A Guide to Section 43B(h) of the Income Tax Act, 1961 - MSME Payment Policy

The tax compliance world in India has changed significantly due to the mandatory requirements introduced under Section 43B(h) MSME Compliance of the Income Tax Act, 1961, as amended from time to time. Effective from 1st April 2024 (AY 2024-25), this regulation has created a major shift in how businesses must handle payments to Micro and Small Enterprises registered under the MSMED Act.

This guide has been designed to help Business Owners, Accountants, CFOs and Compliance Officers understand what Section 43B(h) entails, why timely MSME payments are now critical, and how to implement full compliance in a practical and user-friendly manner.

Significance of Section 43B(h) for Your Organisation

The purpose of Section 43B(h) of the Income Tax Act 1961 has been to create the following positive outcomes for businesses based in India:

To support large-scale companies in making timely payments to their MSME suppliers or providers of services,
To increase cash flow for MSMEs that supply products and/or services by enabling them to generate working capital through improved turnover,
To hold large-scale companies accountable for their ability to make timely payments to MSMEs,
To limit the flexibility of large-scale companies' ability to claim tax benefits based on their timely payments to MSMEs.

Under the provisions of this section, any expense claimed by a business for tax deduction cannot be allowed if any payment(s) made by that business to MSMEs occur later than the specified time limits of 15 days or 45 days from the date specified in either a written or oral agreement. Importantly, if you have been able to deduct a particular expense for tax purposes because you have made a payment on the day you incurred it, the only way you can deduct it subsequently is if you... have made a payment within the time specified for your deduction.

Classification of MSMEs According to the MSMED Act

Section 43B(h) only applies to those suppliers whose registration as Micro or Small enterprises was through Udyam Registration.

MSME Classification According to the MSMED Act 2006

Classification of Enterprise	Investment Threshold	Annual Turnover Threshold
Micro Enterprises	≤ ₹1 Crore	≤ ₹5 Crore
Small Enterprises	≤ ₹10 Crore	≤ ₹50 Crore

🔹 Medium Enterprises are not included under Section 43B(h).

🔹 Retailers and wholesale suppliers will also not qualify to claim the benefits under Section 43B(h), even if they hold a Udyam Registration.

Legal Framework: Section 15 of the MSMED Act in conjunction with Section 43B(h) of the Income Tax Act

Section 43B (h) relies on the definition of legally permitted times for payment as set forth in Section 15 (MSMED Act 2006).

3.1 Timelines for Payments under Section 15 of the MSMED Act (2006).

a. The Payment Terms of an Agreement (maximum 45 days) Buyers and suppliers agree to mutually-set payment terms of the agreement cannot be longer than forty-five (45) days.

Consequently, neither MSME contracts may require payments within sixty (60) or ninety (90) days of acceptance/delivery.

b. If no written agreement is present, the payment should occur no later than fifteen days from the date of the acceptance, or delivery of the items/services.

What is the Day of Acceptance?
The day on which the items or services were delivered. If the buyer has any issues or concerns regarding the Delivery and they raise the matter in writing within fifteen days of acceptance/delivery, the date when the buyer resolves their issue or concern is considered "the day of acceptance".

3.2 The tax effects of section 43B(h)

Expenses (i.e. A deductible expense) : Where payments made within the 15 to 45 days of the due date (including any portion before the due date), the financial year of the payments shall be deemed to be the year of the deduction.

Non-Expenses (i.e. Not a deductible expense): Where payments made after the 15 to 45 days of the due date, the financial year of the payments shall be deemed to be the year of the payment. You cannot utilize payments prior to the filing of your tax return as per the provisions of section 43B of the Income Tax Act.

An Example to Illustrate

An electronic invoice is sent to a Purchaser on 01-03-2025

Seller Name: A Small Business (with a registered status in India)
Understanding Date of Invoice: 45 days from the date of invoice
Amount of Invoice: ₹100,000.00 (Indian Rupee)

A). Payment made on 10-04-2025

1. Payments made within 45 days

2. Payments dated after end of the financial year

3. Payments are included in financial year 2024-2025

B) Payments made on 01-05-2025

1. Payments made outside of 45-day period

2. Payments made are not allowed in the financial year 2024-2025

3. Payments can only be claimed in the financial year 2025-2026.

Period of Interest for Delay in payment

If a buyer delays payment, the law requires them to pay interest at three times the RBI Bank Rate (as on year-end), compounded monthly.

The above interest will not be tax deductible under Section 80C of Income Tax Act.

Compliance Checklist for Businesses :

Businesses must act NOW to minimize their year-end disallowances.

6.1 Supplier Verification :

Collect Udyam Registration Certificates from your suppliers
Maintain a vendor master list containing your suppliers' MSME status
Update your vendor classification every six (6) months
Confirm all suppliers are Micro or Small (not Medium)

6.2 Agreements and Documentation :

Each of your MSME vendors must have a written agreement
Your Vendors payment term must be 45 days or less
There should be no verbal agreements (the default payment term is 15 days).

6.3 Automated Tracking System :

All vendors' invoice acceptance dates must be tracked
All the vendors' invoices must have a deadline of 15 days and 45 days
Set automatic reminders to send alerts 5–10 days before the due date.
Escalation alerts to be sent to your financial head

6.4 Review Periodically to Determine Tax Effect :

You must review your MSME vendors' outstanding balances on a monthly basis.
You must conduct a 43B(h) disallowance simulation.
You must have your final review of all your MSME vendors during the months of February and March.

6.5 Tax Audit Reporting - Form 3CD Clause 22 :

It is required that businesses must disclose the following:

Outstanding Principal Amount for MSME vendors
Outstanding Interest for MSME vendors
Total Breakdown of Micro and Small Amounts Due to MSME Vendors.

Common Risks of Non-Compliance

Have not established formal business agreements → 15 Day Credit will be forced to make payment.
Have not obtained an Udyam verification → Incorrectly classified under the wrong category.
Have not made payments within a single business day of receipt → Full year payment will be disallowed.
Year End cash flow stress → Delayed payments
Reporting incorrectly on Form 3CD → At-risk of an audit

Managing payments under the MSMEs' Act is no longer an option; it is now required by law.

Book My Accountant Can Help You Reach 100% Compliance

Book My Accountant (BMA) is a specialist in the area of Vendor Management and MSME compliance w.r.t. 43B(h) advisory services, as well as tax audit documentation.

Within that scope, we provide the following services:

1. Udyam Certificates/Vendor Due Diligence

Obtaining valid Udyam Certificates.
Mapping to the MSME Status.
Updating vendor classifications as needed.

2. Agreements Drafted and Standardized

Legally compliant contracts – minimum of 45-day contracts.
Protection from a default within the minimum of 15-day rule.
Documentation following the requirements of the MSMED Act.

3. Automated Invoice Tracking

Real-time monitoring.
Alerts when due dates are approaching.
Dashboards showing invoices due for escalation.

4. Simulations of the 43B(h) at Year-End

Predicting potential disallowances for a subsequent tax year.
Identifying invoices which require immediate payment.
Avoiding the risk of unexpected tax liabilities.

5. Tax Audit/Form 3CD Reporting (Clause 22)

Providing accurate MSME disclosures.
Providing calculations of interest.
Providing audit support and representation to clients.

Tips for Business Owners :

Section 43B(h) is non-negotiable and strictly applied. You must pay within 15 or 45 days to claim the deduction; otherwise, the tax authorities will disallow the expense and add it to your taxable income. MSME interest cannot be deducted. The period from February to March could have the highest risk for business owners. Further, audit report preparation requires clean documentation.

Compliance Plan For FY 2024-2025 And FY 2025-2026

Identify Vendors of MSME
Written Agreements (within 45 Days)
Vendor Master Updated
Daily Invoice Tracking
Payment Prioritised for Due Date Approaching
Review MSME for Feb to March
Accurate reporting on 3CD
If we stay disciplined now, we will avoid large tax losses in the future.

Disclaimer
This website is intended to provide information and education (in general) to the reader and should not be regarded as advice on any issue, including legal advice, tax advice, or compliance advice. Legal requirements, notifications and tax laws may change. Readers should seek professional advice from a qualified professional for a thorough understanding of their own situation or check the latest legal amendments on the government websites.
Book My Accountant (BMA) provides professional services; however, this document's content is not intended to be a substitute for BMA's personal advisory services.

