Income tax is a part of every earning individual or business’s financial responsibility. But sometimes, even after filing your return and paying your taxes, you may receive a demand notice from the Income Tax Department. 

Knowing income tax concepts to understand what is income tax demand notice, why it is sent, or how to reply to income tax notice can make the process simple and stress-free.

Here’s a low-down on the concept and how to respond to income tax demand notice.

What is an Income Tax Demand Notice?

An Income Tax Demand Notice is an official communication from the tax department stating that you owe a certain amount of tax. This could be due to mistakes in your return, late payments, or missed tax entries.

Meaning of Notice Under Section 156 of Income Tax Act

When you get a notice under Section 156 of the Income Tax Act, it means the tax department has made a formal demand for payment. This section is invoked after the tax officer completes an assessment or reassessment and finds that additional tax is due. The notice will clearly mention the amount you owe and the due date by which it must be paid.

Reasons for Receiving a Demand Notice

Before getting into how to respond to income tax demand notices, it’s important to understand why the notice was issued in the first place. Here are the most common reasons.

Mismatch in Tax Paid and Tax Liability

This happens when the tax amount mentioned in your return doesn’t match what the department has on record. It could be due to a delay in TDS reporting by your employer or incorrect PAN linking.

Incorrect Reporting of Income or Deductions

If you forget to report some of your income—like interest from savings accounts or capital gains—or if you claim a deduction you’re not eligible for, the department may raise a demand after reviewing your records.

Arithmetical Errors in Return Filing

Sometimes, simple calculation mistakes while filing your Income Tax Return (ITR) can result in wrong tax amounts. These are picked up during processing and can lead to a demand.

Non-Payment or Short Payment of Advance Tax/Self-Assessment Tax

If you’re required to pay advance tax or self-assessment tax but fail to do so in full or on time, a demand notice may be issued for the pending amount along with interest.

How to Respond to Income Tax Demand Notice

You can reply to the demand notice easily through the income tax portal. Here’s how.

Step-by-Step Guide to Responding Online

This is the first step in understanding how to respond to income tax demand notice digitally

1. Go to www.incometax.gov.in
2. Log in using your PAN, password, and Captcha.
3. Navigate to Pending Actions > Response to Outstanding Demand.
4. You’ll see details of the notice, including the demand amount, assessment year, and date.
5. Click on “Submit Response”.

You can choose from three options:

• Demand is correct
• Demand is partially correct
• Disagree with demand

Choose the appropriate one based on your case.

Accepting the Demand and Making Payment

If you agree with the demand, you must make the payment before the due date. Once paid, submit the details online:

• Select “Demand is correct”
• You will be redirected to the payment page
• After payment, update the BSR code, challan number, and payment date on the portal.

Disagreeing with the Demand: How to Submit a Response

If you believe the demand is incorrect:

• Select “Disagree with demand”
• Choose the reason (e.g., demand already paid, appeal filed, or TDS mismatch)
• Upload supporting documents (like challan copies or Form 26AS)

Your response will be reviewed by the tax officer. This is a key step in how to respond to income tax demand notice if you believe the claim is incorrect.

Partial Acceptance and Partial Disagreement Cases

In some cases, you may agree to part of the demand but dispute the rest. For such cases:

• Choose “Partially correct”
• Enter the amount you agree to pay
• Provide reasons and documents for the disputed part

In such cases, knowing how to respond to income tax demand notice with partial disagreement can help you avoid excess payment. It helps avoid penalties on the accepted portion and initiates review of the rest.

How to Pay Outstanding Demand

Paying tax dues has become much easier with online services.

Online Payment Through Challan 280

1. Go to the income tax portal
2. Under “e-Pay Tax”, select Challan 280
3. Choose “Self-Assessment Tax” or “Tax on Regular Assessment” depending on your case
4. Enter the assessment year and other details
5. Pay through net banking, UPI, or debit card

Save the payment receipt carefully.

Providing Payment Details on Income Tax Portal

After paying, revisit the demand notice section:

• Click on “Submit Response”
• Select “Demand is correct and paid now”
• Fill in the BSR code, challan number, and amount paid
• Submit to complete the process

What if the Demand Notice is Incorrect?

Mistakes can happen at the department’s end, too. You have the right to dispute such notices.

Submitting Disagreement Response

As mentioned earlier, choose the “Disagree” option on the portal and explain your reason clearly. This may include:

• Incorrect tax calculations
• Wrong PAN used
• Duplicate entry of demand
• Demand already paid

Documents Required to Dispute a Demand Notice

You may need to upload:

• Form 26AS
• Tax payment challans
• TDS certificates
• Copy of filed ITR
• Communication with employer or banks (if TDS was not reported)

Make sure the documents are clear and accurate to avoid delays in resolution.

Consequences of Not Responding to Demand Notice

Ignoring a tax notice is never a good idea. Here’s what may happen if you don’t respond.

Interest and Penalty Implications

If you don’t pay the demanded amount on time, interest under Section 220(2) is added monthly. Additional penalties may also be levied for non-compliance.

Initiation of Recovery Proceedings

In serious cases, the department can:

• Adjust your refund against the demand
• Attach your bank account
• Recover money directly from your employer or clients

Hence, timely action is very important.

Best Practices When Dealing with Demand Notices

Receiving a tax notice can be stressful, but it doesn’t have to be. The key is to stay calm, act quickly, and follow a clear plan. Understanding how to respond to income tax demand notice correctly can save you from penalties, unnecessary interest, and even legal complications.

