Business Income: Comparative Analysis of Clause 26 of the Income Tax Bill, 2025 and Section 28 of the Income-tax Act, 1961

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..... mic environment and business practices. The existing Section 28 of the Income-tax Act, 1961, has been the cornerstone of business income taxation for decades. This article provides a detailed analysis of Clause 26, comparing it with Section 28, and discusses the implications of the proposed changes. Objective and Purpose Clause 26 of the Income Tax Bill, 2025, seeks to modernize the taxation framework for business income. The legislative intent behind this provision is to ensure a comprehensive and inclusive definition of income under "Profits and gains of business or profession." It aims to address ambiguities and incorporate various forms of compensation and benefits that have emerged in modern business practices. The historical context .....

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..... xport incentives such as input license profits, cash assistance, duty drawback, and duty remission. This is similar to Section 28(iiia)-(iiie), but Clause 26 provides a more streamlined and unified approach to export incentives, potentially simplifying compliance and interpretation. 5. Benefits and Perquisites Clause 26(2)(f) and Section 28(iv) both address benefits or perquisites arising from business or profession. The new clause maintains the essence of the existing provision while ensuring clarity by explicitly mentioning cash and kind benefits, reflecting modern business practices where non-monetary benefits are prevalent. 6. Partner's Income Clause 26(2)(g) aligns with Section 28(v), addressing income received by a partner fro .....

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..... in property income treatment. Practical Implications The introduction of Clause 26 in the Income Tax Bill, 2025, has several practical implications for businesses and professionals. The refined definitions and inclusions aim to reduce ambiguities and enhance compliance. Businesses may need to reassess their accounting practices, especially concerning export incentives and non-monetary benefits. The alignment with international agreements, such as the Montreal Protocol, reflects a move towards global tax compliance standards. Comparative Analysis Clause 26 of the Income Tax Bill, 2025, and Section 28 of the Income-tax Act, 1961, share several similarities, reflecting a continuity in the taxation framework for business income. However, Cl .....

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