How to Prepare GSTR-9 & 9C: A Full Working Checklist for FY 2024-25

Filing GST annual return (GSTR-9) and reconciliation statement (GSTR-9C) always looks cumbersome for the financial year, as annual GST compliance may look tedious at times. Therefore, this guide will not only take you through that step-by-step process but will also provide a practical checklist of all of that and include links to official documentation for your ease of reference, so you can stay on top of compliance regulations.

What are the GSTR-9 and GSTR-9C forms?

GSTR-9 – Annual Return

In essence, this serves as the summary of your GST data, such as outward supplies, inward supplies, ITC claimed, reversals, tax paid, and adjustments, for the financial year, which is then presented in a consolidated GST return. You can find it covered in the manual of the portal.

GSTR-9C – Reconciliation Statement

This form is required when your aggregate turnover exceeds the limit of ₹ 5 crore (based on threshold limit, which is currently ₹ 5 crore) and you have to provide a reconciliation of your annual return with the audited financials.

Key bullets points:

Threshold of ₹ 5 crore aggregate turnover: notification number 30/2021 dated 30 July 2021.
Deadline for filing: Along with GSTR 9 (typically by 31 December in the following year).

Structured Step-by-Step Method for Completing GSTR-9

Step 1

Gather the Required Returns & Records

All monthly/quarterly returns: GSTR-1 (outward supply) and GSTR-3B (summary of tax)
Purchase/ITC data: GSTR-2A/2B (for input tax credit)
Financial books/ledgers (sales, purchases, ITC)

Step 2

Reconcile Outward Supply

Reconcile your books of accounts (sales invoices) against GSTR-1 and GSTR-3B for the applicable year.
Identify any invoices not recorded or amendments
Ensure that the outward supplies declared in GSTR-9 reflect the accurate value

Step 3

Reconcile Input Tax Credit (ITC)

Reconcile ITC claimed in your records against the auto portal data (GSTR-2B)
In addition, identify ineligible ITC, reversals mandated under Rule 42/43, and any obligations under the reverse charge (RCM) mechanism.
Amend your books or provide for reversals in your tax filing prior to filing the return.

Step 4

Examine Tax Liability & Payments

Confirm all GST late fees and tax liabilities owed for the tax year (CGST + SGST/IGST as there may be)
Look for late fees, interest or RCM taxes owed
Correspond the cash/credit ledger balances

Step 5

Complete GSTR-9 Online

Important tables are as follows:

Table 4: Moreover, it highlights the details of the advances and the inward/outward supplies on which taxes are owed.
Tables 6-7: The ITC availed (corrected/reversed)
Table 8: The ITC eligible as determined by the portal (2B/2A etc)
Table 9: Details of taxes paid:
Tables 10-13: Amendments made, credit notes, altered supplies

Step 6: Preview, Compute & File

Use the compute liabilities option on the portal in filing GSTR-9 (important step)
Preview your draft tax return done carefully, make sure to fix mismatches/faults
File using DSC/EVC if necessary
Keep your acknowledgment and proof of filing for your records.

Structured Step-by-Step Method for Completing GSTR-9C

When it is time to file GSTR-9C, here is the procedure to follow:

Step 1

Download Financial Statements : Audited P&L, Balance Sheet, and Trial Balance as well as the Annual accounts as per Companies Act, or audit requirement applicable for your entity.

Step 2

Turnover Reconciliation : Turnover based on books vs GSTR-1 vs GSTR-3B vs e-way bills (if applicable) and identifying differences and the reasons for each difference (for example, exports, exempt supplies, etc.)

Step 3

ITC Reconciliation : ITC based on books vs auto-data (GSTR-2B) and consider any blocked credits, reversals and RCM credit (if applicable) differences and provide a report or reason for any unreconciled differences

Step 4

Taxes Paid Reconciliation : Also, compare the tax liability shown in GSTR-9 with the actual tax payments, and adjust any pending or late-paid liability.

Step 5

Part-A for GSTR-9C (Reconciliation Statement) : In addition, Part A would include turnover, ITC, taxes paid, and any non-reconciled items, accompanied by the reasons for such differences.

Step 6

Certification (Part-B) : To the extent applicable (as per turnover and audit requirement) to be certified by CA (Chartered Accountant) or CMA (Cost Accountant) attached with audited accounts (and audit report) as well.

GSTR-9 & GSTR-9C: Complete Filing Checklist :

Documents Required

Sales register , purchase register, ITC ledger
GSTR-1 , GSTR-3B , GSTR-2A/2B details
E-way-bill summary (if applicable)
Trial Balance, Audited Financials, Balance Sheet, Profit & Loss Account
Tax Payment Challans , ledger of tax paid
Credit/debit notes, register of amendments

Important Reconciliations

Comparison of GSTR-1 to the books to GSTR-3B (outward supplies)
Comparison of ITC ledger to GSTR-2B (inputs)
Book turnover comparison to returns
RCM liabilities comparison to the books
Supplies reported by amendments in the books
Late fees / interest paid / not paid

Pre‐Filing Verification

Verify all tax dues cleared (CGST + SGST/IGST)
Verify late fees & interest paid
Data checks in the main tables : Table 4, 6-8, 9 in GSTR-9
GSTR-9C: Verify reconciliations prepared & (if needed) audited
Backup all data, take printout/screenshot for the client

Common Mistakes

Reporting turnover incorrectly (under/over)
Not accounting for ineligible ITC / not taking back
Not taking back RCM (reverse charge mechanism) liabilities
Not checking or reconciling Table 8 (ITC per portal) to books
Not filing or filing late (for GSTR-9C) and incurring excess penalty.

Why Choose BookMyAccountant for Your Filing?

If you want a stress-free and accurate filing experience, consider Book My Accountant.

Qualified CA and GST experts with previous experience in filing annual return and completing reconciliations.
Full end-to-end service: Data reconciliation completed, auditing coordinated if applicable, and e-filing handled through the portal.
Transparency in pricing and non-googling every filing deadline (so we won't miss 31st December filing deadline).
Safeguard your books and any filings or data related to your GST.
Furthermore, you will be able to reach our client support team for any inquiries, even towards the end of your client experience.

Email or call us today and we will schedule your GST return review and you will never worry about GST compliance again, to be done professionally.

Disclaimer
This Blog provides information only and does not provide any professional tax or legal advice. Although we have made an effort to ensure the material is factually accurate as of the original date of publication, the GST legislation, rule and thresholds can change. Taxpayers should obtain updated provisions from the CBIC official portal, or enlist the services of a qualified tax professional. BookMyAccountant assumes no liability, and is not responsible for any errors or omissions in the information or for any actions taken by any party in reliance upon information contained in this Blog.

Upgrade Alert: 6 Key Changes to GST Invoice Management System (IMS) You Need to Know!

Say Goodbye to ITC Headaches! The New GST System is Coming in October 2025

A significant transition will occur in regard to how taxes are managed by Indian enterprises. The GST Invoice Management System (IMS) will undergo a development and mandatory migration beginning in October 2025, which represents a significant development and will enhance accuracy and transparency throughout the process. The IMS aims to create unmatched flexibility; moreover, it addresses critical business challenges, particularly with respect to Input Tax Credit (ITC) management and buyer-supplier reconciliation.

Here are the 5 crucial updates you must prepare for to ensure seamless GST compliance:

1. The Smarter “Pending” Option is Now Extended to Critical Documents

Previously, the GST portal’s ‘Accept’ or ‘Reject’ choices were too forgiving for businesses; for instance, they compelled you to make decisions hastily, potentially leading to incorrect outcomes. The upgrade to the IMS offers well-deserved flexibility in regards to actions on additional types of documents -

Credit Notes (CN)
Debit Notes (DN)
Invoices with amendments

Why it is important to your business: This additional feature provides comfort that you can mark something as Pending (CN) without having to make an irreversible decision in a hurry. Now you can take your time to mark the Credit Note as Pending until you verify the goods were returned and confirm whether you want to claim it or reverse the ITC.

2. Mandatory Remarks for Rejections or Pending Actions

A major pain point in GST reconciliation has always been the communication gap between buyers and suppliers. If a supplier either rejected or left an invoice or credit note pending, the supplier often had no idea why which initiated the long email threads, delayed adjustments of ITC and continuous back and forth phone calls.

The new IMS update (effective October 2025) is addressing this issue directly by making it mandatory for a recipient to provide remarks every time a recipient:

Rejects an invoice, debit note, or credit note.
Marks a document as Pending for future action.

