Introduction
Determination of tax liability is critical when calculating final income tax dues. Under the Income Tax Bill, 2025, Clause 190 mirrors, yet modernizes, the concept found in Section 110 of the Income-tax Act, 1961. Let’s break it down in simple language for Indian taxpayers.
What is Determination of Tax Liability Where No Tax is Payable?
When total income is already exempt, or deductions and rebates reduce taxable income to nil, no tax is actually payable. Yet, under law, a formal determination of tax liability must still be made.
- Section 110 (Old Law):
Required assessing officer to determine tax liability even if no final tax was due after considering all deductions, exemptions, and rebates. - Clause 190 (New Bill 2025):
Continues the same principle with clearer drafting and alignment to modern tax computation practices.
Comparative Table: Clause 190 vs Section 110
| Basis | Section 110 (1961 Act) | Clause 190 (2025 Bill) |
|---|---|---|
| Purpose | Formal assessment even when no tax due | Same, but with modernized language |
| Wording | Traditional legal phrasing | Simpler and taxpayer-friendly phrasing |
| Compliance Need | Mandatory | Mandatory |
| Impact on Refund or Carry Forward | Ensures no loss of refund or losses to carry forward | Same purpose with easier implementation |
| Relevant Notification/Reference | Income-tax Act, 1961 | Income Tax Bill, 2025 (Draft, March 2025) |
Why Determination is Necessary Even if No Tax is Payable
- Protects taxpayer’s right to claim refunds, set-off, or carry forward losses.
- Validates compliance even for entities having full exemptions (e.g., charitable trusts).
- Acts as legal proof if any future demand or audit inquiry arises.
- Important under GST regime too, where cross-verifications are linked to income disclosures.