New Income-Tax Bill to replace 'assessment year' with 'tax year’ , make compliance easier

The Income-Tax Bill, 2025, likely to be introduced in Parliament on February 13, has several changes that will simplify compliance, as finance minister Nirmala Sitharaman promised while tabling Budget 2025

The bill proposes to introduce the concept of "tax year", doing away with "assessment year”, sources said. The tax year, like the financial year, will be the 12-month period from April 1 to March 31, simplifying compliance and reporting requirements.

The Income-Tax Act, of 1961, uses "assessment year" and "previous year" for filing returns.

In the new bill, 2025, the tax year refers to the period during which income is earned and reported for taxation purposes. This change ensures that the terminology is consistent with the financial year.

The bill proposes to introduce the concept of "tax year", doing away with "assessment year”, sources said. The tax year, like the financial year, will be the 12-month period from April 1 to March 31, simplifying compliance and reporting requirements.

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The Income-Tax Act, of 1961, uses "assessment year" and "previous year" for filing returns.

In the new bill, 2025, the tax year refers to the period during which income is earned and reported for taxation purposes. This change ensures that the terminology is consistent with the financial year.

Also read: New Income Tax Bill to tax winnings of online games with a clearer definition

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Related stories

• 
  Net direct tax kitty swells 15% to Rs 17.78 lakh crore till February 10
• 
  Net direct tax collection up over 15.9% at Rs 16.89 lakh crore

The Income-Tax Act, of 1961, follows a two-layered concept of the previous year – the year in which income is earned – and assessment year – the year following the previous year during which the previous year's income is assessed and taxed.

For example, income earned between April 1, 2024, and March 31, 2025, would be assessed in the Assessment Year 2025–26. In the new system, this period will be referred to as the Tax Year 2024–25, eliminating confusion.

“The new tax bill aims to make the system simpler and more modern. The plan uses easier-to-understand terms like Tax Year instead of Assessment Year, defines Tax Year as the 12 months starting April 1…,” Ritika Nayyar, Partner, Singhania & Co, told Moneycontrol.

The bill proposes to introduce the concept of "tax year", doing away with "assessment year”, sources said. The tax year, like the financial year, will be the 12-month period from April 1 to March 31, simplifying compliance and reporting requirements.

Story continues below Advertisement

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The Income-Tax Act, of 1961, uses "assessment year" and "previous year" for filing returns.

In the new bill, 2025, the tax year refers to the period during which income is earned and reported for taxation purposes. This change ensures that the terminology is consistent with the financial year.

Also read: New Income Tax Bill to tax winnings of online games with a clearer definition

Story continues below Advertisement

Remove Ad

Related stories

• 
  Net direct tax kitty swells 15% to Rs 17.78 lakh crore till February 10
• 
  Net direct tax collection up over 15.9% at Rs 16.89 lakh crore

The Income-Tax Act, of 1961, follows a two-layered concept of the previous year – the year in which income is earned – and assessment year – the year following the previous year during which the previous year's income is assessed and taxed.

For example, income earned between April 1, 2024, and March 31, 2025, would be assessed in the Assessment Year 2025–26. In the new system, this period will be referred to as the Tax Year 2024–25, eliminating confusion.

“The new tax bill aims to make the system simpler and more modern. The plan uses easier-to-understand terms like Tax Year instead of Assessment Year, defines Tax Year as the 12 months starting April 1…,” Ritika Nayyar, Partner, Singhania & Co, told Moneycontrol.

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It also updates rules for digital transactions and cryptocurrencies, she said.

A taxpayer's charter is also proposed to make things more transparent and protect taxpayers. “These changes could make taxes easier to file, less complicated, and more open. Businesses, especially those dealing with digital money, could be affected. This is a big effort to update India's direct tax system but we'll have to wait and see how it works out,” Nayyar said.

The introduction of the tax year aims to simplify laws and enhance taxpayer convenience. The older terms created unnecessary complexity, especially for first-time taxpayers.

By aligning the tax period with the financial year and removing redundant terminology, the new bill aims to reduce errors in filing and improve compliance, she added.