What’s New

The GST portal will prompt the user to enter a brief remark before finalizing either action. The remark will be instantaneously available to the buyer and supplier on their IMS dashboards.

Examples of Useful Remarks

When you take one of these actions, you can provide a reason:
“Goods not received.”
“Wrong GSTIN / Party mismatch.”
“Wrong value or tax rate.”
“Duplicate invoice.”
“Awaiting credit note confirmation.”
“Goods returned and waiting for verification.”

Why This is Important for Businesses

Increased Transparency

Both parties know exactly why an invoice or note was rejected or left pending; there is no more guessing, and clarification no longer requires back-and-forth communication.

Faster Reconciliation

The suppliers can instantly correct or re-issue the document based on the visible remark, which reduces the dispute cycle from weeks to days.

Better Audit Trail

The remark constitutes part of the document history saved in the GST system, providing a digital trail to facilitate compliance review and audit workflows.

Reduced ITC Disputes

Buyers can rest assured knowing their Input Tax Credit (ITC) will be allowed or put on hold; the status, and reason or reasons are clearly documented on both sides.

Increased Professional Accountability

Because remarks are visible to both users, it facilitates a culture of accuracy, ownership, and problem-solving in every transaction.

3. Critical: New Rules Apply ONLY from October 2025 Onwards

It is very important to note that the new IMS features do not apply to prior transactions. Your organization will be working in a dual system for a period of time:

Document Type	Date of Document	System Rule Followed
New Regime	October 2025 or later	Pending option, partial ITC reversal, etc.
Old Regime	Before October 2025	Previous rules (no pending, mandatory full ITC reversal, etc.)

Be sure your accounting software and internal processes are immediately able to accommodate the simultaneous existence of both "old" regime documents and "new" regime documents. Your team must accurately identify the date prior to processing any document.

4. Deep Dive: Flexible ITC Reversal

Clarifying Flexible ITC Reversal – A More Intelligent, Proportionate Approach

Beginning October 2025, IMS goes live with Flexible ITC Reversal. This amendment closes the gap between a CN issuance and the recipient’s ITC claim, while promoting flexibility, accuracy, and fairness in GST compliance.

The Issue with the Previous System

In the previous GST regime (before Oct 2025), a recipient reversing a Credit Note had to reverse the entire ITC linked to that invoice, regardless of what ITC they had actually claimed.

Too much ITC has been reversed, manual reconciliation proves problematic, and buyers and sellers engage in unnecessary disputes.

Example:

A purchaser received an invoice with ₹18,000 GST, and, for various internal accounting reasons, had only claimed ₹10,000 initially. Then, the supplier issued a Credit Note for ₹9,000 GST.The original recipient would reverse ₹9,000 of qualified ITC, even though only half of it was applicable.

The New Flexible System (Post-October 2025)

With the updated IMS, taxpayers have the flexibility to choose a full or partial ITC reversal depending on their actual ITC claim.

When a Credit Note is issued and a reversal occurs, the IMS asks the recipient the following direct question:

"Do you want to reduce ITC for this record?"

Most likely, the next action will be as follows:

If yes, you are able to enter the exact amount of ITC amount and reduce it for that record - there will be no assumptions of any kind and no obligation of full reversal.

If no, the ITC will remain unchanged - until you choose to manually edit it at additional time (if at all).

This change gives businesses "control" to confirm that the ITC reversal is the same as what their real book entries are - not the assumptions of the ITC reversal from the system.

Feature	Old System (Pre-Oct 2025)	New System (Post-Oct 2025)	Compliance Impact
Reversal Amount	Full ITC reversal on original invoice/debit entry linked to Credit Note.	Partial or full reversal can be selected by the recipient.	Prevents over-reversal; aligns reversal with actual ITC claimed.
System Prompt	System assumed full reversal; manual correction required.	System prompts with “Do you want to reduce ITC for this record?”	Improves accuracy, reduces reconciliation disputes.
User Action	No flexibility – automatic or full reversal expected.	‘Yes/No’ choice + editable reversal field.	Flexibility ensures book-level accuracy and smoother audits.

Example for Better Understanding

Let’s say:

Supplier issues an invoice for ₹1,00,000 + ₹18,000 GST.

The recipient claims ₹10,000 ITC initially due to an internal error; consequently, we must conduct further verification to reconcile the figure with supporting documentation.

Later, the supplier issues a Credit Note reducing the value by ₹50,000 plus ₹9,000 GST; thereafter, the adjustment should be reflected in the records and reconciled with supporting documentation.

Now:

Old System: The recipient would have to reverse the entire ₹9,000, even though only ₹10,000 ITC was ever claimed.

New System (Post-Oct 2025): The system asks whether the recipient wants to reverse ITC.

Recipient selects ‘Yes’ and enters ₹5,000 — half of their originally claimed ₹10,000 ITC.

This ensures perfect alignment between the supplier’s CN and the recipient’s ITC records.

5. New Table in Annual Return (GSTR-9) for Full Transparency

The GST Network (GSTN) has added a new table — Table 6A1 — in the Annual Return (Form GSTR-9)
for FY 2025–26 onward for better clarity and accountability of Input Tax Credit (ITC) in one's GST
return.
The new table aims to give you a complete overview of your ITC movement throughout the financial
year with complete transparency with your books, GSTR-3B, and GSTR-2B.

What Table 6A1 Captures

The new table has three relevant stages of your ITC life cycle:

Total ITC Claimed During the Year –

This is your claimed ITC in total in GSTR-3B for the financial year as at the end of the period.
For example, if the claimed ITC of the year across return(s) comes out to be ₹5,00,000, the amount would appear here. Furthermore, you can verify the figure against your records, and if there is a discrepancy, you can initiate a reconciliation.

Total ITC Reversed Later –

The statement covers scenarios in which ITC was reversed for ineligibility: the recipient did not match the invoice, the vendor was not paid within 180 days, or reversal occurred for any other compliance reason.

For example, you claimed ₹5,00,000 but later reversed ₹50,000 for unmatched invoices.

Final Actual ITC Utilized –

This is the net ITC after reversals, which was eligible, and utilized against tax liability.
Final actual ITC utilized = ₹4,50,000 (Claimed - Reversed [i.e., ₹5,00,000 - ₹50,000]).

Disclaimer:
The purpose of this blog is purely to make people aware and provide information. It is not tax or legal advice. Interpretation may differ and tax law can change. Always consult a professional tax advisor before making any tax or financial decision.

The New Income Tax Act of 2025: A Complete Guide for Taxpayers

A new era is going to dawn in India's tax regime. With effect from April 1, 2026, the Income-tax Act, 2025 will take effect in lieu of the Income-tax Act of 1961, which has been in force for more than 60 years. This is history's biggest tax reform, not another amendment.

The new Act is aimed at modernizing regulations, easing tax compliance, and keeping pace with India's digital economy. Everyone who is a taxpayer -- individuals, start-ups, businesses, or charitable trusts -- will be affected.

Whether you are a private taxpayer, business person, or professional responsible for the preparation of GST returns or electronic tax returns, we at Book My Accountant (BMA) are here to assist you through these changes.

The Need for a New Income Tax Act

After decades of revisions, the Income-tax Act of 1961 had grown too complicated and antiquated. It was challenging for professionals and taxpayers to understand, with over 800 sections and multiple clarifications.

Among the principal concerns were:

Too many layers and overlapping rules make up a complex structure.
Outdated clauses: Allusions to antiquated methods.
High litigation: Disputes and administrative hold-ups are common.

To address this, the government unveiled the Income-tax Act, 2025, which was designed from the ground up to give taxpayers a more straightforward, streamlined, and digitally-first system.

Main Features of the New Income Tax Law

With only around 536 sections compared to 800+, the new Act is significantly shorter. A few of the main reforms are as follows:

1. The concept of the tax year

The terms "Assessment Year" and "Previous Year" are no longer interchangeable. From now on, it's just Tax Year, which is less onerous to follow.

2. Digital-First Structure

The government has turned digital in its thinking with full-fledged online notices, time-bound refunds, and faceless assessments. All steps in the compliance process are supposed to be monitored online.

3. VDAs (Virtual Digital Assets)

Cryptocurrency, NFTs, and tokenized assets are defined and taxed for the first time. The unreported holdings can be considered as unaccounted income, and VDA gains are taxable.

