Weekly Round-up on Tax and Corporate Laws | 17th January to 1st February 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from January 17^th to February 01^st, 2025, namely:

1. Highlights of the Finance Bill 2025;
2. RBI tightens the grip, prescribes stricter penalties and enhanced compliances under the PSS Act, 2007;
3. Auto-populated liability in GSTR-3B will not be implemented from January tax period: GSTN;
4. Clarification on applicability of late fee for delay in furnishing of FORM GSTR-9C: Circular;
5. ICAI introduces comprehensive guidelines on Merger & Demerger of CA Firms; and
6. ICAI introduces aggregation of LLPs Guidelines 2024.

1. Highlights of the Finance Bill, 2025

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, brings significant changes to stimulate economic growth, support the middle class, and ensure fiscal stability. The government has introduced crucial measures to provide relief to individuals and small businesses.

The Finance Bill 2025 proposes amendments to tax and corporate laws. The key income tax proposals include personal income tax reform focusing on the middle class, rationalisation of TDS/TCS, encouragement of voluntary compliance, reduction of the compliance burden, ease of doing business, and incentives for employment and investment. The Finance Minister has also announced that the new Income-tax Bill 2025 will be released next week.

This write-up presents a detailed summary of all the amendments proposed in the Finance Bill 2025, categorized as follows:

• Direct Taxes

1. 1. Personal Tax Rates
   2. TDS/TCS
   3. Salary and House Property Income
   4. Income-tax Return
   5. Capital Gains
   6. Deductions
   7. Taxation of Non-residents
   8. IFSC
   9. Block Assessment
   10. Business Trusts
   11. Charitable & Religious Trusts
   12. Transfer Pricing
   13. Crypto Assets
   14. Penalties and Prosecutions
   15. Time Limit for the Sale of Attached Immovable Property
   16. Other Amendments

• Indirect Taxes

1. 1. GST
   2. Excise and Service Tax
   3. Customs

• Corporate Laws

Read the Budget Highlights

Download the Finance Bill 2025

2. RBI tightens the grip, prescribes stricter penalties and enhanced compliances under the PSS Act, 2007

The RBI vide. Circular dated January 30, 2025, has updated the framework for imposing monetary penalties and compounding of offences under the Payment and Settlement Systems (PSS) Act, 2007. The revised framework is designed to enhance the enforcement of regulatory compliance within India’s payment ecosystem, creating a more secure, transparent and accountable environment for payment system operators. The RBI’s move strengthens payment system integrity by ensuring operators uphold high accountability standards.

2.1 What is ‘Payment and Settlement Systems’ Act, 2007?

The Payment and Settlement Systems (PSS) Act, 2007 provides for the regulation and supervision of payment systems in India and designates the RBI as the authority for this purpose. This Act extends to the whole of India.

‘Payment System’ means a system that facilitates payments between payer and beneficiary, involving clearing, payment or settlement service or all of them. However, it does not include a stock exchange.

2.2 Primary Parties involved in ‘Payment and Settlement Systems’ Act, 2007

This Act basically affects payment system operators, i.e. the entities that operate and manage payment systems such as banks, NBFCs involved in payment processing, mobile wallet providers (Paytm, PhonePe and Google Play), etc. These are the primary parties as they facilitate electronic transactions, ensuring security and efficiency in the payment ecosystem. Authorisation from the RBI is required to commence or operate a payment system under this Act.

2.3 Updated framework for imposing penalties under the PSS Act

The RBI has updated the framework for imposing monetary penalties and compounding of offences under the PSS Act, 2007. The objective is to make enforcement actions more structured and efficient while ensuring stronger compliance with the law. The revised framework helps to prevent violations and promote timely corrective actions, thereby safeguarding the integrity of India’s Payment and Settlement Systems.

2.4 Increased penalty limits for contravention under PSS Act to ensure stricter compliance

The RBI can now impose a penalty of up to Rs. 10 lakh or twice the amount involved in the contravention, where such amount is quantifiable (whichever is higher).

For continuing contraventions, a further penalty of up to Rs. 25,000 for each day can be levied after the first day of contravention. Earlier, the penalty was capped at Rs 5 lakh. The penalty amount was raised following the enactment of the Jan Vishwas (Amendment of Provisions) Act, 2023, which came into force on January 22, 2024. This increase aims to ensure stricter compliance and stronger enforcement.

2.5 Revised Designated Authorities for imposing penalties and compounding of contraventions

The designated authority for imposing monetary penalties and compounding of contraventions shall be (a) a Committee comprising three Executive Directors for cases handled by the Central Office of the Enforcement Department and (b) a Committee comprising a Regional Director and two senior officers at the Regional Office of the Enforcement Department.

Under the existing framework, different authorities were designated for imposing monetary penalties and for compounding of contraventions, depending on whether the contravention is quantifiable or non-quantifiable. The revised framework consolidates enforcement actions for quicker decision-making and greater efficiency.