Here are some best practices to follow:

Review Form 26AS, AIS, and TIS Carefully

These documents show all your income and tax deductions. Make sure everything reported is correct and matches your return.

Consulting a Tax Professional for Complex Cases

If you don’t understand the demand or the issue is complex, consult a CA or tax consultant. This is especially helpful for a stock market advisory company or freelancers with multiple income sources.

Maintaining Proper Documentation

Always keep records of your ITR, Form 16, Form 26AS, TDS certificates, and tax payment challans. Good record-keeping avoids future problems.

Conclusion

Importance of Timely and Correct Response to Demand Notices

A demand notice is not the end of the world. It’s simply the department’s way of pointing out a gap. Whether it’s an error or an actual shortfall, responding quickly and accurately is key. Knowing how to respond to income tax demand notice can help you stay stress-free and compliant. Understanding income tax basics and using official resources can ensure your tax journey remains smooth and trouble-free.

FAQs

1. How do I check if there is a pending tax demand against me?

Log in to www.incometax.gov.in, go to Pending Actions > Response to Outstanding Demand to view any pending demands.

2. Can I ignore a small demand amount?

No, even small demand amounts must be addressed. Ignoring them may result in interest, penalties, or refund adjustments.

3. How long do I have to respond to a demand notice?

Generally, you are given 30 days from the date of the notice to respond. Always check the specific due date mentioned in your notice.

4. Can demand notice errors be rectified online?

Yes. You can dispute incorrect demands through the income tax portal by submitting the reason and uploading documents.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Medical expenses are a significant portion of household budgets today. For salaried employees, managing doctor visits, hospital stays, and health check-ups can put a strain on their finances. This is where employee health insurance deduction becomes vital, it helps lower taxable income, eases financial burden, and encourages proactive healthcare.

To avail these benefits, it’s essential to understand how to file ITR online correctly by declaring insurance premiums and medical expenses under the appropriate sections to ensure smooth processing and maximum tax savings.

Importance of Medical Expense Tax Benefits for Employees

By claiming an employee health insurance deduction on premiums and medical bills, salaried individuals can reduce their taxable income and save a significant amount on taxes.

Key Sections Providing Tax Relief on Medical Costs

In India, tax laws offer relief on medical expenses mainly through:

1. Section 17(2) – related to medical reimbursement by employers (under the old tax regime).
   
2. Standard Deduction – replaced most earlier exemptions.
   
3. Section 80D – covers deductions for health insurance premiums and preventive health check-ups.

Together, these help reduce overall tax liability and provide flexibility in managing healthcare expenses.

Medical Reimbursement and Tax Exemption (Old Rules)

Tax Benefit Under Section 17(2) Before Standard Deduction

Before the standard deduction was introduced in FY 2018–19, salaried employees could claim tax exemption for employer-funded medical reimbursements under Section 17(2). In simpler terms, any amount your employer paid back for your medical bills was not added to your taxable salary.

Exemption Limit for Medical Reimbursement

There was a fixed exemption cap, typically ₹15,000 per financial year. Any amount claimed via submitted medical bills up to this limit was fully exempt from tax when processed under “employee health insurance deduction” benefits.

Conditions for Claiming Medical Expense Reimbursement

To claim exemption under Section 17(2), you had to:

• Submit original medical bills to your HR department.
  
• Receive reimbursement from your employer (credited to your salary slip).
  
• Ensure that reimbursement does not exceed ₹15,000 per year.
  
• Be under the old tax regime, where this specific exemption was recognized.

Standard Deduction and Its Impact on Medical Expense Tax Benefits

Introduction of Standard Deduction for Salaried Employees

Starting FY 2018–19, the government introduced a flat ₹40,000 standard deduction (later increased to ₹50,000 from FY 2019–20) for salaried individuals and pensioners. This lump-sum reduction replaced multiple exemptions, including:

• Transport allowance
  
• Entertainment allowance
  
• Medical reimbursement under Section 17(2)

Replacement of Medical Reimbursement Exemption

The arrival of the standard deduction rendered Section 17(2) medical reimbursement obsolete. Now, instead of filing bills for tax breaks, employees can simply claim ₹50,000 off their gross salary, with no documentation required.

Current Tax Implications for Medical Expenses

You cannot claim medical reimbursement under the old tax regime once you choose the standard deduction route. However, you can still claim deductions via employee health insurance deduction under Section 80D, which applies whether you opt for the old or new tax regime.

Tax Benefits on Medical Insurance Premiums Under Section 80D

Section 80D offers tax relief on health insurance premiums paid for you, your family, and your parents. It’s one of the most beneficial routes to manage healthcare costs.

Deduction Limits for Self and Family

For premiums on health insurance covering yourself, your spouse, and children:

• Maximum deduction is ₹25,000 per financial year.
  
• If any member is a senior citizen (60 years or older), the combined limit remains ₹25,000 for yourself and your spouse, plus ₹50,000 for senior parents, totaling up to ₹75,000.

Additional Deduction for Senior Citizens

If you buy insurance for both parents and they are senior citizens, you can claim:

• ₹25,000 (or ₹50,000 if you/your spouse are seniors) for your policy
  
  • ₹50,000 for parents
    
• Grand total deduction: ₹75,000 (or ₹1 lakh if you’re a senior yourself)

Example:

• You (45), spouse (41), child (10) insured for ₹20,000
  
• Parents (65+) insured for ₹45,000
  Your total deduction = ₹20,000 + ₹45,000 = ₹65,000 (falls within allowed ₹75,000)

Deduction for Preventive Health Check-Ups

Section 80D allows extra deduction up to ₹5,000 per year for preventive check-ups (blood tests, X-rays, health screenings). This is part of the ₹25,000/₹50,000/₹75,000 limits above, but doesn’t reduce the insurance premium limit.