4. Plain Words

Heavy legalese is not used in the Act. The language used in the provisions is simpler and more understandable, easy for common taxpayers to read and understand.

5. Notice Before Enforcement

Where there are no exceptional circumstances, advance notification has to be provided by the tax department before any action for enforcement, e.g., search or seizure. This renders the process even more equitable.

6. Charitable Institution and Trust Regulations

There will be exemptions only for valid charitable purposes. There are more stringent reporting requirements and disincentives for gifts anonymously made.

Individuals' New Tax Slabs

The Act now incorporates the new tax slabs announced in the Union Budget 2025. With effect from FY 2025–2026, the following apply:

Range of Incomes (₹)	Rate of Taxation
0–4,00,000	Zero
Between 4,00,001 and 8,00,000	5%
8,00,001–12,00,000	10%
12,00,001–16,00,000	15%
16,00,001–20,00,000	20%
Between 20,00,001 and 24,00,000	25%
Over 24,00,000	30%

Key Points to Note

The normal deduction was raised to 75,000.

Section 87A Rebate: Maximum ₹60,000, effectively tax-free income of ₹12 lakhs.
Default Regime: The taxpayers can choose to go under the old regime if they want; the new regime is the default instead.
Surcharge: Reasonable for high-income earners.

The plan here is to discourage the use of deductions and make it easier to file.

Reductions and Rewards:

The Act retains a few common deductions despite reducing exemptions:

Although the focus on the new regime is more now, 80C investments are still there.

Health insurance (80D): Continues with additional GST exemption.
80JJAA (New Employee Deduction): Provides an additional 30% deduction of salaries of fresh hires to promote employment generation.
MSMEs and start-ups: Continue to avail of relief in tax and simplified schemes.

For tax, the Unified Pension Scheme (UPS) is treated on par with the NPS.

Evaluations and Compliance:

The government is emphasizing faceless digital compliance. Some of the major changes include:

Faceless Assessments: We will handle all cases anonymously to avoid harassment.
3-Year Filing Limit: We cannot file returns after three years from the due date.
Refund Timelines: They disburse refunds earlier, with a levy of penalty for late filing.
Enlarged Search Powers: After searching, the authorities can make use of social media and electronic devices.

Even though these steps streamline the process, they also create privacy issues, with access being in digital format.

Business Provisions:

Corporate Tax Rates: 15% for new manufacturing facilities and 22% for domestic businesses
Start-ups: Clarity on angel tax matters, including VDA taxation.
International Investments: We continue to offer infrastructure exemptions to sovereign and pension funds.
Transfer Pricing: Streamlined with quicker decisions and anonymous resolution of disputes.

Non-profits and trusts

The new Act subject’s non-profit organizations to stricter treatment:

Anonymous donations are excluded.
Donations from corpus must be traced out and handled appropriately.
Expense on CSR is not allowable yet, but reporting must be simplified.

This only makes sure that legitimate non-profits are benefiting from tax relief.

Transition Rules

FY 2025–2026 (AY 2026–2027) will be governed by the 1961 Act.
New Act will come into operation fully on 1 April 2026.
Until they are overtaken, current regulation and case law will continue to inform interpretation.

Tax payers and companies ought to update their data, software, and planning techniques well in advance.

Practical Consequences for Individuals

Particularly in the default regime, return is simpler.
The old regime may still be the choice of major investors in tax-saving products.

When dealing with Companies

Accuracy is desirable but compliance is quicker and simpler.
With increased transparency, there is reduced scope for manipulation.

For tax planners and certified accountants

Both Acts need to be known side by side during the transition period.
Educating the client will be crucial in preventing misconceptions.

Pros and Cons:

Pros	Problems
1. Cleaner, modernized drafting. 2. Simpler abridged sections and slabs. 3. Faster refunds and fairer procedures. 4. Clear rules for digital assets and start-ups.	1. Privacy issues with increased digital access. 2. High-deduction taxpayers (housing loan, PF, LIC) might feel penalized. 3. Enterprises making the transition will have to adjust quickly.

Conclusion

India's tax system has completely changed as a result of the Income-tax Act of 2025. It seeks to align with India's digital economy while making income tax easier, quicker, and more equitable.

For individuals, it means filing tax returns will be less complicated. It represents a shift for companies toward efficient, transparent, and faceless compliance. It's also time for professionals to help clients make the change.

Our goal at Book My Accountant (BMA) is to make this transition as smooth as possible. Our professionals can assist you in meeting your ITR filing deadline, staying in compliance with the new tax regime, and streamlining electronic income tax filing so you can concentrate on what really counts: expansion.

Disclaimer:
The purpose of this blog is purely to make people aware and provide information. It is not tax or legal advice. Interpretation may differ and tax law can change. Always consult a professional tax advisor before making any tax or financial decision.

GST Reform 2025: India's Real Estate and Building Sector Enters A New Era

GST Reform 2025 is set to transform India’s real estate and construction sector. The 56th GST Council Meeting in September 2025 brought sweeping changes that lower GST rates on essential construction materials. This reform aims to reduce project costs, boost housing affordability, and encourage faster infrastructure growth across the country. By easing the tax burden on builders and buyers, GST Reform 2025 marks a new era for India’s real estate industry.

India's construction sector is its growth backbone. It fuels investment, urbanization, and employment through everything from large-scale infrastructure projects to affordable housing developments. Exorbitant GST levies on construction materials forced buyers and builders to absorb astronomical costs for years.

The September 2025 56th GST Council Meeting has brought a sea change to India’s construction industry.The government has finally provided much-awaited relief to real estate buyers, contractors, and builders by reorganizing the GST slabs.

For India's infrastructure development and real estate construction, as well as affordable housing, this is a revolutionary change—it's not just a tax change.

GST Reform 2025: New GST Slabs for Real Estate & Construction

Construction materials were previously classified into a defiling range of GST slabs of 5%, 12%, 18%, and 28%. This led to endless classification disputes, uncertain expenses, and undue weighting on housing affordability.

All of this is reduced to just two large slabs under the new GST regime:

5% slab: Uncomplicated building materials, e.g., various types of marble, stones, and bricks.
The majority of building materials, like cement, form the 18% slab.
The 40% slab is for sin and luxuries that are not construction-related.

The government has made GST transparent, certain, and developer-friendly by rationalizing the tax structure

Cement: The Game-Changer

The backbone of every project, cement, was earlier taxed at 28%. It is now a far more manageable 18%.

Why is it significant? 20–25% of the cost of construction is from cement alone. This single adjustment alone will save three to five percent in project cost.

Improved margins, faster project launches, and competitive pricing are the outcomes for builders. To buyers, it means that the reasonably priced housing and real estate projects will arrive sooner.

Marbles , stones and brick : the quite champion

Marble, Stones, and Bricks: The Quiet Champions

The tax concessions are not just reserved for cement. Key materials such as travertine blocks, granite, marble, and sand-lime bricks are now added to the 5% slab (previously 12%).

These find widespread use in both residential and commercial properties. The reduction brings luxury and affordability closer to each other by lowering directly the input costs of walling, flooring, and decorative finishes.

All in all, the cost of each layer of your home has come down.

How GST Reform 2025 Benefits Real Estate Developers

Developers and builders have more fiscal flexibility. Here's why:

1. Profitability improves as a function of lower input costs.

2. Reduced disputes and better management of input tax credits come from simplified compliance.

3. Improved cash flow and timely delivery come from faster completion of a project.

This is nothing short of a renaissance for an industry plagued often by delays and slim profit margins.

Bricks, Marble, and Stone: Silent Cost-Savers

Cement is not the only one beaming under the new GST regime. Commodity materials like granite, marble, travertine blocks, and sand-lime bricks have all shifted from the 12% slab to the 5% slab.

Think about it—these are the materials that provide your floor with that shine, your walls with that strength, and your interiors with that timelessness. With GST relief, they're a whole lot more affordable now.

For the developers, it's yet another saving layer. For the purchasers, that means luxury finishes might no longer be completely out of their budget.

Why Developers Are Cheering

Developers have had to bear years of rising input costs and thin margins. The new GST reform gives them much-needed relief.

How things change for them:

Lower input costs allow them to finally sleep peacefully while planning projects.
Less complicated GST slabs lead to fewer disputes over classification.
ITC processing becomes simpler, compliance a breeze.
Reduced project duration becomes possible with reduced financial burdens.

