Rationalisation and Alignment in the Budget of Select Provisions of the Income-tax Act, 2025 with the Income-tax Act, 1961




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Rationalisation and Alignment in the Budget of Select Provisions of the Income-tax Act, 2025 with the Income-tax Act, 1961

 

Annual value of property held as stock-in-trade (Section 21(5))

1.  A correction is proposed in section 21(5) of the Income-tax Act, 2025 to align it with the corresponding provision of the Income-tax Act, 1961.

2.  It is proposed to clarify that the annual value of a property held as stock-in-trade shall be taken as nil for a period of two years from the end of the financial year in which the certificate of completion of construction is obtained from the competent authority.

Deduction for interest on borrowed capital for self-occupied property (Section 22)

1.  Section 22 of the Income Tax Act 2025 deals with deductions under the head Income from house property.

2.  Sub-section (2) provides that, in the case of a self-occupied property acquired or constructed with borrowed capital, the aggregate deduction for interest shall not exceed ₹2 lakh.

3.  However, the provision does not expressly clarify whether this ceiling of ₹2 lakh includes prior-period interest payable for the acquisition or construction of the property.

4.  Section 22 of the Act corresponds to section 24 of the Income-tax Act, 1961, under which the overall limit on interest deduction includes prior-period interest.

5.  Accordingly, it is proposed to amend section 22(2) to clarify that the aggregate deduction for interest on borrowed capital shall be inclusive of prior-period interest payable.

Power to prescribe PAN quoting requirements (Section 262(10)(c))

1.  Section 262(10)(c) empowers the Central Board of Direct Taxes (CBDT) to prescribe categories of documents pertaining to business or profession in which Permanent Account Number (PAN) must be quoted.

2.  However, the provision does not expressly empower the CBDT to prescribe PAN quoting requirements for documents relating to transactions not connected with business or profession.

3.  The corresponding provision in the Income-tax Act, 1961 (section 139A(5)(c)) empowers the Board to prescribe PAN quoting in documents relating to such transactions as may be specified in the interest of revenue, without restricting it to business or professional activities.

4.  To align with this position, it is proposed to amend section 262(10)(c) to enable the CBDT to prescribe PAN quoting requirements for documents relating to transactions not connected with business or profession.