Impact on tax filings

Taxpayers will no longer need to differentiate between previous and assessment years. The tax year will directly correspond to the period in which income is earned and reported.

Financial records will align seamlessly with the tax year, reducing confusion while filing tax returns and preparing documents.

Government is making strategy to Reduce Stake in 5 Public Sector Banks

The Indian government is planning to reduce its ownership in five public-sector banks (PSBs) over the next four years. This plan is being developed in coordination with the Department of Investment and Public Asset Management (DIPAM), the Department of Financial Services (DFS), and the banks themselves. The goal is to bring the government’s stake in these banks down by up to 20% to comply with the Securities and Exchange Board of India (SEBI) regulations

SEBI requires that all listed companies maintain at least 25% public shareholding. However, public-sector banks were given an exemption until August 2026 to meet this requirement. Currently, the government holds a significant majority stake in several banks:

• Bank of Maharashtra: 86.46%
• Indian Overseas Bank: 96.38%
• UCO Bank: 95.39%
• Central Bank of India: 93.08%
• Punjab & Sind Bank: 98.25%

Since these banks have more than 75% government ownership, the government needs to reduce its stake by selling shares to the public.

The government plans to reduce its holdings using two approaches:

1. Offer for Sale (OFS) – In this method, the government directly sells some of its existing shares in the banks. The money generated from this sale goes directly to the government.
2. Qualified Institutional Placement (QIP) – Here, the banks issue new shares to raise funds. The money raised stays with the banks and can be used for their growth and operations.

A senior official has indicated that the government is likely to focus more on the OFS route since most PSBs are already financially stable. This would allow the government to raise money for other financial needs.

Why is the Government Selling Shares?

In the past, particularly after the Asset Quality Review (AQR) process, the government invested a large amount of money into public-sector banks to help them recover from bad loans. Now that these banks have become profitable, the government owns excess equity worth over₹43,000 crore in some of them. The plan is to use part of this surplus for the banks’ expansion and sell the remaining shares in the market.

Over the last two financial years, banks have raised money through QIP, but none have raised funds through OFS:

• In FY25, two PSBs raised ₹8,500 crore:
  • Bank of Maharashtra: ₹3,500 crore
  • Punjab National Bank: ₹5,000 crore
• In FY24, five PSBs raised ₹17,500 crore:
  • Bank of India: ₹4,500 crore
  • Bank of Maharashtra: ₹1,000 crore
  • Indian Bank: ₹4,000 crore
  • Union Bank of India: ₹8,000 crore

Despite this, the government has not sold any shares via OFS in recent years.

Next Steps

To move forward with this plan, the government has invited bids from merchant bankers and legal advisors to assist in selling its stake in public-sector banks and financial institutions. DIPAM has also issued a Request for Proposal (RFP) for hiring transaction advisors for three years, with a possible extension of one more year.

This stake sale is part of a broader strategy that aligns with the 2021-22 Budget announcement, where Finance Minister Nirmala Sitharaman had stated plans to privatize two PSBs and IDBI Bank.

A government official has also clarified that while DIPAM is focused on maximizing the value of the government’s stake in public-sector enterprises, strict measures are in place to prevent any misuse of price-sensitive information in the process.

RBI imposes Monetary Penalties on 3 Banks for Violations of Guidelines

The Reserve Bank of India (RBI) has imposed monetary penalties on three co-operative banks for non-compliance with regulatory directives. These penalties were levied under the provisions of the Banking Regulation Act, 1949 (BR Act) based on findings from statutory inspections conducted by the National Bank for Agriculture and Rural Development (NABARD) and RBI.

Penalty on The Gulbarga and Yadgir District Co-operative Central Bank Ltd., Karnataka

By an order dated February 18, 2025, the RBI has imposed a ₹50,000 penalty on The Gulbarga and Yadgir District Co-operative Central Bank Ltd., Karnataka, for failing to comply with NABARD’s directions on the Offsite Surveillance System – Revision of Due Dates for Submission of OSS/FMS Returns.