For contractors, it's not just about cutting costs—it's about restoring confidence to take on new projects without fear of venturing into losses.

GST Reform 2025: Impact on Real Estate Buyers & Housing Prices

That is what every home purchaser would love to learn. The answer: yes… with a rider.

If you're looking at low-cost housing or mid-income projects, chances are that developers are going to be passing on the savings. You would see discounts, better festive offers, or relaxed payment terms.

But when you're looking at high-end or luxury residential units, developers might want to hold back the savings in a bid to protect their margins.

Either way, the mood is generally upbeat. Buyers are positive, developers are positive. That's a double for the real estate sector.

Commercial and Retail Property: Riding the Wave Too

The reform is not confined to residences.

Office towers and commercial projects like them can benefit from reduced inputs, even though GST compliance must still be handled with care.
Shopping malls and retail centres also can have fewer supply chain hiccups and lower building costs—dare it be said, possibly lower rents or better facilities for tenants.

That means the infrastructural boom will spill over into India's growing urban and commercial world.

The Catch: Why You May Not See Savings Immediately

This is where reality kicks in. Most developers are locked into pre-agreed fixed contracts with negotiated cost. These cannot be changed overnight.

So, if immediate discounts are on your mind, you may have to wait. The real impact will manifest gradually—especially in new projects commissioned after September 2025.

But safe to say: the direction is set, and it's in the direction of affordable housing and reduced building costs.

Quick Snapshot: Old vs New GST Rates

Material	Old GST Rate	New GST Rate
Cement	28%	18%
Granite / Marble / Travertine	12%	5%
Sand-lime bricks	12%	5%
Works Stone inlay / marble	12%	5%

This clear-to-read table shows just how radical the change is. These aren't minor tweaks—they're definite cost cuts that will be noticed by developers and buyers in every project budget.

The Bigger Picture

Essentially, the GST reform 2025 is a matter of giving construction and real estate a second chance. Lower taxes on critical inputs mean more projects, stricter deadlines, and better margins.

For India, it is growth.

More homes. More office space. More infrastructure.

And above all, closer to the "Housing for All" reality.

Need Expert Guidance?

Whether you’re a developer planning your next big project or a homebuyer trying to understand how GST affects property prices, BMA here to simplify the numbers for you.

Ring us today for specialist advice and personalized guidance.

Disclaimer

This blog is designed for general information purposes only. The information is based on the 56th GST Council meeting news of September 2025. Take professional tax advice before taking any financial and business decisions in relation to GST.
Team BMA

GST 2.0 Reforms: What the Indian Apparel Industry Had Hoped for and What Really Happened?

The textile and apparel industry has always been the backbone of India's economy. It maintains domestic consumption, enhances exports, and provides employment to millions of individuals. Industry members were optimistic that their long-standing issues would now be resolved as the 56th GST Council meeting (September 2025) brought in the biggest tax reforms since the launch of GST in 2017.

The stakeholders pinned very high expectations on everything ranging from safeguarding artisans to rectifying the inverted duty structure (IDS). Did the apparel industry, however, get what it required from the new GST 2.0 reforms in 2025? Let us state it in plain, human terms that every retailer, producer, and consumer can comprehend.

What the Clothes Industry Asked

Problems of the textile sector have long been expressed by bodies such as CMAI and CITI. The expectations were pragmatic and arose out of cash flow, compliance, and competitiveness concerns.

Uniform 5% GST along the value chain: Since fibre, yarn, and fabric were taxed more than finished apparel, working capital was hindered.
Higher threshold for clothing slabs: The ₹1,000 limit blended luxury and middle-class apparel. The sector asked that it be increased to ₹10,000.
Simple compliance: Filing ITC-04 was drowning small job-work units. There was a pressing need for relief.
Artisan protection: Even though they were not luxury items, traditional sarees, lehengas, and handloom wear often crossed the ₹2,500 mark.
The objective was clear: Make GST inclusive, encouraging, and growth-facilitating for India's most labour-intensive industry.

Major Relief on Inputs

Manufactured yarn came down from 12% to 5%, and Human-made fibers came down from 18% to 5%. The manufacturers enjoyed major relief on working capital due to this ultimate correction to the inverted duty regime.

Increased Range of Inexpensive Apparel

Instead of ₹1,000, the 5% GST bracket now extends to ₹2,500. This is a huge victory for everyday wear and low-cost fashion.

Penalized Artisan & Mid-Range

Clothing GST was previously 12%, but it is now 18% for anything over ₹2,500. The price of artisan handloom goods, jackets, kurtas, and sarees all increased overnight.

Absence of Compliance Relief

Small-scale businesses are still burdened by the dreaded ITC-04 filing, which has not changed.

Side Benefits of the Reforms

Surprisingly, the GST 2.0 reforms also make indirect benefits for the clothing sector:

Insurance is less expensive: Life and medical insurance are GST-exempted, which means families have more spare cash for lifestyle items, including garments.

Daily essentials are less expensive: Soap, shampoo, and food experienced rate reductions. What they save here could translate into discretionary fashion expenses.

Luxury products isolated: A new 40% luxury/sin goods slab means apparel is comfortably outside this band — a relief for mid-market retailers.

Winners and Losers of the New GST Era

Winners

Budget clothing manufacturers: Fashion priced between ₹1,000–₹2,500 is now more affordable. This segment will experience volume growth.
Artificial fibre manufacturers: Lower duties put them at par with cotton.
Exporters: Lower input costs translate into quick refunds and improved international competitiveness.

Losers

Artisan and mid-range wear: Sarees, lehengas, and jackets that cost over ₹2,500 attract a steeper GST. This will impact cultural heritage as well as middle-class affordability.
Mid-tier market retailers: Businesses in the ₹2,500–₹5,000 bracket might experience demand slackening.
Small job-work units: Ongoing ITC-04 compliance causes angst.

Implications for Companies

(a) Relief from Working Capital:
The cash flow has the largest gain. ITC blocked because of inverted duty has stopped. Input/output credits can be seamlessly aligned by manufacturers.

(b) The Pricing Strategy Must Be Modified
• Goods priced between ₹1,000 and ₹2,500 start to compete more.
• However, in order to remain competitive under 18% GST, companies with prices above ₹2,500 must rethink their pricing, offer discounts, or redesign their SKUs.
(c) Stock management:

If you had a lot of clothing in stock that was only slightly over ₹2,500, your working capital outflow increased. Astute competitors might begin re-engineering SKUs to remain in the ₹2,500 range for mass markets.

(d) Competitiveness in Exporting
Indian clothing can command a higher price in international markets thanks to MMF and yarn at 5%, which is advantageous for major exporters.

The Gap Between Demand and Delivery

And how did the Council's decision compare to the industry's wish list?

Industry Demand	What happened	Verdict
Uniform 5% across fibre-to-garment	Inputs cut to 5%, but garments over ₹2,500 charged 18%	Partial win
Threshold to ₹10,000	Increased only to ₹2,500	Partial, much less than ask
Remove ITC-04	No change	Miss
Protect artisan traditional wear	Garments over ₹2,500 charged more	Miss

Bottom line: The government resolved the inverted duty mess and expanded the affordability zone, but fell short of a complete uniform 5% framework or substantive relief for artisan/mid-range categories.

What Businesses Need to Do Now

The GST reforms of 2025 need businesses to revisit their pricing, inventory, and approach.

Re-engineer price: Goods at about ₹2,500 will require repackaging, bundling, or SKU redesigning to stay appealing.
Go for budget fashion: The ₹1,000–₹2,500 segment will be the growth leader. Brands targeting here will emerge winners.
Drive stock smartly: Products priced just over ₹2,500 might require discounts or reorganization to stay free of cash flow problems.
Tap export potential: At 5% input cost, Indian exporters can gain lost territory overseas.

Conclusion

The September 2025 GST overhaul is a milestone for the tax system of India.

Partial win for the textile and clothing industry is:

• Fabulous win on input taxes and mass-market apparel.

• Fabulous miss on artisanal wear and compliance relief.

The message is unmistakable: the government is eager to increase affordability for mass-market wear while reserving higher-end segments as paymasters.

For companies, the game now is flexibility — price sensibly, handling inventory, and using the input credit relief to expand.

So that this does not end up confusing anyone, here's a side-by-side analysis of how GST rates on various categories of clothing have changed after the September 2025 reforms. The above table presents the old rates versus new rates along with a brief note on the real-world implication for companies and shoppers.