Medical Expenditure Deduction for Senior Citizens Without Insurance

Special Tax Benefits Under Section 80D for Uninsured Elderly

If your parents are above 60 and don’t have health insurance, you can claim a deduction for medical expenditure directly (instead of for premiums). The same ₹50,000 limit applies.

Conditions for Claiming Medical Expenditure Deductions

To claim:

• Parents must be senior citizens
  
• No insurance for parents
  
• You must actually pay the medical expenses
  
• You have original hospital bills, prescriptions, and receipts
  
• Limit: ₹50,000 annually (in place of the insurance premium cap)

Documents Required to Claim Tax Benefits on Medical Expenses

Medical Bills and Receipts 

• Original hospital bills & doctor’s fees 
• Pharmacy receipts 
• Paid stamp and invoice for services rendered 

Health Insurance Premium Payment Proofs

• Premium payment certificate from the insurer 
• PAN/Policy number indicated 
• Check or bank statement entry 

Preventive Check-up Payment Receipts

• Separate receipts for preventive tests 
• Must clearly show nature of check-up

Save all documents for at least 6 years, as the Income Tax Authority may ask during assessments.

Important Points to Remember

Limitations and Restrictions Under Sections 17(2) and 80D

• Section 17(2) medical reimbursement is no longer available under the standard deduction.
  
• Section 80D applies to both the old and new tax regimes.
  
• Deductions are based on the payment due date (not necessarily the actual payment date): insurance premiums paid by March 31 qualify.
  
• The combined family and parent deduction maximums at ₹75,000 (or ₹1 lakh in the senior employee scenario).

Impact of Opting for New Tax Regime on Medical Expense Benefits

The new tax regime (effective from FY 2020–21 onwards) offers lower slab rates but eliminates many deductions, including Section 80D. If you rely heavily on medical premiums and preventive care coverage, the old tax regime may remain more beneficial, especially for households with senior members or high medical costs.

Conclusion

To maximize tax benefits on medical expenses, it is advisable to opt for the old tax regime if you pay high health insurance premiums, especially for senior parents, and incur costs for preventive check-ups. 

Ensure you maintain adequate insurance coverage and keep all receipts and proof of premium payments safely. Consulting a reliable share advisory company or financial advisor can help optimize your tax planning. While filing your ITR online, carefully fill in Section 80D details, retain relevant documents for audit purposes, and be aware of distinctions like TCS vs TDS, as insurance premiums usually don’t attract TDS, though salary-based reimbursements may be treated differently.

FAQs

Is medical reimbursement taxable under the new regime?

Medical reimbursement under Section 17(2) no longer exists once you opt for the standard deduction in the old tax regime. Under the new regime, it’s neither available nor taxable. 

Can I claim both the health insurance premium and medical bills?

Yes, within Section 80D, you can claim insurance premiums and preventive health check-up bills, up to your limit. For senior parents without insurance, you can claim medical bills under the ₹50,000 provision. 

What is the limit for the preventive health check-up deduction?

A maximum of ₹5,000 per financial year can be claimed for preventive health check-ups under Section 80D of the Income Tax Act.

Are parents’ medical expenses eligible for deduction under Section 80D?

Absolutely, if they are senior citizens and either insured or uninsured, you can claim: – ₹50,000 (if elderly insured) or – ₹50,000 (if elderly uninsured, for medical expense).

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Casual Income under Income Tax Act refers to income that arises from irregular or unexpected sources, which aren’t part of your usual business, salary, or investments. 

It’s the kind of income you receive by chance, such as winning a lottery, a game show prize, a horse race bet, or a crossword puzzle reward, and isn’t earned under any contract or expectation of recurring success.

Why Understanding Casual Income is Important for Taxpayers

Understanding Casual Income under Income Tax Act matters because:

• It’s taxed at a flat rate without considering deductions or exemptions.
  
• It may be subject to TDS (Tax Deducted at Source) at the source.
  
• Non-disclosure can result in penalties, interest, and increased scrutiny.
  
• It’s distinct from normal income, so blending it can lead to compliance errors.

Additionally, understanding how it fits under the new vs old tax regime and how it interacts with indirect taxes, such as the windfall tax, is crucial for accurate tax planning.

What Qualifies as Casual Income?

Definition Under Income Tax Law

Tax laws in India categorize casual income under “Income from Other Sources.” Section 115BB of the Income Tax Act specifies that income from gambling, betting, lottery, crossword puzzles, races, or any game of chance is taxable as casual income. It is irregular, unpredictable, and unrelated to one’s regular work or business.

Common Examples of Casual Income

Frequent examples include:

• Lottery winnings (jackpots, raffles).
  
• Prize money from quiz shows, reality competitions, and TV game shows.
  
• Income from horse races or sports betting.
  
• Rewards from crossword or puzzle contests.
  
• Online gaming earnings.
  

These are all clear instances of “Casual Income under Income Tax Act.” They often involve a windfall nature, hence sometimes nicknamed “windfall tax” events in common parlance.

Taxability of Casual Income

How Casual Income is Taxed in India

All casual income is taxed flat under Section 115BB as part of “Income from Other Sources.” There is no aggregation with salary/business income for rate calculation, but the final tax is included in your return and added to the overall taxable income.

