Investing

Intraday trading is a popular way to earn profits by buying and selling stocks on the same day. However, when it comes to taxes, this type of trading has different rules compared to other forms of investment. 

In this guide, we explain Income Tax on Intraday Trading, helping you understand the income tax basics, applicable rules, tax slabs, loss treatment, audit requirements, and more.

Understanding Intraday Trading and Capital Assets

Intraday trading refers to the practice of buying and selling stocks within the same trading day. The goal is to profit from price movements during the day. Since no shares are carried forward to the next day, no delivery is involved. This activity is usually considered speculative in nature because it is based on short-term price fluctuations rather than a long-term investment.

Understanding this form of trading is essential to grasp the broader income tax concepts, as intraday gains are treated differently from capital gains. Traders must be aware that profits are taxed as speculative business income, which requires separate reporting and compliance.

Defining Capital Assets and Trading Assets

In income tax terms, capital assets refer to property held as an investment, like shares or real estate. On the other hand, trading assets are those used to generate business income, such as stocks bought for intraday trading.

Since intraday trading does not involve delivery of shares, it falls under the “speculative business income” category under the Income Tax Act.

Difference between Capital Assets and Trading Assets (Speculative)

Holding Period

• Capital Assets: Held for the long-term or short-term based on investment duration.
• Trading Assets: Held for intraday purposes only (same-day transactions).

Nature

• Capital Assets: Treated as investments.
• Trading Assets: Considered part of business activity.

Tax Head

• Capital Assets: Taxed under “Capital Gains”.
• Trading Assets: Taxed under “Business Income”.

Delivery

• Capital Assets: Delivery of shares is involved.
• Trading Assets: No delivery, as transactions are squared off the same day.

Taxation

• Capital Assets: Subject to Capital Gains Tax.
• Trading Assets: Taxed as per slab rates under Income Tax on Intraday Trading rules.

Tax Implications of Intraday Trading

Income Tax Slabs and Applicable Rates

Intraday trading income is treated as speculative business income. Therefore, it is not taxed under capital gains, but as business income under “Income from Business or Profession”.

The tax on this income is calculated based on your applicable income tax slab under either the old or new regime.

Here’s a basic idea of the income tax for intraday traders under slab rates:

• Old Regime (with deductions): 5%, 20%, or 30% based on total income
  
• New Regime (without major deductions): Lower slab rates but fewer exemptions
  

Tax Calculation for Intraday Profits

To calculate income tax on intraday trading, you need to compute your total speculative profits, add them to your other income (like salary, interest, rental income), and apply the relevant tax slab.

Example Calculation under Old Tax Regime

Let’s assume:

• Salary income: ₹6,00,000
  
• Intraday profit: ₹1,00,000
  
• Total income: ₹7,00,000
  

Under the old regime, after claiming deductions like Section 80C (₹1.5 lakh), the net taxable income becomes ₹5,50,000. You will be taxed as per the old slab rates.

Example Calculation under New Tax Regime

If the same taxpayer opts for the new regime, deductions are not allowed, so total taxable income will be ₹7,00,000. However, the slab rates are lower:

• 5% on ₹3,00,000
  
• 10% on ₹2,00,000
  
• 15% on ₹2,00,000
  

Hence, tax is calculated accordingly.

Tax Treatment of Intraday Losses

Just as profits from intraday trading are taxed, losses must also be accounted for. However, since this is treated as speculative income, the loss treatment is a bit different.

Setting off losses against other income sources

It is important to note that speculative losses can only be set off against speculative gains. So, you cannot use an intraday loss to reduce your tax burden on salary or capital gains.

For example, if you have:

• Intraday loss: ₹50,000
  
• Salary income: ₹6,00,000
  

You cannot deduct the ₹50,000 loss from your salary income for tax purposes.

Carry forward of losses

If you cannot set off the entire speculative loss in the current year, you are allowed to carry forward such losses for 4 years. They can be adjusted only against future speculative profits.

To do this, you must file your ITR before the due date under the correct income head.

Turnover Calculation for Intraday Trading

Calculating turnover is important for determining whether a tax audit is needed. For intraday trading, turnover is calculated differently than regular businesses.

Detailed steps and examples

For speculative transactions (like intraday trades), turnover is the absolute sum of profit and loss.

Example:

• Profit on trade 1: ₹5,000
  
• Loss on trade 2: ₹3,000
  
• Profit on trade 3: ₹2,000
  

Turnover = ₹5,000 + ₹3,000 + ₹2,000 = ₹10,000

Note: Do not consider only net profit. You must add all profits and losses in absolute terms.

This turnover figure will help you decide if you fall under audit rules.

Record Keeping and Documentation

• Essential Documents for Tax Filing

When filing ITR for intraday trading income tax, you must keep proper documentation ready, including:

• Contract notes from the broker
  
• Trade-wise profit/loss statement
  
• Broker ledger
  
• Bank account statement
  
• Income proof like salary slips (if applicable)
  

Maintaining Accurate Trading Records

Maintaining clear and accurate records is essential for reporting Income Tax on Intraday Trading. Many brokers offer tools to download trade summaries. Keep a digital or physical record of every trade, along with notes on the transaction type (intraday/delivery) for clarity during tax filing.

Tax Audit Requirements for Intraday Traders

As per Section 44AB of the Income Tax Act, if your turnover exceeds ₹10 crore (for transactions done digitally) or ₹1 crore (for those involving cash), you need a tax audit.

For speculative income, if the net profit is less than 6% of turnover and total income exceeds the basic exemption limit (₹2.5 lakh), a tax audit is mandatory.

Understanding Presumptive Taxation (Section 44AD)

Section 44AD offers simplified taxation for small businesses. However, speculative businesses are specifically excluded from presumptive taxation under Section 44AD.

So, intraday traders cannot opt for presumptive taxation. Instead, they must maintain proper books of accounts and file ITR-3.

Conclusion

Intraday trading income is classified as speculative and taxed under the head “Business or Profession.” It is subject to income tax based on applicable slab rates under both the old and new tax regimes. 

Losses from intraday trading can only be set off against other speculative gains and may be carried forward for up to four years. 

Turnover for audit purposes is calculated using the absolute sum of profits and losses. 

In conclusion, accurate record keeping and correct ITR filing, typically through ITR-3, are essential for compliance. Engaging professional investment advisor services is advisable to navigate tax complexities, avoid audit issues, and gain a better understanding of what is income tax, enabling traders to make informed financial decisions.

FAQs

How much tax is levied on intraday trading profits in India?

Intraday profits are treated as speculative business income and taxed according to your applicable income tax slab, ranging from 5% to 30% based on total income.

What if I incur losses in intraday trading?

Losses from intraday trading can only be set off against other speculative gains and carried forward for four years, provided the ITR is filed on time.

Is a tax audit mandatory for intraday trading income?

A tax audit becomes mandatory if the turnover from intraday trading exceeds ₹10 crore in the case of digital transactions or ₹1 crore for cash transactions. Additionally, if the declared profit is less than 6% of the turnover and the total income exceeds ₹2.5 lakh, a tax audit is required under the Income Tax Act.

Can I claim intraday losses against other income sources?</h3>

No. As per income tax rules, intraday losses can only be set off against speculative profits, not against salary or capital gains.

How do I file my ITR with intraday trading income?

You must file ITR-3 as this form is applicable to individuals having income from business or profession. Declare intraday income under the speculative business section.

What documents are required for tax filing related to intraday trading?

To file your income tax return for intraday trading, you will need several key documents, including a trade-wise report, contract notes, broker ledger, and bank statements. Additionally, keep your PAN card and salary proofs (if applicable) ready to ensure accurate reporting and smooth verification during the tax filing process.