Need Professional Advice?

Feel free to get in touch with us if you would like advice on anything pertaining to GST reforms, clothing taxation, or compliance tactics. We can guide you through the changes and develop a strategy that meets your company's requirements.

Disclaimer

This blog is for general information only. It contains general industry developments and analysis up to September 2025. It must not be considered professional tax or legal guidance. Organizations should approach their accountants, GST practitioners, or financial advisors for personalized advice.

Waiver of TDS/TCS Interest Under Sections 201(1A) (ii) and 206C (7): CBDT’s 2025 Relief

A significant tax relief has been announced by the Central Board of Direct Taxes (CBDT). For qualified cases, CBDT waives the interest levy under Sections 201(1A) (ii) and 206C(7) of the Income-tax Act through its 2025 circular no. 08/2025.

The goal of this action is to lessen the financial burden of taxpayers who had to pay interest on TDS/TCS payments that were delayed for valid reasons. This relief is a much-needed reprieve for a lot of people and businesses.

However, what is the true meaning of this waiver? And who stands to gain from it? Let's dissect it.

What Is This Waiver About?

Interest on late or non-payment of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) is covered by Sections 201(1A) (ii) and 206C (7) of the Income-tax Act.

In the past, taxpayers were still required to pay interest even if the delay was caused by technical difficulties or banking problems.

The CBDT declared in 2025 that in worthy cases, such interest may now be waived. Following comments from taxpayers and industry experts, this decision is described in detail in Circular No. 08/2025.

Why Did CBDT Announce This Relief?

The government's goal to facilitate compliance and assist legitimate taxpayers is reflected in the waiver.

Numerous companies, particularly start-ups and MSMEs, stated that the following factors frequently caused TDS/TCS deposit delays:

Technical issues with banking systems.
Payment is started ahead of schedule, but credit is given after the deadline.
Errors in the processing of payments even though taxpayers took prompt action.

The CBDT recognizes these practical difficulties and guarantees that no taxpayer is unjustly punished by permitting a waiver.

Who Is Eligible for the Waiver?

Not everybody is eligible. The recipients of this relief are taxpayers who actually experienced hardship.

Eligible cases include:

1. Payments made in advance of the due date but credited later because of system problems are examples of eligible cases.

2. Unintended delays that are out of the taxpayer's control.

3. situations in which taxes were paid but interest was assessed.

Ineligible cases:

1. Intentional non-payment or wilful defaults.

2. Persistent late filers without good cause.

Applications must be sent to the appropriate authorities, such as the Director General of Income Tax (DGIT), the Principal Chief Commissioner of Income Tax (Pr. CCIT), or the Chief Commissioner of Income Tax (CCIT).

The deadline for applying

A stringent deadline has been set by the CBDT.

Within a year of the fiscal year in which the interest was assessed, taxpayers must submit an application.

As an illustration:

The application needs to be filed by March 31, 2025, if interest was assessed in FY 2023–2024.

Since this deadline cannot be negotiated, prompt action is essential.

Why This Is Important for New Businesses and Start-ups:

Every rupee matters for new and start-up companies. Even minor fines are a major hardship due to tight budgets, scarce financial resources, and ongoing pressure to fulfil compliance requirements. This is particularly true for MSMEs, who sometimes lack specialized compliance teams and find it difficult to stay on top of constantly evolving tax laws.

The respite is especially helpful for STPI-registered corporations and IT firms that specialize in exports, as international banking procedures and transactions can occasionally result in unanticipated delays in TDS/TCS payments. These companies, who are already dealing with a number of operational difficulties, now have a safeguard against unjust interest charges brought on by uncontrollable circumstances.

We at Book My Accountant (BMA) collaborate closely with IT companies, MSMEs, and start-ups to assist them understand and comply with complicated tax laws. More than merely monetary comfort, this waiver gives these companies the chance to refocus their efforts on expansion and innovation rather than worrying about fines for inevitable delays.

How to Apply for the Waiver?

Here is a basic guide:

Examine your TDS/TCS transactions.
Verify whether interest has been assessed under Sections 206C(7) or 201(1A)(ii).
Gather supporting documentation.
Collect proof of payment initiation, bank statements, and any correspondence pointing out technical difficulties.
Create an application draft.
Request a waiver and provide a clear explanation of the delay.
Send to the appropriate authority
Send it to DGIT, CCIT, or Pr. CCIT by the deadline.
Follow-up
Keep track of your application and answer any questions the department may have.

What Effect Does This Have on You?

You now have the opportunity to get relief if you have paid interest or been charged interest as a result of actual banking or system errors.

For businesses, this means:

Improved cash flow since excessive interest is no longer a burden.
Increased confidence in compliance as a result of knowing that honest mistakes are handled fairly.

Why BMA Suggests Quick Action

Book My Accountant (BMA) has witnessed personally how quickly important deadlines can pass when tax compliance isn't given first priority. Therefore, if you think you are eligible for this waiver, we strongly advise you to take immediate action. Early application submission lowers last-minute stress and improves your chances of approval. Seeking professional aid is equally vital because applications that are accompanied by well-organized documentation have a much higher chance of being accepted. In order to ensure future operations, go more smoothly, now is also a great time to assess and enhance your TDS/TCS compliance procedure.

Popular Takeaways:

A significant 2025 relief is the CBDT's waiver of the interest levy under Sections 201(1A) (ii) and 206C (7).
Applications must be made on time.
Exporters, MSMEs, and startups stand to gain a great deal.
You can increase your chances of approval by seeking professional advice.

Conclusion:

Sections 201(1A) (ii) and 206C (7) of the CBDT provide a 2025 interest waiver, which is a welcome relief for upfront taxpayers, particularly exporters, MSMEs, and start-ups that are facing inevitable delays. It shows that the government wants to make compliance more equitable and useful. But because the relief is application-based and subject to stringent deadlines, prompt action is crucial.

To increase their chances of receiving this benefit, Book My Accountant (BMA) assists individuals and companies in creating strong applications with the required supporting documents. Now is the time to take action and lessen needless financial burden if you think you qualify.

Disclaimer:

This article has been prepared by Book My Accountant (BMA) for general awareness purposes. It is based on publicly available information and CBDT circulars. It should not be treated as legal or financial advice. For personalized consultation, please connect with a qualified tax expert.

UPI a Blessing or a Burden? What Every Indian Needs to Know

UPI: A Powerful Tool When Used Wisely

The UPI Revolution and Its Position in Contemporary Financial Life

Unified Payments Interface (UPI) has revolutionized India's way of paying. A swift QR code scan or tap of the button, and one is done with payments in mere seconds—be it the ride, grocery shopping, or even the roadside tea. It has done away with the inconveniences of cash or card swipes to facilitate quick and convenient payments even for the most fundamental financial transactions.

UPI is being touted as the most successful live payment system in the world. Yet, although unmatched in convenience, its growing popularity has raised genuine raised eyebrows of taxpayers, small merchants, and businessmen alike regarding transparency, record-keeping, and compliance.

Is UPI, then, a digital blessing or an invisible financial bane?

Let us weigh both sides.

The Bright Side: UPI as a Tool for Financial Transparency and Ease

One of the biggest strengths of UPI is its digital trail left behind. Each transaction is timestamped, recorded, and made available through user-friendly applications such as Google Pay, PhonePe, BHIM, Paytm, and others.

This can prove to be of immense benefit in the following manner:

1. Better Taxation Filing and Planning of Budget

UPI transactions also leave behind a transparent, organized record of incomes and expenses. For individuals, freelancers, and entrepreneurs, this makes tax preparation and accuracy easier. No more scrambling through receipts—just glance at your app statement.

2. Reduced Utilization of Unaccounted Cash

India has been extremely cash-oriented historically. UPI has helped reduce cash dependence, hence formalizing greater components of the economy. This translates into better tax compliance and accountability.

3. Broader Financial Inclusion

According to AU Bank, UPI has enabled people who previously had no access to formal banking systems to take advantage of the digital economy. Rural shopkeepers, rural wage workers, and micro-vendors are able to receive payments effortlessly and at no expense without expensive POS machines.

4. Enhanced Creditworthiness

A clean and timely history of digital payments enhances an individual's credit profile. This opens the door to availing loans, subsidies, and business loans easily.

The Flip Side: The Stealthy Cost of UPI to Taxpayers

While it has its advantages, UPI also has its drawbacks—particularly for the ignorant about its tax and compliances implications.