• Violation: The bank failed to submit statutory returns to NABARD within the prescribed timeline.
• Legal Basis: The penalty was imposed under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the BR Act, 1949.

Penalty on The Guntur District Co-operative Central Bank Ltd., Andhra Pradesh

On the same date, February 18, 2025, the RBI also penalized The Guntur District Co-operative Central Bank Ltd., Andhra Pradesh, with a ₹50,000 penalty for violating Section 31, read with Section 56 of the BR Act, 1949.

• Violation: The bank failed to publish its accounts and balance sheet for FY 2022-23 and did not submit copies to RBI/NABARD within the prescribed timeline.
• Legal Basis: The penalty was imposed under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the BR Act, 1949.

Penalty on Mahila Sahakari Bank Ltd., Vadodara, Gujarat

By an order dated February 19, 2025, the RBI imposed a ₹25,000 penalty on Mahila Sahakari Bank Ltd., Vadodara, Gujarat, for non-compliance with RBI’s Know Your Customer (KYC) guidelines.

• Violation: The bank failed to upload customer KYC records to the Central KYC Records Registry (CKYCR) within the stipulated timeline.
• Legal Basis: The penalty was imposed under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the BR Act, 1949.

Regulatory Action and Disclaimer

The penalties were imposed due to deficiencies in statutory and regulatory compliance and do not affect the validity of any banking transactions. Additionally, these penalties are without prejudice to any further action that may be taken by RBI against these banks.

The RBI continues to monitor compliance and take necessary enforcement actions to uphold banking regulations and safeguard depositors’ interests.

Extra Allowance for Banker

Bank Recovery Team Attacked in Sri Ganganagar; Car Set on Fire

A violent attack on a bank’s recovery team has been reported in Sri Ganganagar, Rajasthan. The team had gone to recover an outstanding loan when the borrower, along with his family, attacked them with iron rods and unleashed pet dogs. The attackers also vandalized the bank team’s vehicle and later set it on fire. The incident took place in Raghunathpura village, under the jurisdiction of the Rajiyasar police station.

How the Incident Unfolded

According to ASI Hanuman Meena of Rajiyasar police station, A PSU  Bank’s Raghunathpura branch manager,  lodged a formal complaint about the incident. As per the report, on Thursday EVENING'S, a recovery team from the bank visited Sunil Kumar, a resident of Raghunathpura, to collect an outstanding animal loan that he had taken but failed to repay.

As soon as the bank officials arrived at Sunil Kumar’s house, he became aggressive and started verbally abusing them. Instead of cooperating with the officials, he set his pet dogs on them, forcing the team to run for safety.

However, Sunil did not stop there. Seeing the recovery team trying to escape, he, along with his two sons, Kamal and Praveen, chased them with iron rods. The trio attacked the team members and even broke the glass windows of their car. Fearing for their lives, the bank officials abandoned their vehicle and ran away from the scene. Taking advantage of their absence, the accused then set fire to the vehicle, completely damaging it.

Police Action and Arrests

Following this violent attack, branch manager  approached the Rajiyasar police station and formally filed a complaint against Sunil Kumar and his two sons. The complaint accused them of:

• Assaulting the bank’s recovery team
• Unleashing pet dogs to attack officials
• Vandalizing and setting fire to the team’s vehicle

After the bank manager registered the complaint, the accused reportedly continued their aggressive behavior. They set fire to another vehicle near the police station.

Upon receiving the complaint, the police took immediate action. A team was sent to Raghunathpura village, where they surrounded the accused and arrested all three—Sunil Kumar, Kamal, and Praveen.

Current Status and Investigation

The police have registered a case under multiple sections of the Indian Penal Code (IPC), including charges related to assault, criminal intimidation, property damage, and arson. The investigation is ongoing, and authorities are gathering more evidence to ensure strict action is taken against the accused.

The incident has raised concerns about the safety of bank employees, especially those involved in loan recovery operations. The police have assured that the matter is being taken seriously, and strict action will be taken against those responsible for such violent behavior.