2.6 Illustrative List of Contraventions/Violations for Enforcement Actions

The revised enforcement framework also includes an illustrative list of potential contraventions and violations as under:

• Violation of Authorization Terms: Failure to comply with the terms and conditions of authorisation issued by the RBI.
• Failure to Provide Information: Failure to produce or furnish any statement, information, returns or other documents to RBI or to answer any question relating to the operation of payment systems.
• Unauthorized Disclosure: Disclosure of any information prohibited under section 22 of the PSS Act.
• Data Storage Issues: Inadequacy in the storage of payment system data in India.
• False Statements: Wilfully making a false statement or omitting to make a material statement to the RBI.
• Regulatory Violations: Contravention of any provisions of the PSS Act or any regulation, directions or instructions made, non-compliance with KYC and Anti-Money Laundering norms, and non-compliance with directions relating to maintenance of escrow accounts.

The revised enforcement framework strengthens regulatory oversight by specifying key contraventions, ensuring stricter compliance with the RBI norms. It emphasizes accountability in authorization, data security, disclosure, and adherence to financial regulations.

2.7 Conclusion

The RBI’s updated framework marks a significant move towards strengthening regulatory enforcement in India’s payment ecosystem. By raising the penalty limits, enhancing the efficiency of enforcement actions and consolidating decision-making authority, the framework aims to ensure that payment system operators comply with regulatory requirements, thereby promoting transparency, security and integrity in the financial system.

Read the Circular

3. Auto-populated liability in GSTR-3B will not be implemented from January tax period: GSTN

The GSTN, in its advisory dated October 17, 2025, had informed that the GST Portal would restrict the editing of auto-populated tax liabilities in Form GSTR-3B, effective from the January 2025 tax period. Therefore, the taxpayers were advised that any necessary amendments to the auto-populated liability should be made through Form GSTR-1A, ensuring alignment with outward supply data reported in Form GSTR-1/1A/IFF.

Now, the GSTN has issued an update to inform that various requests have been received from the trade seeking time for restricting the editing of auto-populated liability in GSTR-3B from the January 2025 tax period. Therefore, the decision of making non-editable of auto-populated liability in GSTR-3B is currently not being implemented from January tax period, on the GST Portal. In this regard, GSTN Update dated January 27th, 2025 has been issued.

Read the Story

4. Clarification on applicability of late fee for delay in furnishing of FORM GSTR-9C: Circular

The CBIC has received representations seeking clarification regarding levy of late fee payable for delay in furnishing of reconciliation statement in FORM GSTR-9C. The CBIC has issued circular to clarify that late fee is not separately leviable for delayed furnishing of FORM GSTR-9 and delayed furnishing of FORM GSTR-9C. The late fees is payable for the delay in furnishing of complete annual return under section 44 of the CGST Act, i.e. both FORM GSTR-9 and FORM GSTR-9C.

Also, it is clarified that no additional late fee shall be payable for delayed furnishing of FORM GSTR-9C which is in excess of the late fee payable under section 47 upto the date of furnishing FORM GSTR-9 for the said financial year. In this regard, Circular No. 246/03/2025-GST dated January 30th, 2025 has been issued.

Read the Circular

5. ICAI introduces comprehensive guidelines on Merger & Demerger of CA Firms

The ICAI has introduced the Merger & Demerger of CA Firms Guidelines, 2024 (Notification No. 1-CACAF/M&D-F/2025) to streamline the consolidation of Chartered Accountant firms while ensuring transparency, firm identity protection, and regulatory compliance. Under the new framework, merging firms must submit Form MDG 1 within 30 days, with the merged entity retaining the seniority of the oldest firm. ICAI will freeze the names of merging firms to prevent reuse. In case of a demerger, at least 75% of continuing partners must agree, and firms can reclaim their original name within 1 to 10 years by submitting Form MDG 2; beyond this period, the name remains permanently frozen. To ensure compliance, ICAI mandates firms to register merger agreements and maintain proper documentation. A Grievance Redressal Cell has been established to assist firms, and ICAI reserves the right to issue clarifications for smooth implementation. These guidelines aim to simplify CA firm mergers, safeguard professional identity, and enhance operational efficiency.

Read the Story

6. ICAI introduces aggregation of LLPs Guidelines 2024

The ICAI has issued the “ICAI (Aggregation of LLPs) Guidelines, 2024,” effective January 23, 2025, to provide a structured framework for collaboration among CA LLPs while ensuring compliance with the Chartered Accountants Act, 1949, and other regulations. Under these guidelines, LLPs with over 50% practicing CA partners can form or join a parent LLP, ensuring that practicing CAs retain control over decision-making and profit-sharing. Governance must align with ICAI’s regulations, the LLP Act, 2008, and council guidelines, with a Board of Management overseeing compliance and strategy. The guidelines prohibit joint or rotational audits among partner LLPs to maintain independence and ethical standards, while reconstitution or exit must follow ICAI procedures. Additionally, ICAI has proposed a “Doc Locker”, a secure digital repository for LLP documents. Corporate entities, both Indian and foreign, cannot be partners in a parent LLP, ensuring compliance with Section 25 of the Chartered Accountants Act, 1949. These measures aim to enhance collaboration, maintain professional integrity, and ensure regulatory compliance.

Read the Story