Applicable Tax Rates for Casual Income

• A flat 30% tax on the gross amount.
  
• An additional 4% health and education cess, taking the effective rate to 31.2%.
  
• There is no benefit from the basic exemption limit or slab rates; the rate is the same for all taxpayers.

TDS:

• Section 194B for lottery/quiz prizes.
  
• Section 194BB for horse race winnings if the amount exceeds ₹10,000.
  
• Hence, the payer deducts 31.2% and remits directly, before you receive the amount.

Exemptions and Deductions on Casual Income

Are Any Deductions Allowed?

No deductions are allowed. You cannot deduct expenses like lottery ticket cost, betting outlays, or participation fees under Section 115BB.

Important Exemptions to Know

Strictly speaking, there are no exemptions for casual income, it is fully taxable. However:

• Gambling winnings from the UK or US may be subject to tax treaties, which could potentially reduce tax liability, but are still reportable in India.
  
• If total income (including casual income) after deductions is below ₹5 lakh, you might benefit under Chapter VI-A rebate rules, not because casual income gets special treatment, but due to the overall structure.
  
• Under the new versus old tax regime, casual income is always taxed at this flat rate, regardless of one’s total slab deductions.
  

Indirect Tax, like GST, doesn’t apply to casual income, but organizers of contests may have indirect tax responsibilities.

Differences Between Casual Income and Regular Income

Feature	Casual Income	Regular Income
Nature	Irregular, chance-based	Predictable, earned via contracts or work
Tax Rate	Flat 30% + cess (31.2%)	Slab-wise (0–42%), varies by regime
Expenses Deductibility	No	Yes (varies by nature of business or job)
Exemptions	None Under 115BB	Many (80C, 80D, HRA, etc.)
TDS Applicability	Mandatory above ₹10k (194B/194BB)	Varied (192, 194A, etc.)

Impact on Total Taxable Income

Although taxed separately, casual income must be reported in your ITR and added to total payable taxes. It may push you into a higher tax bracket under the old or new tax regime, affecting total liability. It also interferes with dividends or other investments when calculating effective tax.

Users under the new vs old tax regime should note that casual income doesn’t qualify for the standard slab benefit, making its impact distinct and predictable.

How to Report Casual Income in Income Tax Returns

• ITR‑1 (Sahaj): Only if casual income is from lotteries or horse races (along with salary/interest), and total income ≤ ₹50 lakh.
  
• ITR‑2: For all other cases—if you have other income or own property.
  
• ITR‑4: Not suitable, as casual income doesn’t fall under presumptive business.

Where and How to Declare Casual Income

• Under “Income from Other Sources” schedule.
  
• Enter gross winnings (e.g. ₹100,000 from lottery), TDS deducted, and net income.
  
• Fill in TDS details (section-wise) and upload TDS certificates during e-filing.
  
• There is no need to show “expenses”.
  
• If TDS < computed tax, pay the balance via self-assessment tax before filing. There is no carry-forward of casual losses either.

Penalties for Non-Disclosure of Casual Income

Consequences of Non-Reporting

Failing to disclose casual income can result in:

• Reassessment by tax authorities.
  
• Demand notices for underreported income.
  
• Late filing or concealment penalties.
  

Interest and Penalty Provisions

• Interest under Sections 234A/B/C if you delay payment.
  
• Penalties under Section 271(1)(c):
  
  • Up to 100% of tax unpaid if concealment is deliberate.
    
  • Minimum ₹10,000 for concealment; penalty can go up to 300%.
    
• Non-filing can also lead to legal complications, especially under the upcoming Income‑tax Bill 2025. 

Real-Life Examples of Casual Income Cases

Lottery Wins

Suppose you win ₹5 lakh in a state lottery. The organizer deducts ₹1.56 lakh (31.2%) and pays you ₹3.44 lakh. Upon filing, report ₹5 lakh gross, TDS ₹1.56 lakh, with no deductions.

Game Shows and Prize Money

Game shows offer prizes (e.g., ₹1 lakh + a trip worth ₹ 50,000). Tax applies on ₹150,000 at 31.2%. The organizer deducts accordingly before awarding.

Horse Race Winnings

Winning ₹ 20,000 at a race. Tax deducted under Section 194BB at 31.2% before payout. Report and reconcile in ITR to claim TDS.

These real-life cases vividly show how “Casual Income under Income Tax Act” is handled, often involving share advisory company-sponsored quiz contests, indirect taxes, etc.

Conclusion

Casual income is an irregular, chance-based income that is taxed separately under the Income Tax Act. Governed by Section 115BB and falling under the category of “Income from Other Sources,” it is taxed at a flat rate of 30% plus a 4% cess, resulting in an effective rate of 31.2%, with no deductions or exemptions permitted. 

If the amount exceeds ₹10,000, Tax Deducted at Source (TDS) is applicable under Sections 194B or 194BB. Whether you’re an individual investor or associated with a share advisory company, it’s essential to report such income accurately in the appropriate ITR form—usually ITR-1 or ITR-2—and reconcile it with TDS records. Non-reporting of casual income can result in penalties, interest charges, and legal action, particularly under the new income tax regime.

FAQs

Is Gift Money Considered Casual Income?

No. Gift money is covered under separate exemptions. If received from specified relatives or under ₹50,000 from non-relatives, it’s tax-free (Section 56). It’s not categorized as casual income. 

Are Casual Income Winnings Taxed at Flat Rates?