Can I e-verify my ITR if I have intraday trading income?

Yes. Filing and e-verification of ITR with intraday income is allowed through Aadhaar OTP, bank account verification, or net banking.

Can I do intraday trading while employed?

Yes, salaried individuals can do intraday trading. However, the income from intraday trading must be declared under business income, and proper taxes must be paid.

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.

If you’re a non-resident Indian (NRI), understanding Income Tax for NRIs can be a bit confusing. Whether you live abroad permanently or just for a few years, your income, both in India and outside, can attract taxes under different rules. 

This article provides a detailed guide on NRI taxation, including rules, exemptions, tax-saving strategies, and common mistakes to avoid.

Understanding Your Residential Status

Your residential status plays a vital role in assessing your tax liability under the Non-Resident Indian income tax framework. It determines whether your global income or only income earned or accrued in India will be taxed. Accurately identifying this status is the first step in ensuring proper tax filing and avoiding legal issues. 

Defining a Non-Resident Indian (NRI)

A non-resident Indian (NRI) is a citizen of India who resides outside the country for employment, business, education, or any other purpose for an extended period. An NRI is not taxed in India for income earned outside India, with exceptions based on residential status.

Determining Residency Status: The 182-Day Rule and Other Criteria

According to the Income Tax Act:

• If you spend 182 days or more in India during a financial year, you’re considered a resident.
  
• Alternatively, if you are in India for 60 days or more in a year and have stayed for 365 days or more in the last 4 years, you also qualify as a resident.
  

Anyone who does not meet these conditions is considered a Non-Resident Indian (NRI).

Resident but Not Ordinarily Resident (RNOR) Status

There is also an intermediate status known as RNOR. You are classified as RNOR if:

• You have been an NRI in 9 out of the last 10 years, or
  
• You have spent less than 729 days in India in the last 7 financial years.
  

RNORs enjoy partial tax exemptions similar to NRIs.

Exceptions and Special Cases

• Indian citizens leaving for employment abroad
  For such individuals, the 60-day rule is relaxed to 182 days, ensuring they are not taxed as residents if they leave India for overseas employment purposes.
  
• Indian citizens or Persons of Indian Origin (PIOs) visiting India
  The 60-day threshold extends to 182 days if their total Indian income is below ₹15 lakh. If the income exceeds this amount, the standard 60-day rule may apply.
  

Taxable Income for NRIs

NRIs are only taxed on the income earned or accrued in India. Foreign income is generally not taxable unless you’re a resident.

Income Accrued or Earned in India

Let’s break this down into common income sources:

Salary

If your salary is paid in India or for services rendered in India, it is taxable. If your employer pays you abroad for foreign services, it’s not taxed in India.

House Property

Rental income from property located in India is taxable. You can also claim deductions like municipal taxes and 30% standard deduction on the net annual value.

Capital Gains

• Gains from sale of immovable property, stocks, or mutual funds in India are taxed based on holding period.
  
• Short-term capital gains (STCG) and long-term capital gains (LTCG) rules apply as for residents.
  

Other Sources

• Interest earned from NRO accounts is taxable.
  
• Interest from NRE and FCNR accounts is exempt, as long as you maintain NRI status.
  
• Dividends from Indian companies are taxable in the hands of the recipient.
  

Income from Sources Outside India (Tax Implications)

NRIs are not taxed on income earned or received outside India. However, you must be careful while transferring money to India, as large remittances may be subject to indirect tax monitoring.

Rental Income from Property in India

This is considered taxable income, and you can claim deductions under Section 24 for home loan interest and standard deduction.

Taxation on Gifts, Inheritance, and Remittances

• Gifts from relatives are exempt.
  
• Gifts above ₹50,000 from non-relatives are taxable.
  
• Inheritance is not taxable, but the income generated from inherited assets may be.
  

NRI Income Tax Rates and Slabs (Old vs. New Regime)

• Old Regime
  
  • Allows deductions like 80C, 80D, 80G, etc.
    
  • Basic exemption: ₹2.5 lakh
    
  • Slabs: 5% (₹2.5–5L), 20% (₹5–10L), 30% (above ₹10L)
    
• New Regime
  
  • Lower tax rates but no major deductions
    
  • Basic exemption: ₹3 lakh
    
  • Slabs: 5% (₹3–6L), 10% (₹6–9L), 15% (₹9–12L), 20% (₹12–15L), 30% (above ₹15L)
    
• Key Difference: The Old regime suits those claiming deductions; the new regime benefits those with fewer investments or deductions.
  

Choosing the Best Tax Regime for Your Situation

• If you claim deductions (like 80C, 80D), the old regime may benefit you.
  
• If you don’t invest much, the new vs old tax regime comparison usually favors the new one due to lower rates.
  

Surcharge and Cess Calculations

• Surcharge: Applied on income above ₹50 lakh, ranging from 10% to 37%.
  
• Health and Education Cess: 4% on the total tax and surcharge.
  

Tax Deductions and Exemptions Available to NRIs

Though some deductions are restricted for NRIs, several useful ones still apply.

Deductions Under Section 80C (Investments and Expenses)

Limit: Up to ₹1.5 lakh per year.

• Life Insurance Premiums – Premiums paid for policies in the name of self, spouse, or children qualify. 

• Tuition Fees – Tuition for full-time education of children in Indian institutions is eligible. 

• Home Loan Principal Repayment – The Principal portion of EMIs for a loan taken to buy a house in India qualifies.

• ELSS Mutual Funds – Equity Linked Savings Schemes (ELSS) are tax-saving investments with a 3-year lock-in. 

• ULIPs – Unit-Linked Insurance Plans combine insurance with investment and are eligible for tax benefits under Section 80C. 

Deductions Under Section 80D (Medical Insurance)

You can claim:

• Up to ₹25,000 for health insurance of self and family.
  
• Additional ₹25,000 for parents (₹50,000 if senior citizens).
  

Deductions Under Section 80E (Education Loan Interest)

Interest paid on loans for higher education is fully deductible for up to 8 years.

Deductions Under Section 80G (Donations to Charity)

Donations to registered charitable institutions qualify for 50% or 100% deduction (with or without restriction).

Deductions Not Available to NRIs

NRIs cannot claim:

• Section 80TTB (Interest on savings for senior citizens)
  
• Section 54EC (Capital gain exemption via NHAI/REC bonds in some cases)
  
• Agricultural income exemption, unless from Indian land
  

Tax Planning and Optimization Strategies for NRIs

Minimizing Tax Liability Through Strategic Investments

• Invest in ELSS funds for Section 80C.
  
• Maintain funds in NRE/FCNR accounts for tax-free interest.
  
• Avoid frequent short-term trading; use a share market advisory to guide your investment strategy.
  

Utilizing Double Taxation Avoidance Agreements (DTAA)

Double Taxation Avoidance Agreement (DTAA) is a tax treaty India has signed with over 85 countries to prevent NRIs from being taxed twice on the same income, once in India and again abroad. It offers three methods:

• Exemption Method: Income taxed in one country is completely exempt in the other.
  
• Deduction Method: Taxes paid in the foreign country are deducted from total taxable income in India.
  
• Tax Credit Method: Tax paid abroad is allowed as a credit against Indian tax liability.
  

DTAA ensures fair taxation and helps NRIs minimize their global tax burden legally.

Understanding TDS Implications for NRIs

• TDS is deducted at 30% on income like rent, dividends, and capital gains.
  
