Module – 1 General Concepts of Taxation Laws - September 2025.ppt

Module – 1 General Concepts of Taxation Laws - September 2025

1. UNIT – 1
GENERAL CONCEPTS

2. According to Adam Smith, “Every tax should be
designed to take as little money as possible out
of people’s pockets while yet contributing to
the public treasury of the state.”

18. INTRODUCTION: The New
Income Tax Bill 2025 has been tabled in the
Lok
Sabha on July 21, marking a pivotal reform in India’s tax
framework.
This Bill proposes revised tax slabs, a significant hike in
Section
87A rebate, and a simplified tax regime aimed at middle-
income
taxpayers.
SECTION 87A REBATE RAISED TO ₹60,000: The
proposed law
significantly
increases the rebate under Section 87A from ₹25,000 to
₹60,000.
WHAT IT MEANS:
If
your taxable income is up to ₹12 lakh, your entire tax liability
becomes
zero.
This
is a major tax relief, especially for the salaried middle class.

19. Q1.
Will old regime be completely removed?
No. As of now, it will remain optional — but not the default.
Q2.
Is the ₹12 lakh limit applicable to all?
Yes, if the final Bill retains the enhanced rebate under Section 87A.
Q3.
Can I still claim 80C if I opt for the new regime?
No. The new regime does not allow most deductions.
Q4.
When will this come into effect?
From
 
1 April 2025, applicable for returns filed in
 
AY 2026–27.

41. E-Commerce transactions are affected by several tax
rules under Income Tax and GST.
Government has introduced new sections in both
Direct and Indirect Taxes to prevent tax evasion and
ensure proper tax collection.
In the past, when there were no specific rules for
E-Commerce, small sellers using E-Commerce
platforms could avoid paying taxes on their sales and
services.
Similarly, Non-Resident E-Commerce Operators made
profits in India without paying taxes.
To address this issue, the government introduced
specific provisions under Income Tax and GST.

43. UNDER THE INCOME TAX ACT: (TAXATION ON E-
COMMERCE TRANSACTION)
Section 194-O states that e-commerce operators must
deduct TDS at 1% on the total sales or services amount.
This deduction should be made either when the sale
amount is credited to the e-commerce participant’s
account or when payment is made to the participant,
whichever happens first.
Example:
If the total sales amount is ₹30 lakhs and
returns
are ₹5 lakhs, TDS should be deducted at 1% on
₹30
lakhs (the total sales) and not on ₹25 lakhs (sales
after
returns).

44. SECTION 9(5) OF THE CGST ACT, 2017:
1.PASSENGER TRANSPORT SERVICE (CAB OR MOTORCYCLE):
The E-Commerce Operator (ECO) must pay 100% of the tax,
whether the cab operator is registered or not.
2.ACCOMMODATION SERVICES (HOTELS, INNS, ETC.):
a)If hotels or similar establishments are registered, they are
responsible for paying the tax, not the ECO.
b)If the hotels or establishments are not registered, the ECO
is responsible for paying the tax.
3.HOUSEKEEPING, PLUMBING, CARPETING SERVICES:
a)If the service providers (e.g., plumbers, housekeepers) are
registered, they pay the tax, and the ECO has no tax
liability.
b)If the service providers are not registered, the ECO is
responsible for paying the tax.

46. NO CHANGE IN TAX RATES:
The bill did not introduce any new taxes or alter the existing tax
rates.
All tax rate modifications will continue to be made via the annual
Finance Act.
INTRODUCTION OF THE ‘TAX YEAR’ CONCEPT:
The ‘assessment year’ has been removed.
And the ‘tax year’ now aligns with the finance year (April 1 to
March 31).
For businesses or newly set up professions, the tax year begins
from their establishment date.
CLEARER TAX SLABS UNDER THE NEW REGIME:
The government aims to promote the new tax regime by refining
its structure.
FACELESS JURISDICTION FOR APPEALS:
Faceless tax assessment and appeals continue, reducing the need
for physical interactions with tax authorities.
AI – driven assessments to prevent corruption and delays.

47. INTRODUCTION OF A TAXPAYER CHARTER:
Explicitly outlines taxpayer rights and obligations.
Aims to reduce taxpayer grievances and ensure fair treatment.
STREAMLINED COMPLIANCE AND FILING PROCESS:
Pre-filled tax returns with more details to reduce errors.
Standardized reporting format for businesses and individuals.
Faster refunds through real-time processing.
ENHANCED TAX BENEFITS FOR STARTUPS AND MSME’s:
Reduced tax burden on startups with relaxed compliance norms.
Tax exemptions for newly incorporated startups for a defined
period.
REVISED CAPITAL GAINS TAX STRUCTURE:
Clearer classification of short-term and long-term appeals.
Simplified rates to make capital gains taxation more transparent.
DIGITAL ECONOMY & CRYPTO REGULATIONS:
Crypto transactions now have a well-defined taxation structure.
GST-like compliance system for digital transactions to avoid tax
evasion.

48. PENALTY REFORMS AND DISPUTE RESOLUTION:
Lower penalties for voluntary disclosures of tax errors.
More structured tax tribunals to resolve disputes quickly.
EXPANDED DEFINITION OF INCOME:
Virtual Digital Assets (VDAs) like cryptocurrency and NFTs are now
considered capital assets, similar to land and shares affecting tax
calculations.
SIMPLIFIED AND CONCISE DRAFTING:
The bill reduces the number of provisos and cross-references,
making it easier to interpret without relying on multiple sections
and rules.
CONSOLIDATION OF TAX COMPLIANCE REQUIREMENTS:
Provision related to TDS, assessment timelines, dispute resolution,
and deductions have been tabulated for easier access.
REMOVAL OF OUTDATED EXEMPTIONS:
Provision like Sec 54E(CG exemption for pre-1992 asset transfers)
and redundant sections from past amendments have been
eliminated.