1. Paying More through Impeccable Payments

India Today indicated that almost 75% of UPI users confess to increasing expenditure. Since there is no actual cash transfer, individuals lose track of the amount spent.

It is this "hidden spending" that is the problem when

Your monthly expenditure exceeds your income
You are not saving
There is poor financial planning and improper taxation reporting

2. Unintended Tax Implications on Small Vendors

Picture this: a roadside tea seller now takes UPI. Within a year, their cumulative digital payments exceed ₹20 lakhs. Even if the margin is slim, now the number of transactions attracts investigation by tax bodies or even GST registration levels.

This has been the reason for the UPI usage decline in some small business communities in states such as Karnataka. The merchants feel penalized for embracing digital behavior as tax regulations are ambiguous.

3. Ambiguity Over UPI Income Rules

In most instances, professional and business dealings are grouped in one UPI ID. This commingles taxable income and informal payments (such as reimbursement from buddies).

If taxpayers don't classify it correctly, auditors often flag even non-taxable revenue—wasting time, money, and effort.

Benefits	Pitfalls
Makes Transactions Transparent – All transactions are traced and documented	Promotes Expenditure Without Means – Ease makes impulse buying more likely
Reduces Black Money Flow – Encourages cleaner, compliant transactions	Generates Tax Nerves among Traders – Unnecessary digital volumes without context may draw inquisitive questions
Enhances Credit Availability – UPI history creates a financial history	No Segregation – Blending business and personal UPI payments generates confusion
Makes Correct Filing of ITR Easy – Easy to track and report income and outgoings	Misrepresentation of Payments – Non-taxable funds may be reported as taxable income
Supports Financial Planning – Simple to view past history from UPI statements	No Framework Defined Yet – Lack of standardized taxation policy on UPI usage

Best Practices for UPI Transactions Users: What You Need to Do as a Taxpayer

As a regular user of UPI for personal and business spendings, here is how you can remain compliant and worry-free:

1. Keep Your UPI Transaction History in Check

Avail monthly UPI statements through your app or bank. This serves the purpose of:

Tracking expenses
Preventing unnecessary or duplicate payments
Safe segregation of source of income

2. Use a Different UPI IDs for Business and Personal Transactions

Vendors, gig economy workers, and freelance workers must never combine personal expenditures and business receipts. It helps you to file taxes methodically and guards you during audit.

3. Save Digital Records

Download and save monthly UPI statements at all times, particularly if you are reporting business or professional income. These can come in handy during audits or when seeking loans.

4. Assign UPI Spending Limits

PhonePe and Google Pay apps provide the facility to limit transactions. This easy step can prevent excessive spending and help you maintain a budget.

What Policymakers Need to Do: Making UPI transaction Taxpayer-Friendly

To implement UPI successfully without causing confusion or fear, the government must focus on the following measures:

Initiate Clear Guidelines on what UPI transactions can be classified as business income
GST Thresholds for digital payments and micro-enterprises
Implement Awareness Campaigns for freelancers and small traders on how to handle UPI earnings
Implement a Grievance Redressal System for UPI tax complaints
Encourage Financial Literacy Features in UPI apps (auto-categorization, reminder of expenses, etc.)

UPI transactions : A Reflection of Your Financial Discipline

How Book My Accountant (BMA) Can Help You

In Book My Accountant (BMA), we realize the increasing complexities of digital payments. You are an employee, freelancer, founder of a startup, or small trader, we provide tailored assistance to guide you through:

UPI is not just a payment system. It's a reflection of how well we're disciplined when it comes to money. If used intelligently, it can usher in unprecedented ease and transparency into our finances. But if you're unaware of it or misuse it, it can be a pain for money—particularly when it comes to taxes.

UPI business and personal transaction segregation
Monthly digital records upkeep
Awareness of the income tax, GST, and TDS implications of UPI
Prevention of under-reporting income or non-filing while filing ITR
Stay Informed On The Latest Tax Rules Pertaining To Digital Payments

Do not wait for a notice or fine. Take control of your digital cash. With BMA's expert guidance, UPI can be a growth driver, not a stress factor.

Use UPI, But Use It Smrtly

UPI has revolutionized India's finance—convenience in payments, speed, and transparency. But higher convenience requires higher awareness.

Learn where UPI has a place in your tax life. Employ it as a smart money tool—not a trap. With professional advice from BMA, you can be treated by UPI without losing out on compliances.

Disclaimer

The facts stated in this article are for general information purposes only and are not professional financial or legal advice. Book My Accountant (BMA) has attempted its best to state accurate information; however, we disclaim all responsibility for loss or inconvenience arising due to reliance on the content. You are advised to seek professional advice from a qualified tax consultant on an individual basis.

Form 3CD Applicability Explained: A Complete Guide for Indian Businesses and Professionals in 2025

When Income Tax filing season is coming near 2025, companies and practitioners in India need to make sure they are compliant with audits. One of the necessary characteristics that are causing confusion is Form 3CD applicability. Whether it is business, profession, or operating presumptive scheme, one needs to understand when and why to file Form 3CD pursuant to Section 44AB of Income Tax Act.

Here in this blog, we demystify all about Form 3CD—its applicability, threshold limit, presumptive tax effect, and penalties. Let us take a close look at this valuable tax audit form.

What is Form 3CD?

Form 3CD is a comprehensive audit report submitted by a Chartered Accountant (CA) during a tax audit as required by Section 44AB of the Income Tax Act, 1961. It contains 44 clauses dealing with:

Gross receipts and turnover
Deductions claimed
Compliance of TDS, GST, and statutory payments
Related party transactions
Depreciation and capital expenditure details

Imagine it as a financial MRI scan. It provides a clear, methodical snapshot of your business or professional account to the Income Tax Department.

When is Form 3CD Applicable?

1️⃣ Businesses: Section 44AB(a)

Whether you are in business, the applicability of Form 3CD is based on your turnover and mode of payment.

Condition	Turnover Limit	Form 3CD Filing Required?
Normal Business	More than ₹1 crore	✅ Yes
95% or more transactions via digital modes	More than ₹10 crore	✅ Yes

Note: From AY 2021–22, the threshold limit became ₹10 crore if you receive 95% or more of all business income (receipts) and payments digitally through modes like NEFT, IMPS, UPI, credit/debit cards, net banking, etc.

2️⃣ Professionals: Section 44AB(b)

If you are a doctor, lawyer, architect, CA, or consultant, and your gross receipts are more than ₹50 lakh in a year, you will have to go for a tax audit, and your CA will have to file Form 3CD.

3️⃣ Presumptive Taxation Scheme Cases

a. Section 44AD – Small Businesses

For small firms with turnovers of up to ₹2 crore. You can report profits presumptively at:

8% of turnover on cash dealings
6% on digital dealings

However, if you:

Declare profit below 8% or 6%
And your total income exceeds the basic exemption limit (₹2.5 lakh for individuals below 60 years in AY 2025–26)

Your books will need to be audited and Form 3CD to be submitted under Section 44AB(e).

b. Section 44ADA – Professionals

Can be availed by professionals with gross receipts up to ₹50 lakh. Presumptive profit cannot be less than 50% of gross receipts.

You:

Report profit less than 50%
And total income is over the exemption limit

Then Form 3CD is required.

c. Lock-in Period under Section 44AD

If a taxpayer exits the presumptive plan for some time, say during the lock-in period of 5 years, then the taxpayer will not be permitted to join it again within the next five years. During the lock-in period, if turnover is above the basic exemption limit, submission of Form 3CD and tax audit are obligatory even if turnover is less than ₹1 crore.

4️⃣ Business or Profession Loss

Even when business is in loss, tax audit can be still applied if:

Turnover is more than ₹1 crore, and
You have not chosen presumptive taxation

You have shown loss, but aggregate income is more than exemption limit due to other incomes (such as rent, salary, or interest)

Then Form 3CD under Section 44AB is required.

Quick Summary Table – Form 3CD Applicability in 2025

Category	Condition	Form 3CD Filing?
Business	Turnover > ₹1 crore	Yes
Business (Digital 95%)	Turnover > ₹10 crore	Yes
Professional	Gross receipts > ₹50 lakh	Yes
Presumptive (44AD)	Profit < 8%/6% + Income > Exemption	Yes
Presumptive (44ADA)	Profit < 50% + Income > Exemption	Yes
Opted Out of 44AD	Within 5-year lock-in + Income > Exemption	Yes
Business Loss	Turnover > ₹1 crore or Income > Exemption	Yes

Penalty for Failure to File Form 3CD

Failure to file Form 3CD is punishable under Section 271B of the Income Tax Act:

0.5% of gross turnover or total receipts
Maximum fine: ₹1,50,000

This fine is levied if the assesses doesn't arrange the audit of accounts and file Form 3CD within the due date (ordinarily 30th September or 31st October, as the case may be).

