According to the bill, most provisions, including those related to pension taxation and Saudi investment exemptions, will take effect from 1 April 2025.
Published Aug 12, 2025 | 3:58 PM ⚊ Updated Aug 12, 2025 | 3:59 PM
File photo of Lok Sabha. (Screengrab)
Synopsis: The Lok Sabha passed the Taxation Laws (Amendment) Bill, 2025, to amend the Income-tax Act, 1961 and the Finance Act, 2025. The amendments target three major areas: Tax exemptions for Saudi Arabia’s sovereign wealth fund, tax treatment of payouts under the UPS and changes to the block assessment process in search and seizure cases.
The Lok Sabha on Monday, 11 August, passed the Taxation Laws (Amendment) Bill, 2025, to amend the Income-tax Act, 1961 and the Finance Act, 2025.
The amendments target three major areas: Tax exemptions for Saudi Arabia’s sovereign wealth fund, tax treatment of payouts under the Unified Pension Scheme (UPS), and changes to the block assessment process in search and seizure cases.
A key provision extends direct tax exemptions under section 10(23FE) of the Income-tax Act to the Public Investment Fund (PIF) of the Government of Saudi Arabia and its fully owned subsidiaries that are residents of Saudi Arabia and invest in India.
These exemptions apply to income from investments in infrastructure projects, specified companies, and certain regulated funds, subject to conditions on investment timing and holding periods.
According to the bill, the move is part of a bilateral understanding to strengthen cross-border investment ties between India and Saudi Arabia.
The Bill also introduced tax provisions for UPS, rolled out in 2025. Under the new rules, up to 60 percent of the pension corpus withdrawn at superannuation, voluntary retirement, or other permitted retirement will be exempt from tax. Certain lump sum payouts specified by government notification will also enjoy tax exemption.
However, any amount, including accrued returns withdrawn from the scheme where tax deductions were earlier claimed, will be treated as taxable income in the year of receipt. Transfers from an individual corpus to a pool corpus at retirement will not be considered taxable income.
The government said in the bill that the amendments aim to provide clarity for government employees and other subscribers on the tax treatment of their retirement benefits.
The bill also proposed revisions to the block assessment procedure used in income-tax search cases. It clarifies that all pending assessments or reassessments for years within the block period will automatically abate when a search or requisition is initiated.
Additionally, any proceedings started after the search but before the issuance of the block assessment order will also be deemed abated. The government said that these changes will prevent duplication of proceedings and ensure a more consistent application of the law in search-related cases.
According to the bill, most provisions, including those related to pension taxation and Saudi investment exemptions, will take effect from 1 April 2025. The changes to block assessment rules will apply retrospectively from 1 September 2024.
(Edited by Muhammed Fazil.)