• Ensure correct PAN and DTAA documents are submitted to reduce TDS.
  

Filing Your Income Tax Return (ITR) as an NRI

Choosing the Correct ITR Form

• Use ITR-2 if you have income from capital gains or property.
  
• Use ITR-1 (Sahaj) only if you have salary or pension income and no capital gains.
  

Required Documents for ITR Filing

• PAN card
  
• Aadhaar (if applicable)
  
• Bank account details (Indian and foreign)
  
• Form 16, 26AS
  
• Details of foreign income and assets (if resident)
  

Step-by-Step Guide to ITR Filing (Online and Offline)

1. Log in to the Income Tax Portal.
   
2. Select the right form and assessment year.
   
3. Fill in income details from Form 16 and bank statements.
   
4. Claim deductions.
   
5. Verify via Aadhaar OTP, Netbanking, or DSC.
   

Deadlines for ITR Filing

• 31st July for most NRIs.
  
• If audited, the due date is 31st October.
  

Advance Tax Payments for NRIs

If your total tax liability exceeds ₹10,000, you must pay advance tax in four installments to avoid interest under Section 234B and 234C.

Conclusion

Understanding Income Tax for NRI is essential for managing global income efficiently. With changing rules, choosing between the new vs old tax regime, and staying aware of concepts like DTAA and windfall tax can significantly impact your liabilities. 

FAQs 

I live abroad but visit India frequently. Am I an NRI?

You are an NRI if your stay in India is less than 182 days in a financial year.

Is my foreign salary taxable in India?

No, unless you are a resident or the salary is received in India.

Can I claim Section 80C benefits?

Yes, but only for certain investments, such as ELSS, LIC, NRE FD, etc.

Do NRIs need to file returns?

Yes, if your Indian income exceeds ₹2.5 lakh.

I already pay tax abroad. Will I be taxed again in India?

If your country has a Double Taxation Agreement (DTAA) with India, you can avoid double taxation.

Is Aadhaar mandatory for NRI?

No, unless you’ve lived in India for 182 days or more in the last 12 months.

Paying taxes has become more streamlined and digitized over the years, thanks to the introduction of structured systems and identifiers, such as the CRN number in income tax. 

Whether you’re an individual taxpayer, or a stock market investor seeking guidance from a stock market advisory, understanding the CRN is essential for smooth tax payments.

This article offers a detailed breakdown of what a CRN is, why it’s important, and how to generate and use it efficiently when filing your taxes, including tax on mutual funds, TDS in India, or self-assessment tax.

What is a CRN (Challan Reference Number)?

CRN stands for Challan Reference Number. It is a unique 18-digit identification number generated during the process of creating a tax challan. The CRN full form in income tax signifies its primary role to serve as a reference point for tracking and managing tax payments across various platforms, including the Income Tax e-filing portal, Net Banking, and other digital methods.

Understanding the Purpose of CRN in Tax Payments

The CRN number in income tax plays a pivotal role in linking your payment to your PAN (Permanent Account Number) and the appropriate tax head (like self-assessment tax, advance tax, or regular assessment tax). Without the CRN, tax payments may not be recognized or properly recorded in your Form 26AS, which can affect ITR processing.

CRN vs. Other Transaction Identifiers

A common confusion exists between CRN and other IDs like UTR (Unique Transaction Reference) or CIN (Challan Identification Number). Unlike UTR, which is generated by the bank post-payment, and CIN, which is created after the payment is successfully processed, CRN is generated before the tax payment is made. It is needed to initiate the payment process.

Types of Challans and Their Applications

The Income Tax Department uses different types of challans for various kinds of tax payments. Knowing which challan to use helps ensure accurate tax compliance.

Tax Payment Challans

Some of the commonly used tax challans include:

• Challan 280 – Used for Income Tax payments like Advance Tax, Self-assessment Tax
  Challan 280 is used by individuals and businesses to pay Income Tax, including Advance Tax, Self-Assessment Tax, and Regular Assessment Tax directly to the government.
• Challan 281 – For TDS/TCS payments
  Challan 281 is primarily used by deductors to deposit Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) for payments made to recipients.
• Challan 282 – For payment of Estate Duty, Wealth Tax, Gift Tax
  Challan 282 is used for making payments related to non-income taxes like Estate Duty, Wealth Tax, and Gift Tax, applicable under specific legal conditions.

Each of these challans, once created, will have an associated CRN number in income tax to identify and track the payment.

Other Challan Types

Non-tax payments such as penalties, fines, or fees related to income tax filings may also require a challan. Although the tax structure may differ, the system still generates a CRN for these payments for record-keeping purposes.

Significance of CRN in Income Tax

For taxpayers, the CRN ensures:

• Accurate tax head categorization
  CRN helps ensure that the tax amount paid is properly linked to the correct tax head, such as advance tax or self-assessment, minimizing confusion.
• Faster reconciliation of payments with the I-T Department
  The CRN allows seamless matching of tax payments with income tax records, enabling quicker verification and reconciliation by the department for efficient processing and clearance.
• Reduced chances of errors in ITR filing
  Using CRN minimizes human errors during income tax return filing, ensuring that the correct payment details are prefilled and accurately reflected in the ITR form.
• Tracking tax on sources like mutual funds, salary, or stock investments
  CRN enables easy tracking of taxes paid on various income sources like mutual funds, salary, and equity investments, supporting better tax planning and documentation.

Importance for Tax Authority

For the Income Tax Department, CRN helps:

• Authenticate tax receipts
  
• Maintain an accurate audit trail
  
• Improve transparency and digital verification
  

Generating a CRN

The CRN can be generated in two main ways: through the income tax portal (after logging in) or directly via the e-pay tax option without logging in.

Generating CRN via the E-filing Portal

1. Go to https://www.incometax.gov.in
   
2. Log in using your PAN/Aadhaar and password
   
3. Navigate to e-File > e-Pay Tax
   
4. Choose the relevant tax head (e.g., Self-Assessment Tax)
   
5. Enter payment details, and submit
   
6. A unique CRN number in ITR is generated for your selected payment
   

Generating CRN without Logging into the E-filing Portal

If you prefer not to log in, follow the instructions below.

1. Visit: https://eportal.incometax.gov.in/
   
2. Click on e-Pay Tax under Quick Links
   
3. Enter your PAN and mobile number
   
4. Verify OTP sent to your mobile
   
5. Select ‘New Payment’
   
6. Choose the correct tax head (e.g., Advance Tax)
   
7. Fill in payment details
   
8. Click on Proceed
   
9. CRN will be auto-generated before directing you to the payment gateway
   

Making Tax Payments After CRN Generation

Once the CRN is generated, you can proceed to complete the payment using various methods.

Available Payment Methods

Net Banking

Most major banks offer direct Net Banking options. Simply log in to your bank, go to tax payment, and use the CRN for payment.

Debit/Credit Cards

For quick payments, many portals allow Debit/Credit Card transactions. The gateway will request the CRN before processing.

Other Payment Options

Other payment methods include NEFT/RTGS through authorized banks and UPI (in select cases). The CRN is required regardless of the payment mode.

Key Benefits of Using CRN

Tracking Payments

The CRN allows you to track the exact status of your payment. You can also verify whether the payment has been successfully acknowledged and reflected in Form 26AS.

Ensuring Accurate Record Keeping

CRNs enable consistent record maintenance. This is especially useful when differentiating between multiple payments, such as advance tax, self-assessment tax, and TDS, all within a single financial year in India.

