Quick Summary
The amended Income Tax Bill aims to settle the persistent dispute over the definition and tax treatment of Non-Performing Assets (NPAs). The Select Committee of Parliament has adopted its report on the new Bill, which is expected to be submitted to the Lok Sabha Speaker early next week. The Bill has
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FAQ :
The main aim is to settle disputes regarding the definition and tax treatment of Non-Performing Assets (NPAs) by aligning income tax provisions with RBI guidelines.
Currently, RBI considers a loan an NPA if payments are overdue for over 90 days, but income tax rules only allow taxing interest on a receipt basis if the default lasts over 180 days, causing a conflict.
The bill proposes to define 'bad or doubtful debts' according to RBI guidelines and align the taxability of NPA interest income with the year it is actually received or credited.
The 'real income' principle, upheld by courts, suggests that only income that has actually been earned or received should be subject to tax, not hypothetical or notional income.
The bill is listed for discussion and passage during the upcoming Monsoon Session, beginning July 21.
If passed, the amendment is expected to simplify India's tax regime, reduce litigation for banks and financial institutions, and uphold the principle of taxing only real income.
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