Yes. Casual income is always taxed at a flat 30% under Section 115BB, plus cess, regardless of your income slab, unlike salaries or business income.

Is TDS applicable on casual income?

Yes, TDS of 31.2% applies if winnings exceed ₹10,000 under Section 194B (lottery, puzzle) or 194BB (horse races). This must be deducted by the organizer before payment.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

The Bombay Stock Exchange (BSE) is celebrating a major milestone in 2025, marking 150 years since its founding. Established in 1875, the BSE is not only Asia’s oldest stock exchange but also ranks as the tenth oldest in the world. 

What began as informal meetings under a banyan tree has grown into a modern, tech-driven financial institution.

This journey reflects India’s own economic and social progress over the decades. 

Throughout its history, the BSE has played a pivotal role in developing India’s capital markets, enabling businesses to raise funds and creating wealth for investors nationwide.

Historic Milestone with New Index Launch and Policy Recognition

Earlier this year in April 2025, BSE marked a significant milestone with a grand celebration attended by Finance Minister Nirmala Sitharaman. She lauded BSE’s transformation into a cutting-edge, technology-driven platform that now processes daily orders worth Rs 1,500 crore, an achievement she described as a clear reflection of India’s dynamic economic progress.

The Finance Minister also highlighted BSE’s impressive market capitalization of Rs 400 lakh crore, placing it among the world’s top stock exchanges. She also unveiled the BSE 150 index, a new benchmark designed to track the performance of the top 150 listed companies based on market capitalization and liquidity.

Source: newsonair.gov

From Banyan Tree to Formal Foundation

The roots of the BSE trace back to the 1850s, when informal stock trading began under a banyan tree near Mumbai’s Town Hall. Gujarati and Parsi brokers traded securities, including East India Company shares, relying on trust and reputation, principles that would shape India’s capital markets. 

On July 9, 1875, this informal group formalized into “The Native Share & Stock Brokers’ Association,” marking the official birth of BSE.

By 1921, it had established its base on Dalal Street, and by 1930, it was a central platform for corporate financing in British India, supporting industrial giants like Tata, Birla, and Bajaj.

To provide a clear overview of this extensive history, the following table highlights some of the most significant milestones in the BSE’s journey:

Year	Milestone/Event	Significance
1850s	Informal trading under a banyan tree	Roots of organized market
1875	Formal establishment as “The Native Share & Stock Brokers’ Association”	Birth of Asia’s oldest exchange
1921	Shift to Dalal Street premises	Centralization of operations
1956	Permanent recognition under Securities Contracts (Regulation) Act	Formal legal framework for operations
1986	Introduction of Sensex (Base 1979=100)	India’s first stock market index and economic barometer
1992	Establishment of SEBI (empowered)	Regulatory authority strengthened post-scam
1995	Introduction of BOLT (BSE Online Trading)	Transition to electronic trading
1996	Introduction of Dematerialization	Enhanced security, efficiency, investor participation
2001	Launch of BSEWEBX.com	World’s first centralized internet trading system
2005	Corporatization and Demutualization	Modernized ownership and governance structure
2023	Unveiling of new BSE logo	Symbolizing renewed vision and growth

Where BSE Fits in India’s Demat Account Growth Story

As more Indians embrace equity investing, BSE remains at the heart of this transformation — enabling millions of new investors to participate in India’s growth story with trust, transparency, and scale.

Domestic brokerages added a record-breaking 41.1 million demat accounts in FY25, taking the total number to 192.4 million. This marks the highest-ever annual increase in absolute terms. The monthly average stood at 3.42 million new accounts, setting a new benchmark for any financial year.

Total Demat Accounts		Change
Year	Count (in Cr)	Absolute (in Cr)	in %
FY21	5.5	1.4	33%
FY22	9.0	3.5	63%
FY23	11.5	2.5	28%
FY24	15.1	3.7	32%
FY25	19.2	4.1	27%

Source: IBEF.org

This surge in demat accounts was driven by easier account opening, rising smartphone usage, and strong market returns.

CDSL: BSE’s Trusted Partner in Secure Electronic Trading

Central Depository Services (CDSL), promoted by the Bombay Stock Exchange (BSE) in 1999, is one of India’s key depositories, enabling electronic holding of shares, bonds, and mutual funds. 

Though now a listed company, CDSL remains closely linked to BSE, which is its largest shareholder. 

CDSL works with exchanges, brokers, and intermediaries to maintain investor records and streamline trade settlements. Its integration with BSE enables investors to manage and store their securities securely in a paperless environment.

Source: Business Standard

BSE Still Going Strong: Potential for Deeper Market Reach

India’s capital markets have experienced a significant increase in participation over the past few years. However, despite these gains, mutual fund adoption remains surprisingly low, with only 3% of India’s population currently investing in mutual funds. 

When it comes to demat penetration, only 8% of the population holds demat accounts, compared to 62% in the US Monthly Systematic Investment Plan (SIP) inflows have also surged, tripling to around ₹25,300 crore, underscoring retail investors’ growing preference for disciplined investment strategies.

Yet, mutual funds’ Assets Under Management (AUM) relative to GDP remain low at 17%, significantly behind the global average of 65%. Stock market turnover velocity also lags international peers at around 70% versus nearly 115% on NASDAQ. 

Looking forward, robust demographics and rising incomes could propel further market growth. Over the next decade, an estimated 100 million people are expected to join the workforce, with a similar number of households entering the middle-income segment.

Source: aninews.in

Now let’s explore how BSE has overcome various challenges over time and transformed into one of the world’s leading stock exchanges.