Latest AY 2025–26 (FY 2024–25) Due Dates

31st October 2025: Due date for filing Form 3CD along with Tax Audit Report and ITR in cases of audit
30th September 2025: Deadline for audit completion

Ensure that your books of accounts are well in advance ready. Delays may invite penalties and added scrutiny.

Professional Tip: Track Turnover through Digital Resources

As digital transactions impact audit limits, keep proper records of:

Mode of receipts and payments
Bank statements
UPI/Wallet transactions
GST returns (particularly GSTR 3B and GSTR-1)

A GST portal summary often helps your CA reconcile turnover figures for Form 3CD.

Why Business Owners Shouldn't Take Form 3CD Lightly

Form 3CD is no formality box. It is a highly useful document at the time of the risk assessment of the Income Tax Department.

It is due to non-filing or incorrect filing of Form 3CD for the majority of the GST notices, TDS mismatches, and departmental scrutiny.

Proper filing brings transparency and less litigation.

Final Thoughts

Form 3CD is an exhaustive report card of your business or profession. Whether you are a retail trader, an e-business person, or a seasoned consultant, it is vital to know when Form 3CD applies so that you are on the right side of the law and avoid substantial fines.

If your turnover is over ₹1 crore, or if you earn professional income of more than ₹50 lakh, consult a Chartered Accountant forthwith. Do not wait. Put your books of accounts in order to make them audit-worthy, and submit Form 3CD under Section 44AB within time.

✍️ Need Help Filing Form 3CD?

Let our expert Chartered Accountants at Book My Accountant (BMA) assist you with:

Tax audit
Form 3CD preparation
GST reconciliation
Income tax filing

📞 Call us now: +91-7890002000
🌐 Visit: www.bookmyaccountant.in

⚠️ Disclaimer

This blog is intended for informational purposes only. The contents are based on the provisions of the Income Tax Act, 1961 as applicable for the Assessment Year 2025–26. Tax laws are subject to change, and individual circumstances may vary. Readers are advised to consult a qualified Chartered Accountant or tax professional before making any financial or compliance decisions. Book My Accountant (BMA) shall not be held responsible for any liability arising from the use of this information.

Got a Notice Under Section 143(2) of Income Tax Act? Here's What You Should Do Now

Timely filing of your income tax return is such a euphoric feeling, isn't it? You have made the disclosure, availed the deductions, and filed your return on time. And then, out of the blue, you get a notice in your mailbox — a notice that states your return has been selected for scrutiny under section 143 2 of income tax act.

Now what?

If you hear this before, don't panic. You're not alone. Thousands of taxpayers, both companies and individuals, receive the same income tax notices annually. And the majority of them also panic at first. But the good news is: if you play smart and within the time frame, there's absolutely nothing to fear.

This blog, courtesy of Book My Accountant (BMA), will take you through what the notice is about, why it occurs, and the precise steps to follow—particularly if you do not wish to incur penalties or tax issues down the road.

What Does a Section 143(2) Notice Mean?

Let's make it easy. Notice under section 143 2 of income tax act indicates the Income Tax Department needs to examine your return in more detail. It doesn't indicate that you are in trouble. It only means that something in your return puzzled them and they require clarification.

It might be because:

You have reported a high amount of income or deducted large amounts.
There is inconsistency between your Form 26AS/AIS and your ITR.
You had significant transactions—namely, selling a property or investing a large sum.
Your return was arbitrarily picked up by the system for scrutiny.

Briefly, this is routine scrutiny by the tax department. You just have to reply correctly and in time.

How Does Section 144B Relate to This?

You may have also heard of section 144B. It addresses faceless assessment.

Are those days gone when you used to have to go to an IT office? Now all of this is done online — safely, openly, and without any human bias. If your return is selected for assessment, all correspondence will be through the income tax portal.

So yes, even if you receive a notice under section 143(2), the assessment will probably follow the procedure under 144B.

Why Did You Receive a Notice?

Folks will wonder, "But I didn't do anything wrong. Why me?"
The truth is, here are some of the usual triggers:
Enormous refunds received
Donations or deductions that don't make sense based on your income
Transactions flagged by banks or third parties but not included in your return
Business expenses appearing to be exaggerated
Technical discrepancies in income or tax credits

Even if you've been completely above board, certain patterns or numbers can trigger your return for audit.

Step-by-Step: What You Should Do Immediately

Let's go into action mode. Here's your plan:

Step 1: Read the Notice Carefully

The assessment year (e.g. AY 2024–25)
The date of issue
The deadline for response
Whether it’s under 143(2) or also mentions 144B

Don't freak out. Just know what they're looking for.

Step 2: Collect Your Documents

Before you reply, you'll need to substantiate your claims with appropriate documents. Start with:

PAN & Aadhaar copies
ITR Acknowledgement
Bank statements
Salary slips / Form 16
Form 26AS, AIS, and TIS reports
Deduction proofs (80C, 80D, home loan, etc.)
Capital gain statements
Business records, if applicable

In essence, you need to construct a solid, fact-based reply.

Step 3: Log into the e-Filing Portal

Go to https://www.incometax.gov.in.

Proceed to "e-Proceedings" under "Pending Actions".

Locate the notice and click on "Submit Response".

Here you can attach supporting documents and reply in writing as needed.

Step 4: Respond Before the Deadline

Suppose the notice was published on 23rd June 2025 with a deadline to respond of 8th July 2025. If you happen to miss this date, the department can go ahead with a best judgment determination. That is, they will determine your case in your absence — and that might not be favorable for you.

What If You Need More Time?

If you are really not able to file on time, you can get an income tax extension through the portal. Simply state your reason clearly. Extensions are issued in actual cases.

But it's always best to be prepared and proactive. Answer early if you are able to.

Why a Tax Expert Can Make a Huge Difference

Even if you’re comfortable handling your taxes, scrutiny notices can get technical. If you’re a salaried person with multiple income streams, a business owner, or someone who has claimed heavy refunds, consulting a Chartered Accountant (CA) is wise.

Here’s how professionals like the team at BMA can help:

Identify errors or mismatches in your ITR vs. AIS/Form 26AS
Draft a legally strong response under the correct tax provisions
Upload clear and complete documentation
Handle follow-ups or departmental queries on your behalf
You wouldn’t want to lose a refund or face penalties because of an innocent mistake.

Tips to Avoid Notices in the Future

Want to stay off the department’s radar? Here’s how:

File your income tax return before the income tax return last date
Reconcile Form 26AS, AIS, and your actual income before filing
Don’t overclaim deductions
Disclose all sources of income, including crypto, rent, dividends
For businesses, keep books current and tidy
Think about getting a professional tax review prior to filing

And if you fear that you need extra time to file, get an income tax extension ahead of time instead of waiting until the very last minute.

What Happens if You Don't Respond?

Seriously? It's just not worth taking the chance.

If you don't respond:

The department might think that you're concealing something
Penalties and interest could be charged
Your income tax refund could be withheld
It may lead to further investigation

If it's a company tax return, the risk is even higher — your history of compliance counts for loans, tenders, audits, and reputation.

Dos and Don'ts of Tax Notice Handling

✅ Do This	❌ Avoid This
Check portal regularly	Ignoring the notice
Respond on time	Waiting till the last minute
Submit full documents	Uploading incomplete files
Keep records safe	Misplacing old returns
Ask a professional	Trying to wing it alone

Final Thoughts

Receiving a notice under section 143 2 of income tax act can be alarming, but it doesn't have to be an issue. It's a normal part of the tax system these days. Remain calm, remain truthful, and react intelligently.

And don't forget, if it's your first time receiving a notice or you are getting the notice every income tax this year, BMA is a call away. We are experts at solving both individual and company tax filing, with one-on-one care.

Disclaimer

This blog is for information purposes only. It is not a source of legal advice. Readers should contact a competent tax advisor or the Income Tax Department for personal advice. Book My Accountant (BMA) will not accept liability for action taken on the basis of this blog.