations, filing requirements and planning strategies for FY 2025-26. The Income Tax Department has tightened compliance norms in recent years and with increased data-sharing between countries, NRIs can no longer afford to overlook their India-side tax obligations.

Coming to this month’s Taxation Times, here’s what we have:

An article on NRI Taxation – Recent Changes and Planning for FY 2025-26.
Case Laws from various courts & jurisdictions.
Tax Compliance Calendar –July 2025
Circulars & Notifications – June 2025
Tax News from around the world

We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in

Happy Reading!

Best Regards,
UJA Tax Team

NRI Taxation – Recent Changes and Planning for FY 2025-26

With globalization on the rise and many Indians living, working or investing abroad, Non-Resident Indians (NRIs) face increasingly complex tax obligations—both in India and overseas. The Indian Income Tax Department has ramped up efforts to ensure compliance, particularly when it comes to foreign income, asset disclosures and remittances.

As we enter the Income Tax Return (ITR) filing season for FY 2025-26, it’s crucial for NRIs to stay informed about the latest changes in tax laws, reporting requirements and planning strategies. From updated rules on residency status to stricter foreign asset disclosures and the importance of Form 67 for claiming Foreign Tax Credit, NRIs must navigate their tax responsibilities with care.

In this article, we break down the recent changes in NRI taxation and offer practical planning tips to help you stay compliant and tax-efficient this financial year.

Who Qualifies as an NRI in FY 2025-26?

Before diving into tax rules, it’s crucial to establish residential status, which impacts your tax liability in India. For FY 2025-26, you will be considered an NRI if:

You were in India for less than 182 days in the financial year
You were in India for less than 365 days in the last 4 years and less than 60 days in the current year.

For Indian citizens or PIOs visiting India, the 60-day limit extends to 120 or 182 days based on income levels, per recent amendments.

Recent Changes NRIs Should Know (As of 2025)

Stricter Disclosure Norms in ITR (Schedule FA)

NRIs with any foreign assets or accounts need to disclose them under Schedule FA if they become tax residents. Even partial-year residents must report offshore bank accounts, ESOPs, stocks and properties.

Non-disclosure may attract penalties under the Black Money Act, up to ₹10 lakh per year of default.

Updated TCS Rules on Foreign Remittances

Under the Liberalised Remittance Scheme (LRS):

TCS @ 20% still applies on remittances over ₹10 lakh unless for education or medical purposes.
In case of Non-PAN case, TCS rate will be 20% with a threshold limit of Rs. 10 Lakh.
NRIs sending funds to India are generally not subject to TCS but must ensure the correct classification of source and recipient.

Double Taxation Relief – Form 67 Mandatory

If you are taxed abroad and also taxed in India (e.g. global income as RNOR/Resident), claiming Foreign Tax Credit (FTC) requires:

Timely filing of Form 67, before or along with your ITR.
Documentary evidence of tax paid abroad.

Revised ITR Forms for AY 2025-26

The updated forms include:

Enhanced disclosures for foreign income
Segregation of passive vs. active income
Mandatory PAN-Aadhaar linking for RNORs (Resident but Not Ordinarily Resident)

Tax Planning Strategies for FY 2025-26

Choose the Right ITR Form

NRIs generally use:

ITR-2 for salary, capital gains and rental income
ITR-3 if they have business income in India or other form as applicable.

Incorrect form = defective return notice.

Avoiding Double Taxation

Use applicable DTAA (Double Taxation Avoidance Agreements) between India and your country of residence.
Disclose all relevant income transparently and apply tax credits via Form 67.

Manage Indian Investments

Interest on NRO accounts is taxable; TDS at 30% applies.
NRE and FCNR interest is tax-free only if you maintain NRI status.
Consider repatriating funds legally and reporting them in tax filings.