BSE in the Planned Economy Era

In 1956, the BSE became the first stock exchange to gain permanent recognition under the Securities Contracts (Regulation) Act, providing a legal framework for regulated trading.

However, the exchange struggled with poor transparency, malpractices, and slow, manual systems. Trades happened through open outcry, and price updates often reached investors late via newspapers. These issues limited participation and fair pricing, highlighting the need for modernization. These early inefficiencies eventually led to important reforms and the adoption of technology in later years to improve market access and efficiency.

Liberalisation and Market Reforms in the 1990s

The 1990s marked a turning point for India’s economy, triggered by the 1991 reforms aimed at deregulation, foreign investment, and trade liberalisation. These changes greatly boosted the capital markets. BSE’s market capitalisation grew at 27% annually between 1991 and 1999, while trading volumes doubled in a year. The primary market expanded with fresh issues from private firms and mutual funds. Foreign portfolio inflows touched $3.8 billion by 1995, and SEBI gained full regulatory authority in 1992 to enhance market transparency and investor protection.

1992 Scam Sparked Reforms in Indian Stock Market

During India’s economic liberalisation, the 1992 Harshad Mehta scam exposed major flaws in the stock market. By manipulating stock prices using fake funds, Mehta triggered a 12.7% crash in the BSE Sensex on April 18, 1992. While it deeply shook investor confidence, the crisis became a turning point. It led to stronger powers for SEBI, the push for electronic trading, and enhanced transparency, proving that even major setbacks can drive essential reforms for a more robust and efficient market.

Technological Revolution

The launch of the fully automated National Stock Exchange (NSE) in 1994 pressured BSE to modernize. In response, BSE introduced its electronic trading system, BOLT (BSE Online Trading), in 1995, replacing the outdated open outcry system and enhancing speed and efficiency.

In 2001, BSE launched BSEWEBX.com, the world’s first centralized exchange-based internet trading system, allowing global investors remote access to Indian markets, marking BSE’s global push.

A key milestone came in 2005 when BSE corporatized and demutualized under SEBI’s direction. This governance shift enabled strategic partnerships with global exchanges like Deutsche Börse and Singapore Exchange, cementing BSE’s international presence.

Sensex: The Nation’s Economic Barometer

In 1986, the BSE introduced the Sensex, India’s first stock market index, with a base value of 100, which was set in 1979. The Sensex rapidly became a crucial indicator of India’s economic health and a sensitive barometer of market sentiment. Its early movements directly reflected significant economic policies and emerging industrial trends. 

Key Sensex Milestones and Their Triggers

• January 15, 1992: Sensex crossed 2,000 points after liberal economic reforms were announced.
  
• February 29, 1992: Surged past 3,000 points following a market-friendly Union Budget.
  
• March 30, 1992: Touched 4,000 points, driven by expectations of a liberalised export-import policy, shortly before the Harshad Mehta scam shook the market.
  
• October 11, 1999: Crossed 5,000 points, coinciding with the victory of a political coalition, boosting investor confidence.
  
• February 11, 2000: Surpassed 6,000 points, hitting a high of 6,006 due to the booming IT sector during the tech rally.
  
• 2007: The Sensex surpassed the 20,000-point mark, reflecting robust economic growth and heightened global investor interest.

• 2015 – 30,000 points The Sensex breached 30,000 as the RBI’s rate cuts and policy support boosted investor sentiment and confidence in economic growth.
  
• 2019 – 40,000 points:  Bullish market response to the decisive general election outcome, signaling political stability and continued economic reforms under a strong mandate.
  
• 2021 – 50,000 points:  Post-COVID recovery optimism and liquidity-driven rally propelled Sensex to 50,000, reflecting faith in India’s economic bounce-back.
  
• 2021 – 60,000 points:  Continued economic recovery, global liquidity, and robust corporate earnings lifted investor confidence, pushing Sensex past 60,000 mark.
  
• 2023 – 70,000 points:  Strong domestic demand and resilient macro indicators helped Sensex breach 70,000, a major psychological and historic milestone.
  
• 2024 – 80,000 points:  Sensex touched a record-breaking high driven by strong inflows, policy clarity, and positive economic and earnings outlook.
  
• 2024 – 85,978:  Sensex reached its all-time peak amid surging investor optimism, robust GDP growth, and global interest in Indian equities.
  

BSE’s Role in Supporting Indian Businesses

The large number of companies listed on the BSE demonstrates the importance of the exchange in helping businesses raise capital. BSE has the highest number of listed companies in the world. 

In January 1991, it had 4,510 listed stocks. This number has kept growing, reaching 5,595 in 2025, and 5,647 as of June 27, 2025, according to Wikipedia. 

This steady rise highlights how BSE continues to support a wide range of Indian companies by giving them a platform to access funds and grow.

Sensex Performance Analysis

The Sensex, as the benchmark index, provides a compelling narrative of the Indian market’s long-term growth and its ability to navigate periods of volatility. It has demonstrated remarkable long-term growth, achieving a Compound Annual Growth Rate (CAGR) of 15% over the past 20 years and an impressive 16% since its inception.  

While the Sensex’s journey has been predominantly upward, it has also experienced several significant single-day or short-period drops, reflecting the inherent volatility of financial markets in response to both domestic and global events.

Today, BSE is a strong global player in the financial world. By June 27, 2025, its market value had grown to ₹461 lakh crore (around US$5.5 trillion), making it the 6th largest stock exchange globally. It also leads the world in the number of listed companies, with over 5,500 firms.