Troubleshooting Common Issues

Lost or Misplaced CRN

If you lose your CRN:

• Log in to the e-filing portal
  
• Go to e-Pay Tax > Payment History
  
• You will find all your CRNs listed
  
• You can also email yourself the challan receipt
  

Discrepancies in Payment Records

If your CRN payment is not reflected:

• Check the status with your bank
  
• Wait for up to 24-48 hours
  
• Raise a grievance on the e-filing portal with CRN and payment proof
  

Payment Failure

In case the transaction fails:

• Use the same CRN to retry payment within the validity
  
• If it expires, generate a new CRN
  

Conclusion

The CRN number in income tax has significantly simplified the digital payment and tracking of taxes in India. Whether you’re paying advance tax, responding to a demand notice, or calculating tax on mutual funds, having a CRN ensures accuracy, transparency, and ease. By understanding how to generate and manage this number, both taxpayers and authorities benefit from better record-keeping and efficient processes.

Be sure to consult professionals or stock market advisory firms for accurate financial planning that also considers aspects like exemptions vs deductions.

FAQ

Can I use the same CRN to make multiple tax payments?

No, a CRN is valid for only a single transaction. Each new payment requires a fresh CRN. 

Can taxpayers make modifications to the already generated Challan (CRN)?

No, once a CRN is generated, you cannot modify its details. A new CRN must be created with corrected inputs.

Can I create a CRN for tax payments that are linked to the past assessment years?

Yes, the system allows CRNs for payments related to earlier assessment years. You need to specify the correct year while generating the challan. 

Is it necessary to create a Challan (CRN) for tax payments?

Yes, for any online tax payment via the e-filing portal or Net Banking, generating a CRN is mandatory.

For how many days is a CRN valid?

A CRN is typically valid for 15 days from the date it is generated. If not used within this time, a new CRN must be generated. 

What if I lose my CRN?

You can recover it by logging into the income tax portal and checking under “Payment History.” 

Can I reuse a CRN for multiple payments?

No. A CRN is a single-use reference number. It gets invalidated once used. 

How long does it take for a payment to reflect in Form 26AS?

Usually within 3-4 working days. However, during high-traffic seasons, such as return filing deadlines, it may take slightly longer. 

What are the steps to retrieve a lost CRN?

Log in to your account > Navigate to e-Pay Tax > Payment History > Download or view the challan receipt with the CRN. 

Is CRN mandatory for advance tax and self-assessment tax?

Yes, it is mandatory. Without a valid CRN, you cannot proceed with these types of tax payments.

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.

In the past few trading sessions, Zee Entertainment Enterprises (ZEEL) share price has moved up following a big development.

The company’s board recently approved the issuance of convertible warrants to its promoter group entities on a preferential basis, thereby raising close to Rs 2,200 crore. 

This move is aimed at strengthening the media company’s financial base and accelerating its strategic ambitions in the content and technology sectors.

In a month, the stock price has smartly climbed from Rs 120 odd levels to Rs 140.

ZEEL Share Price in 2025 so far

Source: Google

Let’s understand whether the stock has enough steam left or will the momentum die down.

Promoter Infusion

Earlier this week, the board of directors of Zee Entertainment Enterprises approved the issuance of up to 16.95 crore fully convertible warrants to promoter group entities on a preferential basis at Rs 132 per warrant.

With this, the company raised a total of Rs 2,237.4 crore. 

Following this preferential allotment, which is subject to shareholder approval, the promoter group’s stake will rise to 18.39%. As of March 2025, promoter holding in ZEEL stands at 3.99%.

After conversion of the warrants, the stake of mutual funds, which is 9.49% at the end of the March 2025 quarter, will reduce to 8.1%; insurance companies will decline to 5.2% and foreign portfolio investors’ stake will come down to 19.4% from 22.8%. 

Retail investors will see their stake fall to 28.6% from 33.6%, according to data from the BSE.

Commenting on this stake hike, ZEEL’s chairman R Gopalan said the promoter stake enhancement is part of its broader strategy with regard to the firm’s future growth plans. Last month, Zee announced that it was transforming to a content and technology company as it sought to get future-ready.

A Close Look at ZEEL’s Financials

For the financial year ended March 2025 (FY25), ZEEL clocked a revenue of Rs 8,294 crore and net profit of nearly Rs 680 crore. 

While its revenue was down 4% for the year amid tightening of ad budgets by advertisers, net profit rose four-fold as the company pruned costs and workforce in a bid to improve earnings.

In FY24, ZEEL had clocked a profit of Rs 140 crore and Rs 48 crore a year before that.

In the past few quarters, ZEEL has increased its focus on improving margins and giving a push to content and technology initiatives after it failed to merge with Sony amid consolidation in the domestic media market.

At the end of March 2025, ZEEL had a cash & cash equivalent balance of Rs 2,406 crores.

Source: Investor Presentation

What Next for ZEEL?

For FY26, Zee Entertainment has ambitious plans to boost its revenue and improve margins to 18% from the current 15%.

In FY25, ad revenues had declined by 11% YoY due to a weak ad environment, a busy sports calendar, and a high base in the previous year.

However, ZEEL is targeting double digit growth in revenue for the advertisement segment in FY26. The company also plans to ramp up efforts and unlock value via music and syndication segments.

It is set to channel 40% of its free cash flow into building up its regional content, music business, digital platforms, and international presence.

The company is also widening its content reach through Free-to-Air TV, connected TV, and FAST channels. To boost the reach and monetisation of ZEE5, Zee has tied up with telecom players.

By FY28, the goal is to double advertising contributions and share the gains with investors, setting aside 25-30% of net profits as dividends.

Conclusion

Going by the recent developments, ZEEL is poised for major growth if all goes according to the plan. Nevertheless, the media sector is highly regulated and any changes could materially impact the company’s performance.

Investors should also remember that the sector is highly sensitive to shifts in consumer preferences and advertising cycles – both of which can impact growth and profitability.

For more details, check out ZEEL’s complete share price analysis on our website.

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 & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

India’s capital market regulator Securities and Exchange Board of India (SEBI) recently concluded its board meeting. 

This was the 210th Sebi board meeting. It wasn’t just routine—it packed a punch with key decisions that could reshape India’s financial markets.

Capital market observers look forward to this event as this is where the Indian market regulator lays down the rules and informs about the big changes they make.

These changes usually tend to send ripple effects across the market, affecting investors like you and me.

While the entire presentation and changes can be viewed on SEBI’s official website, we wanted to share our top 5 takeaways from the meeting.

#1 Delisting of PSUs with >90% Government Holding

In a big move aimed at streamlining the exit process for certain government owned companies or PSUs, the market regulator on 18 June 2025 introduced special measures to facilitate their voluntary delisting.

This rule applies to companies with government holding of 90% or more (excluding banks, NBFCs, and insurance firms).

Under the new rules, the delisting price must be at least 15% above the floor price. The floor price, in turn, must be the highest among the volume-weighted average price over the past 52 weeks, the highest acquisition price in the past 26 weeks, or a valuation determined by two independent registered valuers.

At present, there are only 10 listed companies that have a government holding of 90% or above.

Some popular names include KIOCL, IDBI Bank, Indian Overseas Bank, HMT, Punjab & Sind Bank, State Trading Corporation, UCO Bank, ITI and Fertilisers & Chemicals Travancore.

#2 ESOP Changes

Under current rules, startup founders must be classified as promoters at the time of filing IPO documents. Once labeled promoters, they are no longer eligible to receive Employee Stock Options (ESOPs).

However, the Indian market regulator believes the existing rules do not clearly specify whether founders who received ESOPs before being classified as promoters can exercise their vested and unvested options after the IPO.