49. CHANGES IN SEARCH AND SEIZURE PROVISIONS
POWERS EXTENDED TO VIRTUAL DIGITAL SPACES:
The New Bill gives power to override any access codes (passwords,
passcodes, encryption keys) protecting an individual’s digital
communication or accounts.
EXISTING POWERS UNDER THE INCOME TAX ACT, 1961:
Tax authorities could enter and search premises and forcibly open
locks to seize financial records.
Officials were already examining electronic records like emails,
hard disks, and desktops.
NEW POWERS UNDER THE INCOME TAX ACT, 1961:
Authorities can now access “virtual digital spaces’ such as:
Email servers, Social media accounts (Facebook, Twitter,
Instagram, etc.)
Online banking and investment accounts.
Websites storing asset ownership details.
Cloud storage and remote servers , Digital application platforms,
any other similar digital space.

50. CHANGES IN SEARCH AND SEIZURE PROVISIONS
This means tax officials can use password-breaking software or
request tech companies (E.g., Apple, Google, Meta)to bypass login
credentials.

55. 1.CANON
OF EQUITY OR EQUALITY
The burden of taxation must be distributed equally or evenly
among taxpayers.
This type of equality; however, deprives justice because not
all taxpayers have the same ability to pay taxes.
Rich individuals can afford to pay more taxes than
impoverished ones.
Justice requires that a person with greater financial ability pay
higher taxes.
If everyone is expected to pay taxes based on his or her
abilities, then all taxpayers’ sacrifices become equal.
This is the core of the equality canon (of sacrifice).
To ensure equity in sacrifice, taxes will be imposed based on
the principle of ability to pay.
The canons of equality and ability are two sides of the same
coin.

56. 2. CANON OF CERTAINTY
The tax that an individual must pay should be certain and not
arbitrary.
The time of payment, the method of payment, and the amount to
be paid; i.e., tax liability, should all be apparent to the contributor
and everyone.
The canon of certainty encompasses a wide range of concepts.
It must be certain for both the taxpayer and the taxing authority.
Taxpayers should be aware of when, where, and how much taxes
are due.
The certainty of liability must be anticipated ahead of time.
There must be certainty about the amount of income that the
government wants to collect throughout the specified time period.
Any bit of uncertainty in these areas could lead to disaster.

57. 3. CANON OF CONVENIENCE
Taxes should be imposed and collected in such a way that it is
most convenient for both the taxpayer and the government.
It should be as painless and trouble-free as possible.
“Every tax”, emphasizes, “should be levied at the time or in the
manner most likely to be convenient for the contributor to pay it.”
Agricultural income tax is collected after the harvest.
Salaried people are taxed at the point of receipt of their salaries.

58. 4. CANON OF ECONOMY
This canon suggests that the cost of collecting a tax should be
kept to a minimum.
Any tax that has a large administrative cost, extraordinary delays
in assessment,
High collection rate should be avoided at all costs.

59. 5. CANON OF ELASTICITY
The canon of elasticity is very important to modern economists.
This canon indicates that a tax’s yield should be flexible or
elastic. It should be levied in such a way that the tax rate can be
adjusted in response to changing circumstances. When the
government requires funds, it must be able to extract as much
revenue as possible without causing any negative repercussions
by raising tax rates. This canon is satisfied by income tax.

60. 6. CANON OF PRODUCTIVITY
Taxes must be productive or cost-effective.
Revenue generated by any tax must be substantial.
Only taxes that do not impede the productive work of society
should be imposed.
Only when a tax functions as an incentive to produce, it is
considered productive.

61. 7. CANON OF VARIETY
Taxation must be dynamic.
Rather than having single or two taxes, a country’s
tax structure should be dynamic or diversified.
Diversification of a tax structure will necessitate the
participation of the majority of the people.
If a single tax system is implemented, only a certain
sector will be required to pay to the national
exchequer, leaving a big number of people out.
The impact of such a tax structure will be greatest on
particular taxpayers.
A dynamic or varied tax system will result in the
distribution of tax burdens throughout a large
population, resulting in a low degree of incidence of a
tax in aggregate.

62. 8. CANON OF SIMPLICITY
Every tax must be straightforward and understandable to the
public so that the taxpayer can calculate it without the assistance
of tax professionals.
A complex and complicated tax is certain to have unfavourable
side effects.
If tax system is determined to be difficult, it may encourage
taxpayers to evade taxes.
 
A complicated tax system is costly in the sense that even the
most honest and informed taxpayers must seek the guidance of
tax professionals.
In the end, such a tax structure has the potential for breeding
corruption in society.

63. 9. CANON OF EXPEDIENCY
A tax should be expedient
 or beneficial so that the
government may defend itself against public criticism by
arguing for its need.
Taxpayers will be outraged if there is no justification for the
levy.
Every new tax must have a reason to generate a feeling of
acceptability in the minds of the taxpayers.
An unfair tax will always confront acute refusal on the part of
the taxpayers to pay and they will try to avoid them.

64. 10. CANON OF FLEXIBILITY
It states that the entire tax system should be flexible enough to
allow taxes to be readily increased or decreased in response to
government requirements.
This flexibility guarantees that anytime the government wants
more money, it can generate it quickly and easily.
Similarly, decreasing taxes should not be an issue when the
economy is not thriving.