Conclusion

The BSE has completed 150 years, marking a journey of resilience, innovation, and growth. From informal cotton trading under a banyan tree in the 1850s to becoming a formal exchange in 1875, BSE has adapted through every major shift in India’s financial history. 

It has seen planned economies, liberal reforms, and global market challenges. Today, BSE is not just a historic platform but a modern, tech-driven exchange that plays a key role in capital formation and economic growth. 

As markets evolve, so should your investment decisions. With over 5,000 listed companies and countless choices, investing without the right guidance can be overwhelming—or worse, risky.

That’s why we believe: If you do invest, do it right. With a SEBI-registered advisor who works for you—not for a brokerage.

Because real wealth isn’t built by following noise, it’s built with research, strategy, and accountability.

Watch out for this space as we’ll take you through what the next 150 years could look like for BSE, in our next post.

Happy Investing.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

If you’re a non-resident Indian (NRI) earning income in both India and your country of residence, you might’ve faced a frustrating situation—getting taxed twice on the same income. 

Sounds unfair, right? 

That’s exactly where DTAA India steps in. The Double Taxation Avoidance Agreement (DTAA) is a treaty that India has signed with many countries to protect you from being taxed twice on the same income.

What is Double Taxation?

Double taxation simply means getting taxed on the same income in two different countries. For instance, if you live in the US and earn rental income from a property in India, both India and the US may tax you on it. That’s double trouble.

Luckily, India DTAA agreements aim to solve this issue.

How DTAA Helps Avoid Double Taxation

DTAA allows you to either:

• Avoid paying tax in one country altogether, or
  
• Get credit for the tax already paid in one country while filing taxes in the other.

Why DTAA is Important for Taxpayers and NRIs

If you’re an NRI, DTAA India isn’t just a tax rule, it’s a smart tool to help you keep more of your hard-earned money. Apart from paying tax twice, DTAA treaties often offer lower withholding tax rates on specific incomes like:

• Interest from bank deposits (as low as 10%)
  
• Dividends from Indian companies
  
• Royalties or fees for technical services

This is a huge plus if you have NRO accounts, investments in Indian companies, or earn consulting income.

How DTAA Works in India

Key Provisions Under India’s DTAA Treaties

India has signed DTAA treaties with over 90 countries, each with its own set of rules. But the core idea remains: helping you avoid double taxation.

Here’s how DTAA India usually works:

• It determines your tax residency.
  
• It defines which country gets the primary right to tax different types of income.
  
• It decides the method of tax relief—either exemption or credit.

Types of Reliefs Provided

1. Exemption Method: One country agrees to exempt certain income from taxation if it is taxed in the other.
   
2. Tax Credit Method: You pay tax in the source country and get a credit for that in your resident country.

For example, if you paid tax in India, your resident country will reduce that much tax from your final bill.

Countries with Which India Has DTAA

India’s DTAA network includes countries where a large number of Indians live, such as:

• USA
• UK
• Canada
• Australia
• Singapore
• UAE
• Germany

Apart from these, India has DTAA with Malaysia, Mauritius, Netherlands, France, Saudi Arabia, and many more. You can check the complete list on the Income Tax Department’s website.

How NRIs Can Claim Benefits Under DTAA

Here’s a simple step-by-step guide to claim DTAA India benefits:

Step-by-Step Process:

1. Get a Tax Residency Certificate (TRC) from the country where you reside.
   
2. Fill Form 10F—available on the income tax e-filing portal.
   
3. Draft a self-declaration confirming your eligibility for DTAA.
   
4. Submit these documents to the Indian entity paying you (bank, employer, etc.).
   
5. Ensure these are filed before the financial year ends.

Essential Documents Required

• Tax Residency Certificate (TRC)
  
• Form 10F
  
• PAN Card
  
• Passport and visa copies
  
• Self-declaration for no Permanent Establishment in India

These documents prove that you’re eligible for tax relief under India DTAA rules.

Types of Income Covered Under DTAA

Different income types are treated differently under DTAA India. Here’s a quick overview:

• Salary: If you’re working abroad but receiving salary from India, DTAA helps decide where the tax applies.
  
• Capital Gains: Say, you sold shares or property in India. The tax treatment depends on the treaty.
  
• Interest Income: If you earn interest on NRE/NRO deposits, DTAA can lower your tax rate to as little as 10%.
  
• Dividends & Royalties: These are also covered under DTAA, often at reduced tax rates.

If you’re into share market advisory, you’ll especially benefit from knowing how DTAA applies to capital gains.

Common Methods of Relief Under DTAA

1. Exemption Method: Income is taxed in only one of the two countries.
   
2. Tax Credit Method: Tax paid in India is credited in your resident country to avoid double taxation.

Example: You paid ₹1 lakh tax in India. While filing abroad, you claim this amount as credit, reducing your tax payable there.

Important Points to Remember While Claiming DTAA Benefits

• Always file Form 10F and TRC before the due date.
  
• Ensure accurate PAN and account details.
  
• Remember, deadlines matter—especially if you’re managing multiple income sources.
  
• Stay updated with income tax calculation on salary to avoid under-reporting.

Also, don’t forget about professional tax compliance if you’re working across countries.

Challenges and Common Mistakes in DTAA Claims

• Submitting incomplete or wrong documentation (especially TRC).
  
• Not knowing whether you’re a tax resident or not.
  
• Not understanding how direct tax applies differently under treaties.

Take expert help if you’re unsure—many share market advisory services now offer tax consultation too.