Founders of many new-age tech startups often receive ESOPs instead of salaries in the early stages to align their interests with shareholders. But as these companies raise capital from external investors, founders’ stakes tend to get diluted.

Which is why under the new rules, the market regulator permitted startup founders to retain ESOPs post-IPO, addressing their role in accepting equity over salaries. 

A one-year cooling-off period between ESOP grants and IPO filing was introduced to prevent misuse, ensuring alignment with shareholder interests.

#3 Regulations Relaxed for FPIs Investing Only in Govt. Bonds

To attract big money from global markets, the market regulator simplified registration and compliance norms for foreign portfolio investors (FPIs) investing exclusively in Indian Government Bonds via the Voluntary Retention Route (VRR) and Fully Accessible Route (FAR).

This move comes in light of India’s entry into global bond indices and is aimed at easing operational compliance and boosting foreign investment into Indian sovereign debt.

#4 QIP Documentation

To streamline Qualified Institutional Placement (QIP) documentation, reducing duplication and focusing on relevant disclosures to make capital-raising more efficient, SEBI announced a slew of measures.

As per the existing norms, companies raising funds via QIP have to file lengthy documents, which is a time-consuming process and also leads to bulky documents.

But now, the market regulator has changed this after hearing opinions from industry experts.

#5 Co-Investment Allowed in AIFs

In another development, the market regulator also approved co-investment opportunities within Alternative Investment Funds (AIFs) through a Co-Investment Vehicle (CIV) as a separate scheme.

This enhances flexibility for investors while it also ensures uniform exits to protect main scheme investors.

Other Big Updates

Apart from these headline reforms, SEBI also relaxed investment limits for mutual funds in REITs and InvITs, raising the cap under equity schemes from 10% to 20% of NAV, and allowed their classification as equity instruments for index eligibility. 

It clarified disclosure norms, public unitholding thresholds, and cash flow treatment for REITs and InvITs to enhance transparency.

The board also approved changes to the Social Stock Exchange framework to allow greater flexibility in fundraising and disclosures by social enterprises, and enabled ESG rating providers to access non-public ESG data from listed companies through a regulated mechanism.

Final Words

Market participants have welcomed these changes with open arms. The impact of the recent changes by SEBI will be seen in the Indian markets as and when some developments happen around QIPs, delisting, or ESOPs.

In conclusion, amid the latest tensions around the Israel-Iran war and rising crude oil prices, being patient with your investments is key as the coming few days could be extremely volatile.

With Equentis’ powerful financial calculators, specific investing tools, and stock screener, you have much faster access to information, along with less spin coming from the mainstream media. This access to unfiltered content should allow you to make higher quality decisions as long as you keep your emotions in check.

This is what makes investing so interesting. 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 & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

In a much-anticipated move, Siemens Energy made its stock market debut on 19 June 2025 following its demerger from Siemens Ltd. 

The shares were listed at Rs 2,840 on the NSE, reflecting a 14% premium over the discovery price of Rs 2,478.20. Investor interest remained strong post-listing, with the stock hitting the 5% upper circuit at Rs 2,982, marking a rally of nearly 20% from the base price on its very first trading session. 

On the BSE, the shares opened slightly higher at Rs 2,850 and similarly touched the upper circuit at Rs 2,992.45.

Source: Live Mint

This listing follows the recent demerger of Siemens Ltd’s power transmission and distribution (T&D) business, which officially took effect on 7 April 2025.

What this Blockbuster Listing Means

The listing of Siemens Energy follows a strategic demerger from its parent company, Siemens Ltd. The objective? To give investors direct exposure to the energy-focused business and allow both entities to grow independently.

With this listing, Siemens Energy India officially begins its journey as a standalone entity on the bourses, specializing in transmission, generation, and other energy-related services. Siemens will now continue as a separate company, focused more on industrial automation, mobility, smart infrastructure, and digital industries.

How the Listing Was Priced

The discovered price for Siemens Energy shares was ₹2,536.80 per share. This price was arrived at after the demerger ratio was applied, and it provided a fair reference point for the market.

But investor enthusiasm meant the listing didn’t just meet expectations—it exceeded them. The stock opened at Rs 2,840, about 12% higher than the discovered price, and closed 20% higher by the end of the day. 

Source: CNBC TV18

Source: NSE India

Demerger Structure at a Glance

Under the terms of the demerger, Siemens shareholders received 1 share of Siemens Energy India for every 1 share held in Siemens as of the record date. 

This corporate action also aligns Siemens India’s structure more closely with its global parent, Siemens AG, which separated its energy business globally back in 2020.

Source: Business Standard

Why Investors Are Watching Siemens Energy India Share Closely

There are a few reasons why investors are bullish on Siemens Energy:

• Strong Order Book: Siemens Energy India has a healthy order backlog, especially in power transmission and grid technologies. By the end of March 2025, Siemens Energy India had secured Rs 15,100 crore worth of orders—2.4x its FY24 revenue. It added Rs 5,100 crore in new orders between April and August FY25.

Source: Economic Times

• Favorable Sector Outlook: India’s energy sector is undergoing rapid transformation, with increasing government focus on renewables and modernised grid infrastructure. The government has unveiled a Rs 1.5 trillion T&D project pipeline in FY25 alone—a fourfold increase from previous years—as part of its energy infrastructure push.

Source: Economic Times

• Independent Strategy: With a separate listing, Siemens Energy can now pursue independent strategic goals, partner selectively, and respond more quickly to sector-specific opportunities.

These factors make the stock attractive, especially at a time when infrastructure and energy investments are expected to rise.

Siemens Energy India Market Valuation

Several brokerage firms have issued early commentaries. Jefferies India noted that Siemens Energy may see strong earnings growth, especially with margin expansion in transmission and digital services. Some analysts estimate that the fair value could touch Rs 3,200–Rs 3,300 per share if the company delivers steady revenue growth and expands its market share.

Source: Outlook Business

In addition to this, analysts believe that Siemens Energy’s exclusive access to technologies through its global parent, Siemens AG, gives it an advantage over other players in the Indian power equipment sector. The company’s local manufacturing and service capabilities are expected to complement India’s growing demand for reliable and efficient energy systems.

Parent Company Performance

It’s also worth noting that Siemens shares fell 4% today, which many market watchers attribute to the value being unlocked and transferred to Siemens Energy post-demerger. Such initial corrections are common in demerger situations, especially when a high-potential spin-off entity begins trading.

Still, Siemens remains a strong industrial player in its own right, and analysts believe the combined value of both companies will be greater in the long run than under a single umbrella.

What’s Next?

For Siemens Energy India, the road ahead involves building investor confidence through performance. The company is expected to announce its first post-listing quarterly results in the coming months, which will be a key indicator of how well it is positioned.

The management’s ability to drive growth, maintain margins, and capitalise on India’s push for power reforms will be closely tracked.

Over the next few quarters, investors will be watching project execution timelines, margin stability, and new order wins. The company’s expansion plans for transformer manufacturing and digital grid services will also come into focus as India ramps up spending on infrastructure and clean energy.

A Play on India’s Energy Transition

This listing comes at a time when India is investing heavily in the energy sector. Government initiatives such as the Revamped Distribution Sector Scheme (RDSS), the Green Energy Corridor, and the National Green Hydrogen Mission point to sustained demand for advanced grid and transmission systems.

For a company like Siemens Energy, this opens up opportunities in areas like high-voltage substations, flexible AC transmission systems (FACTS), HVDC systems, and digital automation in transmission.

Unlike diversified industrial conglomerates, Siemens Energy is now positioned as a pure-play transmission and power systems company. This makes it a more focused bet for investors looking to ride the energy transformation trend in India.