Sale of Property in India

Long-term capital gains taxed at 12.5% without indexation or 20% with indexation
Buyer must deduct TDS @ 12.5% or 20%, depending on section.
DTAA may provide relief on capital gains

Plan Your Residential Days in India

Crossing 120 or 182 days could change your tax residency and bring global income under the Indian tax net. Use a day count tracker.

Final Words:

NRI taxation in India is becoming more digitally monitored, globally aligned and disclosure-heavy. With stricter timelines and penalties, it’s important to take a proactive approach to compliance and planning.

Need help filing your NRI ITR or claiming FTC? Contact UJA for expert assistance in ITR filing, foreign asset reporting and DTAA advisory.

Case Laws

10TH JUNE 2025

[2025] 175 taxmann.com 447 (Ahmedabad - Trib.) IN THE ITAT AHMEDABAD BENCH 'D' Health Foundation and Research Centre v. Assistant Commissioner of Income-tax

Section 11, read with section 12A, of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under (Filing of audit report in Form No. 10B)

Fact I :

The assessee, a charitable trust, was engaged in the field of health and education. It was registered under section 12A and was also enjoying approval under section 80G(5). For the year under consideration, the assessee filed its return of income on 2-11-2017, declaring income at Nil.
The Assessing Officer denied exemption under section 11 on the ground that the audit report in Form No. 10B was not furnished along with the return or subsequently up to the time of assessment. Accordingly, he treated the entire income of the assessee as taxable, including corpus donations.
The assessee filed an application for condone the delay of 63 days in filing the appeal before the Commissioner (Appeals).
The Commissioner (Appeals) declined to condone the delay and dismissed the appeal in limine without adjudicating the matter on the merits
On the assessee’s appeal to the Tribunal:

Held I:

Assessee-trust, engaged in field of medical relief and education, filed its return of income claiming exemption under section 11 – Assessing Officer denied exemption under section 11 ground that audit report in Form No. 10B was not furnished along with return or subsequently up to time of assessment – Assessee filed an appeal before Commissioner (Appeals) along with an application to condone delay of 63 days in filing appeal – Commissioner (Appeals), however, declined to condone delay and dismissed appeal in limine without adjudicating matter on merits – It was noted that audit was completed on 29-7-2019 and audit report was signed on 27-7-2019 – However, said audit report was e-filed belatedly on 7-12-2019 – Whether since audit was completed in time and there was no adverse finding by Assessing Officer on merits of exemption, exemption could not be denied solely on ground of belated filing of audit report in Form No. 10B – Held, yes – Whether, therefore, delay in filing Form No. 10B and delay in filing appeal before Commissioner (Appeals) was to be condoned in interest of justice and Assessing Officer was to be directed to grant benefit of exemption under sections 11 and 12 – Held, yes [Paras 14 and 15]

In Favour of: The Assessee

[175 taxmann.com 352 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'C' Deputy Commissioner of Income-tax v. Phillips Carbon Black Ltd.

Reference: Section 92BA, read with section 80-IA, of the Income-tax Act, 1961 - Transfer pricing - Domestic transactions (Captive power plants)

Facts I :

The assessee was engaged in the business of manufacturing carbon black. The assessee operated four power plants whose profits were eligible for deduction under section 80-IA. During the relevant year, these power plants had generated and distributed power, which was entirely consumed by the manufacturing unit of the assessee. The assessee filed its return claiming deduction under section 80-IA.
On reference, the TPO benchmarked the transfer of power from the captive power plant to the manufacturing unit by applying the rate at which the power-generating station/s were supplying power to the Grid. Accordingly, a downward adjustment was made to the income of the assessee with respect to 80IA units.
Consequently, the Assessing Officer made adjustments to the income of the assessee.
On appeal, the Commissioner (Appeals) deleted the disallowance of deduction claimed under section 80-IA.
On appeal to the Tribunal:

HeId I:

assessee operated four captive power plants (CPPs) whose profits were eligible for deduction under section 80-IA – During relevant year, these CPPs had generated and distributed power which was entirely consumed by manufacturing unit of assessee – Assessee claimed deduction under section 80-IA in respect of profits earned by its CPPs – TPO benchmarked transfer of power from CPPs to manufacturing unit by applying rate at which power generating station/s was supplying power to Grid – TPO, accordingly, made downward adjustment – It was noted that Supreme Court in similar case had held that market value of power supplied by captive power plant to an industrial unit should be computed by considering rate at which State Electricity Board(SEB) supplied power to industrial consumers in open market and not by comparing it with rate of power when sold by assessee to State Electricity Board – Whether, following aforesaid view, assessee’s benchmarking methodology viz., price at which manufacturing units procured power from SEB, was held to be appropriate ALP – Held, yes [Para 9]

In Favour of: The Assessee

Facts II:

The assessee reported Gross Total Income of Rs. 17.64 crores against which deduction under Chapter VI, i.e. Section 80-IA and 80G was claimed, which aggregated to Rs. 125.46 crores. Accordingly, the deduction claimed under Chapter VI was restricted to the extent of Gross Total Income, i.e. Rs. 17.64 crores.
The Assessing Officer however in the impugned order, while assessing the total income, restricted the allowance of deduction under Chapter VI to the extent of ‘Business Income’, which was assessed at Rs. 14.64 crores.
On appeal, the Commissioner (Appeals) directed the Assessing Officer to allow the deduction claimed by the assessee under Chapter VI, i.e. Section 80-IA and 80G against the ‘Gross Total Income’ instead of ‘Business Income’.
On appeal to the Tribunal:

Held II:

Section 80-IA of the Income-tax Act, 1961 – Deductions – Profits and gains from infrastructure undertakings (Computation of deduction) – Assessment years 2017-18, 2018-19, 2020-21 and 2021-22 – Whether deduction under section 80-IA has to be allowed with reference to gross total income and not business income alone – Held, yes [Para 11]
In Favour of: The Assessee

Facts III:

Section 80G of the Income-tax Act, 1961 – Deductions – Donation to certain funds, charitable institutions (CSR expenses) – Assessment years 2017-18, 2018-19, 2020-21 and 2021-22 – During year, assessee made CSR contributions out of which certain sum was paid to charitable institution registered under section 80G – Assessee claimed deduction under section 80G in respect of CSR contributions – Assessing Officer held that CSR donations were a mandatory obligation under section 135 of Companies Act, 2013 and was not voluntary in nature and thus did not qualify for deduction under section 80G and accordingly disallowed same – Whether CSR expenses incurred by way of donation given to any eligible charitable trust (except for Swachh Bharat Kosh and Clean Ganga Fund) would be eligible for deduction under section 80G – Held, yes – Whether since assessee had made donations to registered charitable trusts which had been approved under section 80G(6)(vi) and unlike sub-clauses (iiihk) and (iiihi), there was no restriction or prohibition set out in said sub-clause denying deduction under section 80G for CSR contributions, CSR expenses incurred by assessee by way of donation to such trusts would be eligible for deduction under section 80G – Held, yes [Para 13]
In Favour of: The Assessee

Fact IV:

The assessee had incurred club subscription and expenses.
The Assessing Officer observed that the tax auditor had reported this amount as expenditure incurred at clubs being entrance fees & subscriptions, as well as costs for club services and facilities used. According to the Assessing Officer, this reporting amounted to qualification by the tax auditor and therefore, he disallowed the same.
On appeal, the Commissioner (Appeals) deleted the disallowance of club expenses.
On appeal to the Tribunal:

Held IV:

Section 37(1) of the Income-tax Act, 1961 – Business expenditure – Allowability of (Club membership expenses) – Assessment years 2017-18, 2018-19, 2020-21 and 2021-22 – Assessee-company was engaged in business of manufacture of carbon black – It had obtained corporate membership of clubs having affiliations across India for its directors and senior employees to interact with customers and other stakeholders – It was noted that club facilities were used as a platform for holding business meetings of directors and senior employees to interact with business partners and customers – Whether thus, activities undertaken by directors and senior employees in such clubs were in nature of business meetings, networking, brand building, dealings and business gatherings between suppliers/customers and/or senior executives of assessee-company, which fostered business interests of assessee-company – Held, yes – Whether thus, club membership and club service expenses borne by company were incurred in course of and for purposes of business and same were to be allowed as deduction under section 37(1) – Held, yes [Para 17]
In Favour of: The Assessee

Facts V:

The assessee earned exempted dividend income of a certain amount. In the return of income, the assessee suo moto computed and disallowed a certain amount under section 14A by way of expenditure incurred for earning of exempt income.
During assessment, the Assessing Officer computed the disallowance under section 14A being 1 per cent of the average fair value of all investments, in accordance with rule 8D(2)(ii).
On appeal, the Commissioner (Appeals) directed the Assessing Officer to recompute the disallowance under rule 8D(2)(iii) with reference to the component closing value of the investment which yielded dividend income during the year.
On appeal to the Tribunal:

Held V:

Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 – Expenditure incurred in relation to income not includible in total income (General) – Assessment years 2017-18, 2018-19, 2020-21 and 2021-22 – During year, assessee earned exempted dividend income of certain amount – In return of income, assessee had suo moto computed and disallowed a sum of certain amount under section 14A by way of expenditure incurred for earning of exempt income – Assessing Officer computed disallowance under section 14A being 1 per cent of average fair value of all investments, in accordance with rule 8D(2)(ii) – Commissioner (Appeals) directed Assessing Officer to recompute disallowance under rule 8D(2)(iii) with reference to component closing value of this investment which yielded dividend income during year – Whether there was no infirmity in impugned order of Commissioner (Appeals) and same was to be upheld – Held, yes [Para 21]

In Favour of: The Assessee

Circulars and Notifications June 2025

Circulars / Orders

SECTION 139 OF THE INCOME-TAX ACT, 1961 - RETURN OF INCOME - EXTENSION OF DUE DATE FOR FURNISHING RETURN OF INCOME FOR ASSESSMENT YEAR 2025-26

CIRCULAR NO. 6/2025 [F. NO. 225/205/2024/ITA-II], DATED 27-5-2025

The Central Board of Direct Taxes (CBDT), in exercise of its powers under Section 119 of the Income-tax Act, 1961 (‘the Act extends the due date of furnishing of Return of Income under sub-section (1) of section 139 of the Act for the Assessment Year 2025-26 in the case of assessees referred in clause (c) of Explanation 2 to sub-section (1) of section 139 of the Act, which is 31st July, 2025 to 15th September, 2025.

DATED: 27-5-2025

Press Release

CBDT EXTENDS DUE DATE OF FILING OF ITRs WHICH WERE DUE FOR FILING BY 31-7-2025

The notified ITRs for AY 2025-26 have undergone structural and content revisions aimed at simplifying compliance, enhancing transparency and enabling accurate reporting. These changes have necessitated additional time for system development, integration and testing of the corresponding utilities. Furthermore, credits arising from TDS statements, due for filing by 31st May, 2025, are expected to begin reflecting in early June, limiting the effective window for return filing in the absence of such extension.

In view of the extensive changes introduced in the notified ITRs and considering the time required for system readiness and rollout of Income Tax Return (ITR) utilities for Assessment Year (AY) 2025-26, the Central Board of Direct Taxes (CBDT) has decided to extend the due date for filing returns.

Accordingly, to facilitate a smooth and convenient filing experience for taxpayers, it has been decided that the due date for filing of ITRs, originally due on 31st July 2025, is extended to 15th September 2025. A formal notification to this effect is being issued separately.