Recent Developments Related to DTAA in India

India has been renegotiating treaties with countries like Mauritius and Singapore to plug loopholes used for tax evasion.

There’s also been a push for more transparency through Automatic Exchange of Information (AEOI) between countries. Stay tuned to the income tax portal for updates.

Conclusion

Understanding DTAA India is crucial if you’re an NRI juggling income across borders. It saves you from paying more tax than necessary and keeps things legally clean. Whether it’s salary, capital gains, or interest income, knowing how India DTAA works can make a huge difference to your finances.

FAQs

Q. Is DTAA benefit automatic for NRIs?
No, you need to actively claim it by submitting TRC, Form 10F, and other required documents.

Q. What happens if I don’t submit a TRC?
Without a valid TRC, Indian tax authorities won’t allow DTAA benefits. You’ll be taxed as a regular resident.

Q. Can residents of India claim DTAA benefits?
Generally, DTAA benefits are for residents of treaty countries. Indian residents usually don’t qualify unless they have foreign income and face double taxation.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Filing your Income Tax Return (ITR) accurately is crucial to staying compliant with Indian tax laws. 

One of the lesser-known but very important details to enter during ITR filing is the business code. The Income Tax Business Code List is a structured way of identifying and classifying the nature of a taxpayer’s profession or business activity.

Understanding your business type also helps determine tax benefits correctly, especially when evaluating exemptions vs deductions for various eligible expenses and income heads.

In this article, we will explore everything you need to know about selecting the correct business code, its significance, and how to avoid common errors.

What is a Business Code in Income Tax Return?

A business code is a numeric code that corresponds to a specific profession or business activity. This code is selected from a predefined business code list income tax released by the Income Tax Department.

When filing ITR, especially forms like ITR-3 or ITR-4, you are asked to choose a business code that best defines your source of business or professional income.

These codes help in:

• Categorizing your income accurately
  
• Enabling department-specific tax treatment
  
• Aligning your profession with the right exemptions and deductions
  
• Avoiding ambiguity during return processing

Why Selecting the Correct Business Code is Important?

Filing an incorrect business code can result in discrepancies and could even trigger scrutiny. Here’s why selecting the right code is essential:

• Accuracy in Tax Classification: The correct code reflects your real source of income.
  
• Claiming Benefits: Business codes guide what exemptions vs deductions you’re eligible for.
  
• ITR Form Relevance: Helps match your income type with the applicable ITR form.
  
• Reduced Scrutiny Risk: Ensures smoother processing and minimizes the chances of receiving tax notices.
  
• Ease of Audit: In case of audits, a correct business code supports transparent representation.

When is Business Code Required in ITR?

Applicability of Business Codes for Different ITR Forms

The requirement to enter a business code depends on the ITR form you’re filing and the type of income you report. Here’s a brief guide:

• ITR-1 (Sahaj): For salaried individuals and pensioners. Business code not required.
  
• ITR-2: For income from capital gains, foreign assets, or more than one house property. Business code not required.
  
• ITR-3: Mandatory for individuals/HUFs with income from business/profession.
  
• ITR-4 (Sugam): Required for presumptive income under sections 44AD, 44ADA, or 44AE.

Mandatory Disclosure for Business and Professional Income

If your income source falls under:

• Business Income: Trading, shop owners, manufacturing, etc.
  
• Professional Income: Consultants, stock market advisor, legal professionals, medical practitioners.
  
• Freelance or Service Providers: Web developers, content creators, marketers.

Then, disclosing your income with the correct business code is mandatory. Selecting the wrong business code or skipping it may impact your return’s validity.

Categories of Income Tax Business Codes

Refer to the official Income Tax Department website, incometax.gov.in, for the full list, especially if your business type is niche.

Common Mistakes While Selecting Business Codes

Accurate code selection avoids complications. However, many taxpayers unknowingly commit errors that can affect their tax records.

For instance, a freelance graphic designer selecting a general trading code can misclassify their income. This mismatch may result in wrong tax treatment or processing delays.

Skipping Business Code Selection

Some taxpayers intentionally skip entering the business code, assuming it is not essential. But for ITR-3 and ITR-4 filers, it’s mandatory. Omission can cause your return to be marked as defective.

Impact on Return Processing and Scrutiny Risk

Using an incorrect code may result in:

• Your return being flagged for manual verification,
  
• Mismatched income heads leading to demand notices,
  
• Loss of eligibility for benefits like presumptive taxation, tax on mutual funds, and others.
  
• Increased chances of being selected for audit.

Conclusion

Choosing the correct business code from the Income Tax Business Code List is not just a formality; it is a critical element that determines how your income is interpreted and taxed.

Whether you’re a share market advisor, consultant, or small business owner, staying updated on these requirements will ensure you stay compliant and avoid future complications related to TDS in India or other financial areas.

FAQs

What happens if I select the wrong business code?

Selecting an incorrect code may lead to misclassification of income, wrong tax treatment, delayed refunds, and, in some cases, scrutiny notices from the IT Department.

Can I update my business code after ITR submission?

No, you cannot edit a submitted ITR directly. However, you can file a Revised Return within the due date to correct the business code or other errors.

Do salaried individuals need to fill a business code?

No. Business codes are not required for individuals with only salary income filing ITR-1. But if they have side income from freelancing or business, then business code is needed.

Are business codes different for each ITR form?

No, business codes are not different for each ITR form. The same Income Tax Business Code List applies across forms like ITR-3 and ITR-4, where business income is reported.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.