Conclusion

Today’s listing of Siemens Energy is more than just another trading event. It’s a structural change that gives Indian investors direct access to a critical part of the country’s energy infrastructure growth story. 

With a sharp 20% jump on debut, Siemens Energy has clearly made a strong first impression. Whether it can sustain this momentum will depend on sector tailwinds, execution, and market sentiment over the coming quarters. 

As the company settles into its independent operations, its ability to grow profitably and deliver value will determine how the market continues to reward it. For now, the signs are promising—and the interest, well deserved.

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 performance of the intermediary or provide any assurance of returns to investors.

A mid-cap company that previously gained attention through a viral job advertisement is once again in the spotlight, this time in the stock market.

Vishal Mega Mart share price declined by nearly 7.5% in early trading on 17th June 2025, reaching an intraday low of ₹113.5. 

The movement followed the announcement of a massive block deal involving the sale of approximately 20% of the company’s stake by promoter entity Samayat Services LLP. 

So, what exactly is the aim behind the sale, and how does it affect shareholders? Let’s decode… 

About Vishal Mega Mart

Incorporated in 2001, Vishal Mega Mart is one of India’s largest hypermarket chains, offering a wide range of products including apparel, groceries, electronics, and home essentials. The company serves India’s middle- and lower-middle-income consumers through a network of 645 stores across 414 cities, supported by its e-commerce platform. 

Vishal Mega Mart operates across three major categories:

• Apparel: Exclusive in-house brands catering to men, women, children, and infants across categories.
• General Merchandise: A mix of own-brand and third-party products in home appliances, furnishings, toys, travel accessories, and footwear.
• FMCG: Packaged foods, staples, and personal care products.

(Source: Q4 Report)

The company has developed 26 in-house brands, which contributed 73% of FY24 revenue. Notably, 19 of its brands have surpassed ₹100 crore in sales, with six exceeding ₹500 crore. Ranked among India’s top three offline-first diversified retailers by retail space, Vishal Mega Mart leverages a hub-and-spoke distribution model to drive operational efficiency.

(Source: Company DRHP)

In December 2024, Vishal Mega Mart launched its ₹8,000 crore IPO as a book-built offer for sale (OFS), and it was subscribed 27.28 times by the closing day of bidding. 

Now, as the lock-in period for a portion of Vishal Mega Mart’s shares (254.2 crore) held by pre-IPO shareholders and anchor investors ended on 17th June 2025, a promoter of the company, Samayat Services LLP, announced the sale of 20% of its stake.

Details Of The Block Deal

As of 31st March 2025, Samayat Services held a significant 74.55% stake in the company. The promoter announced the sale of 20% of its stake in the company on 17th June 2025, with the deal involving 91 crore shares valued at approximately ₹10,488 crore. The transaction was executed in the early hours of the trading session at an average share price of around ₹115.

Source: ET

The possible reasons for the deal can be:

1. Profit Booking

The block deal allowed the private equity investors, Partners Group and Kedaara Capital, to monetise part of their holdings. Vishal Mega Mart shares had risen 18% in 2025 and 12% since listing, providing an opportunity to realise returns. 

Source: India Today

2. Increasing Liquidity

A secondary objective was to improve stock liquidity. Increasing the public float makes the stock more attractive to institutional investors and facilitates possible inclusion in key indices. Higher float and liquidity help sustain long-term demand and price stability.

3. Planned Partial Exit

This was not a complete exit; Samayat Services, the promoter entity, continues to hold a significant majority stake. The deal represents a calibrated strategy to monetise part of the investment while maintaining long-term alignment with the company’s growth prospects.

Market Impact Of Block Deal

As a result of the block deal, the share price of Vishal Mega Mart opened with a steep cut of nearly 7.49% from the previous day’s close of ₹124.85. As the trading session continued, the share price recovered from its intraday low of ₹113.50 to trade at Rs ₹119.85 as of 12:30 p.m. on 17th June 2025.

Source: Money Control

The transaction marks a partial stake sale by the promoter group, coinciding with the end of the post-IPO lock-in period for certain shareholders. Following the block deal, attention has also shifted to the company’s financial position.

Financial Snapshot of Vishal Mega Mart

For the fourth quarter of FY25, Vishal Mega Mart reported consolidated revenue from operations of ₹2,547.9 crore, reflecting a year-on-year growth of 23.2%. Its EBITDA stood at ₹208.1 crore with a margin of 8.2%, representing a 73.6% year-on-year increase, and the profit after tax (PAT) was ₹128.1 crore, up 109.9% year-on-year. Plus, the company recorded a same-store sales growth (SSSG) of 13.4%. 

Source: Financial Statements Of The Company

Additionally, other key profitability indicators also showed continued improvement.

The company’s return on equity (ROE) was reported at 9.9% for FY25, up from 8.2% in FY24, and the average ROE over three and five years stood at 8.5% and 7%, respectively. Plus, the return on capital employed (ROCE) for FY25 was 13.1%, compared to 14.2% in FY24. 

Lastly, the operational metrics also reflected a strong customer base, with approximately 95% of revenue generated from loyalty customers. 

Bottomline

The recent block deal involving an approximate ₹10,500 crore partial stake sale by the promoter entity, Samayat Services LLP, comes shortly after the expiry of the post-IPO lock-in period. While the transaction led to a temporary dip in Vishal Mega Mart’s share price, the recovery seen during intraday trade suggests active investor interest.

From a fundamental standpoint, Vishal Mega Mart continues to show consistent revenue growth, expanding profitability margins, and operational efficiency, supported by a strong, loyalty-driven customer base. The company remains debt-free and maintains a sizable presence across Tier 1 and Tier 2+ markets with a growing store network.

However, with changes in promoter shareholding and evolving market dynamics, it becomes important for investors to closely monitor future disclosures, institutional interest, and stock liquidity trends. Thus, as a potential or existing investor, it is suggested that you conduct thorough due diligence and assess both market movements and company fundamentals before making any investment decisions.

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 & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Understanding the Direct Tax Code (DTC)

What is the Direct Tax Code?

The Direct Tax Code (DTC) is a proposed legislation designed to replace the current Income Tax Act (ITA) of 1961. It was introduced to simplify direct tax laws in India and bring them in line with evolving economic practices.

But does it impact the income tax basics? And how exactly does it differ from the current framework? 

This comparison of the Direct Tax Code vs Income Tax Act will help you understand the changes and how they affect the fundamentals of income tax basics. 

Objectives and Goals of the DTC

The DTC aims to simplify a tax system that has become complex due to overlapping exemptions and inconsistent interpretations under the Income Tax Act. It focuses on easier compliance, broader taxpayer participation, fewer disputes, and greater transparency. With simplified rules and fewer exemptions, it also aims to improve voluntary compliance, reduce the tax burden through wider tax bases, and increase consistency across tax provisions.

Key Features of the DTC

1. Simplification of Tax Laws

The DTC simplifies tax language and reduces the need for cross-referencing between sections. This is helpful for both individuals and businesses to understand what is income tax and how it applies to them.

2. Reduction in Litigation

Many tax disputes today arise due to unclear language or conflicting interpretations. The DTC aims to cut down these legal challenges by making tax rules easier to interpret. Clear guidelines are especially helpful for professionals such as a stock investment advisor, who often work with clients to align financial planning with changing tax rules.

3. Enhanced Transparency

With clearer definitions and simplified rules, the DTC improves transparency and reduces confusion. It makes it easier for individuals and businesses to understand and follow tax laws, encouraging voluntary compliance over the older, more complex Income Tax Act.