This extension is expected to mitigate the concerns raised by stakeholders and provide adequate time for compliance, thereby ensuring the integrity and accuracy of the return filing process.

PRESS RELEASE, DATED 27-05-2025

Notifications

SECTION 138 OF THE INCOME-TAX ACT, 1961 - DISCLOSURE OF INFORMATION RESPECTING ASSESSEES TO SPECIFIED OFFICER, AUTHORITY OR BODY PERFORMING FUNCTIONS UNDER ANY OTHER LAW - NOTIFIED AUTHORITY UNDER SECTION 138(1)(a)(ii)

In pursuance of sub-clause (ii) of clause (a) of sub-section (1) of section 138 of the Income-tax Act, 1961, the Central Government hereby specifies the Secretary to the Government of Maharashtra, Women and Child Development, for the purposes of the said clause in connection with sharing of information regarding Income-tax payers for identifying eligible beneficiaries under the “Mukhyamantri Mazi Ladki Bahin Yojana”.

NOTIFICATION NO. S.O. 2479(E) [NO. 54/2025/F.NO. 225/213/2024/ITA-II], DATED 3-6-2025

Tax Calender: June 2025

07th July 2025

Equalization Levy Deposit Due Dates: Collection and recovery of equalization levy on specified services in June 2025
TDS/TCS Deposit: Due date for deposit of Tax deducted/collected for June 2025. However, all sums deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day on where tax is paid without production of an Income tax Challan
Form 27C: Declaration under sub-section (1A) of section 206C of the Income-tax Act, 1961 to be made by a buyer for obtaining goods without collection of tax for declarations received in the month of June 2025

15th July 2025

Due date for issue of TDS Certificate for tax deducted under section 194S/194-IA/194-IB/194M in May 2025
Form 27EQ: Quarterly statement of TCS deposited for the quarter ending June 30, 2025
Form 15G/15H: Upload the declarations received from recipients in Form No. 15G/15H during the quarter ending June 2025

30th July 2025

Form 26QB: Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in June 2025
Form 26QC: Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in June 2025
Form 26QD: Due date for furnishing of challan cum statement in respect of tax deducted under section 194M in June 2025
Form 26QD: Due date for furnishing of challan cum statement in respect of tax deducted under section 194M in June 2025
Form 27D: Quarterly TCS certificate in respect of tax collected by any person for the quarter ending June 30, 2025

31st July 2025

Form 24Q/26Q/27Q Quarterly statement of TDS deposited for the quarter ending June 30, 2025
Form 10BBD Statement of eligible investment received.
Form 26QF Quarterly statement of tax deposited in relation to transfer of virtual digital asset under section 194S to be furnished by an exchange for the quarter ending June 30, 2025.
Form 10BBB Intimation by Pension Fund of investment under clause (23FE) of section 10 of the Income-tax Act, 1961 for the quarter ending June 30, 2025.

Tax News from Around the World

United States: Tax Policy Adjustments

A new tax bill before Congress includes a provision that partially exempts the U.S. Virgin Islands from the global minimum tax enacted under the 2017 GOP tax law. This exemption, which could cost U.S. taxpayers nearly $1 billion over the next decade, follows a lobbying campaign led by the USVI government and Golub Capital, a $75 billion private credit firm with operations on the islands.

Global Minimum Tax Implementation

Several countries are moving forward with implementing the OECD’s global minimum tax (Pillar Two):

South Africa: Enacted the Global Minimum Tax Act in December 2024, introducing a 15% global minimum tax for companies with consolidated annual revenue of at least EUR 750 million in two of the tax years preceding the reporting year.
Turkey: Enacted legislation implementing the OECD Pillar Two global minimum tax and a domestic minimum tax. The legislation includes an Income Inclusion Rule (IIR) and a Qualified Domestic Minimum Top-up Tax (QDMTT), effective from 1 January 2024.
Thailand: Introduced Pillar Two rules via an emergency decree published in December 2024, effective from 1 January 2025.