4. Provisions for Digital Economy Taxation

The DTC includes proposals that account for the fast-growing digital economy. With more businesses and individuals earning through online platforms, the code adds clarity on how digital income should be taxed, making it more relevant in today’s tech-driven world.

Understanding the Income Tax Act (ITA) of 1961

Overview of the ITA 1961

If you’re starting with income tax concepts, the ITA is the current go-to structure. Introduced in the twelfth year of India’s Republic, the Income Tax Act, 1961, governs the taxation of income for individuals and businesses. It outlines rules for exemptions, deductions, compliance, and penalties. 

The Act applies to income earned in the previous year and is administered by the Central Government. Over time, the Act has grown to 23 chapters, 298 sections, and over 1,000 sub-sections, reflecting its complex evolution in response to India’s changing economic landscape.

Major Provisions and Sections of the ITA

The ITA (both old and new regimes) contains detailed provisions to ensure fair, transparent, and efficient taxation. Some of the significant provisions include:

1. Right to Appeal:

• Section 260A: Appeal to the High Court
• Section 261: Appeal to the Supreme Court

2. Assessment and Taxation Process:

• Self-assessment, summary, and scrutiny assessments
• Power and responsibility of assessing officers
• TDS mandates for timely tax collection

3. Allowable Deductions & Slabs:

• Sections 80C, 80D, and 80G for deductions
• Tax calculation based on income slabs

4. Compliance and Enforcement:

• Penalties for non-compliance or evasion
• Prosecution in extreme cases
• Defined process for financial transaction statements

5. Administration and Transparency:

• Clear guidelines for transaction reporting
• Representation through authorised personnel
• Instructions to subordinate tax authorities

Shortcomings and Challenges of the ITA

Despite its depth, the ITA faces several challenges in the modern context:

1. Complex Structure: The Act has grown to a vast and intricate legal framework, with multiple sections and sub-clauses, making compliance and interpretation difficult for taxpayers.
2. Personal Tax Slabs: The current slab system is seen as cluttered, and multiple tax brackets create confusion.
3. Savings Taxation: Debate continues between EET (Exempt-Exempt-Taxed) and EEE (Exempt-Exempt-Exempt) systems, as they lack consistency
4. Corporate Tax Gaps: Though the 2024 budget addressed capital gains and reduced corporate tax rates, areas like group tax consolidation still need reform for a more unified tax experience across corporate entities.

Key Differences Between DTC and ITA

Parameter	Income Tax Act (ITA), 1961	Direct Taxes Code (DTC)
Tax Slabs and Rates	Multiple slabs with frequent revisions; complex exemptions and deductions	Proposes fewer, broader slabs; simplified rate structure with higher exemption thresholds
Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)	Detailed TDS/TCS provisions across sections and income types	Aims to consolidate and simplify TDS/TCS mechanisms for easier compliance
Dispute Resolution Mechanisms	Traditional appellate structure involving ITAT, HC, SC	Proposes faster resolution with alternative mechanisms like Dispute Resolution Panels (DRPs)
Applicability to the Digital Economy	Limited coverage; relies on newer amendments like Equalisation Levy	Intends to address digital transactions more holistically with updated definitions and rules
Compliance and Reporting Requirements	Complex filing norms; several forms, statements, and assessments	Targets simplified reporting, fewer forms, and reduced compliance burden

The Proposed Transition from ITA to DTC

Timeline for Implementation

There is no official implementation date for the DTC yet. It remains under review and discussion by policymakers.

Expected Impact on Taxpayers

For individual taxpayers and businesses, the DTC promises less paperwork, more predictability, and improved clarity on tax obligations. The possible changes for this are expected to include the following:

• Residential status will be simplified to just “Resident” and “Non-Resident.”
• Tax filing will align with the “Financial Year,” removing older year-based terms.
• Revised slabs and reduced exemptions aim to simplify calculations and reduce misuse.
• Capital gains (except listed securities) will be taxed like regular income.
• Uniform corporate tax rates and expanded audit eligibility (CS, CMA) will ease compliance.
• Wider TDS/TCS coverage will ensure steadier, source-based tax collection.

Challenges in the Transition Process

While the intent behind DTC is progressive, its transition presents several hurdles:

• Structural Overhaul: Transitioning from a 298-section Act to a simplified code will require massive updates to tax systems, software, and processes.
• Training and Awareness: Tax officials, professionals, and taxpayers will need retraining to understand the new provisions, definitions, and compliance timelines.
• Resistance to Change: Businesses and political stakeholders have raised concerns about the removal of exemptions and changes to capital gains, which could impact investor sentiment and business profitability.
• Technology and Infrastructure Gaps: Upgrading digital tax filing infrastructure and linking financial systems to comply with the new rules may be a major logistical challenge.
• Impact on Investments: Changes in capital gains treatment and mutual fund taxation could alter investment decisions and potentially affect foreign direct investment (FDI).

.

Conclusion

Summary of Key Differences and Implications

While the ITA is detailed and well-established, it often feels complicated. The DTC, with its emphasis on simplification and transparency, aims to make taxation more manageable. Understanding the Direct Tax Code vs Income Tax Act will thus help you prepare for possible changes in tax filing and compliance.

Frequently Asked Questions (FAQs)

1. When will the DTC be implemented?

There is no fixed timeline yet. The proposal is still under government review.

2. How will the DTC affect different taxpayer categories (Individuals, Businesses, etc.)?

The DTC plans to make tax rules more consistent across taxpayer categories, which can help both salaried individuals and businesses manage taxes better.

3. What are the benefits of the DTC?

Simpler compliance, better clarity, and updated rules for digital income sources.

4. What are the potential drawbacks of the DTC?

Transitioning could take time and may need significant adjustments for businesses and tax advisors.

5. What support will be provided to taxpayers during the transition?

Government-led guidance, digital tools, and support from investment and tax advisors are expected during the rollout.

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.

Section 45 of the Income Tax Act, 1961, is a cornerstone in India’s taxation framework, governing the taxation of capital gains. 

This guide aims to simplify the complexities of Section 45, providing clarity on its various subsections, implications, and recent updates.

For anyone trying to grasp what is income tax, especially in relation to capital assets, Section 45 serves as a key reference point. It also forms a vital part of core income tax concepts that every taxpayer should be familiar with.

Overview of Section 45 of the Income Tax Act

When it comes to income tax basics, capital gains is a topic that often leads to confusion. Whether you’re a property holder, an investor, or a business partner, understanding how your gains are taxed is essential.

Section 45 of the Income Tax Act serves as the charging section for capital gains tax. It stipulates that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head “Capital Gains” and shall be deemed to be the income of the previous year in which the transfer took place.

Historical Context and Amendments

Over the years, Section 45 has undergone several amendments to address evolving economic scenarios and tax planning strategies. Notably, subsections like section 45 2 of income tax act, section 45 3 of income tax act, section 45 4 of income tax act and 45(5A) were introduced to tackle specific situations such as conversion of capital assets into stock-in-trade, transfer of assets to firms, distribution of assets on dissolution, and Joint Development Agreements (JDAs), respectively.

Section 45(2) of the Income Tax Act applies when a capital asset is converted into stock-in-trade, such as land turned into business inventory. In this case, the capital gain is not taxed at the time of conversion. Instead, it is taxed in the year the stock-in-trade is sold. The fair market value (FMV) on the date of conversion is used to calculate the gain. This helps in deferring tax and provides clarity on how to value the asset.

Section 45(3) comes into effect when a partner gives a capital asset to a firm as part of their capital contribution. Here, the capital gain is taxed in the hands of the partner. The value recorded in the firm’s books is treated as the sale price. This avoids misuse by underreporting or overreporting the asset’s value in internal transfers.

Section 45(4) is used when a firm or Association of Persons (AOP) gives out capital assets to partners during dissolution or reconstitution. In such situations, the firm is liable to pay tax on the capital gain. The gain is calculated using the fair market value of the asset at the time of transfer. This rule prevents tax avoidance when assets are distributed without proper valuation.

Section 45(5A) was added to cover Joint Development Agreements (JDAs), especially in real estate. Under this rule, capital gains are taxed not when the agreement is signed but when the completion certificate is issued by the authority. This benefits individual and Hindu Undivided Family (HUF) landowners by delaying tax payment until they actually receive possession or income.

Capital Gains Under Section 45

Transfer of Capital Assets

A capital asset is defined as property of any kind held by an assessee, whether or not connected with their business or profession. This includes movable and immovable properties, securities, and rights in assets. However, certain items like stock-in-trade, personal effects, and agricultural land in rural areas are excluded.

Types of Capital Assets Covered

Capital assets can be categorized into:

• Short-Term Capital Assets: Held for 36 months or less (12 months for certain securities). Reuters
  
• Long-Term Capital Assets: Held for more than 36 months (12 months for certain securities).
  

Computation of Capital Gains

Capital gains are computed by deducting the cost of acquisition, the cost of improvement, and expenses incurred in connection with the transfer from the full value of the consideration received or accrued.

Cost of Acquisition and Improvement

The cost of acquisition refers to the amount paid to acquire the asset. The cost of improvement includes expenses incurred to make additions or alterations to the asset.

Indexation and Its Impact

For long-term capital assets, the cost of acquisition and improvement can be adjusted using the Cost Inflation Index (CII) to account for inflation. This process, known as indexation, reduces the taxable capital gain.

Deductions and Allowances

Certain deductions are available under sections like 54, 54B, 54EC, and 54F, which allow exemption from capital gains tax if the proceeds are reinvested in specified assets within stipulated time frames.

Exemptions and Reliefs Under Section 45

Section 45 of the Income Tax Act offers certain exemptions and reliefs to reduce the tax burden on capital gains, as outlined in provisions like Sections 54, 54EC, and 54F. These exemptions apply when taxpayers reinvest capital gains into specified assets, such as residential property or bonds. 

Specific Exemptions based on Asset Type

• Section 54: Exemption on sale of residential property if proceeds are reinvested in another residential property.
  
• Section 54EC: Exemption if gains are invested in specified bonds within six months.
  
• Section 54F: Exemption on sale of any asset other than residential house if proceeds are invested in a residential house.
  

Conditions for Claiming Exemptions

To claim these exemptions, taxpayers must adhere to specific conditions, including reinvesting within specified periods, holding periods for new assets, and ensuring that the new asset is not transferred within a certain timeframe.

Special Provisions Under Section 45

Section 45(5A) and Joint Development Agreements (JDAs)

Taxation Implications of JDAs

Section 45(5A) addresses the taxation of capital gains arising from Joint Development Agreements. It stipulates that the capital gains shall be chargeable to tax in the year in which the certificate of completion for the whole or part of the project is issued by the competent authority. 

Computation of Capital Gains under 45(5A)

The capital gains are computed by taking the stamp duty value of the owner’s share in the project on the date of issue of the completion certificate, plus any monetary consideration received, and deducting the cost of acquisition.

Other Specific Provisions within Section 45 

While rural agricultural land is not considered a capital asset and hence not taxable under capital gains, urban agricultural land is taxable. However, exemptions under sections like 54B may be available if the proceeds are reinvested in agricultural land.

Implications of Non-Compliance with Section 45

Penalties and Interest

Non-compliance with the provisions of Section 45 can lead to penalties under sections like 271(1)(c) for concealment of income and interest under section 234A/B/C for defaults in filing returns and payment of advance tax.

Legal Recourse and Dispute Resolution

Taxpayers can approach the Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal, and higher courts for dispute resolution. Alternative Dispute Resolution mechanisms like the Dispute Resolution Panel (DRP) and Advance Pricing Agreements (APA) are also available.

Practical Considerations for Taxpayers

It’s essential for taxpayers to maintain proper documentation, consult with tax professionals, and stay updated with changes in tax laws to ensure compliance and optimal tax planning.

Budget 2025 Update (and Future Updates)

The Finance Bill, 2025, introduced several amendments impacting capital gains taxation:

• Forex Fluctuation Benefit for NRIs: NRIs can now factor in currency exchange rate variations while computing gains on equity investments, potentially reducing their tax liability. The Economic Times
  
• One-Time Set-Off of Long-Term Capital Loss: From the tax year 2026-27, taxpayers can set off long-term capital losses against short-term capital gains, providing temporary relief. Business Today
  
• Taxation of ULIPs: Unit Linked Insurance Plans with annual premiums exceeding ₹2.5 lakh will now be taxed as capital gains, effective from April 1, 2026. Business Today
  

Important Terms to Understand (Glossary)

• Capital Asset: Property of any kind held by an assessee, excluding stock-in-trade, personal effects, and certain agricultural land.
  
• Capital Gains: Profits or gains arising from the transfer of a capital asset.
  
• Indexation: Adjustment of the cost of acquisition and improvement for inflation using the Cost Inflation Index.
  
• Joint Development Agreement (JDA): An agreement between a landowner and a developer to develop a property jointly.
  
• ULIP: Unit Linked Insurance Plan, a combination of insurance and investment.
  

Case Studies and Real-Life Examples

Case Study 1: An individual sells a residential property and reinvests the proceeds in another residential property within two years. By doing so, they can claim exemption under Section 54, reducing their capital gains tax liability.

Case Study 2: A landowner enters into a JDA with a developer. The completion certificate is issued in 2025. Under Section 45(5A), the capital gains will be taxable in 2025, aligning the tax liability with the actual receipt of consideration.

Tax Planning Strategies Under Section 45

• Utilize Exemptions: Plan asset sales to take advantage of exemptions under sections like 54, 54EC, and 54F.
  
• Indexation Benefit: For long-term assets, use indexation to adjust the cost of acquisition and reduce taxable gains.
  
• Timing of Transfers: Consider the timing of asset transfers to align with favorable tax provisions and rates.
  
• Consult Professionals: Engage with tax advisors or share market advisors to navigate complex transactions and optimize tax outcomes.
  

Conclusion

Section 45 of the Income Tax Act plays a pivotal role in the taxation of capital gains in India. Understanding its provisions, exemptions, and recent amendments is essential for effective tax planning and compliance. By staying informed and seeking professional guidance, taxpayers can navigate the complexities of capital gains taxation with confidence.

FAQs

What constitutes a capital asset?

A capital asset includes property of any kind held by an assessee, excluding stock-in-trade, personal effects, and certain agricultural land.

How are capital gains calculated?

Capital gains are calculated by deducting the cost of acquisition, cost of improvement, and transfer-related expenses from the full value of consideration received.

What are the tax implications of capital gains?
Capital gains are taxed based on the holding period of the asset. Short-term gains are taxed at higher rates, while long-term gains often enjoy reduced rates. Indexation benefits may apply to long-term capital assets, lowering tax liability.

What are the exemptions and deductions available?
Exemptions like Section 54 (on sale of residential property) and Section 54EC (investment in specified bonds) reduce capital gains tax. Deductions aren’t directly allowed from capital gains, but reinvestment options and exemptions help lower the taxable amount effectively.

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