Question 1

The passage of the Appropriation Bill alone completes the budgetary process in Parliament.

Accepted Answer

The budgetary process requires the passage of both the Appropriation Bill (which legally authorizes the government to withdraw money from the Consolidated Fund for spending) and the Finance Bill (which gives effect to the government's taxation proposals).

Question 2

Section 9A of the Income Tax Act provides offshore funds with a blanket exemption from all Indian taxes.

Accepted Answer

Section 9A only provides a 'Safe Harbour' ensuring that the mere presence of an eligible fund manager in India does not create a taxable 'business connection' for the fund's global income. Any income actually sourced in India is still taxed appropriately.

Question 3

Consider the following statements regarding the amendments passed via the Finance Bill 2025: 1. The sunset date for claiming tax concessions by units located in the International Financial Services Centre (IFSC) has been extended to March 31, 2030. 2. Under Section 9A of the Income Tax Act, both direct and indirect participation by Indian residents are now excluded from the 5 percent threshold limit for eligible investment funds. 3. Basic Customs Duty on 35 capital goods utilized in the manufacturing of electric vehicle batteries has been completely exempted. How many of the above statements are correct?

Accepted Answer

(b) Only two — Statement 1 is correct: The sunset dates for various IFSC tax incentives were extended to March 31, 2030, to provide long-term predictability. Statement 2 is incorrect: The Finance Bill 2025 removed only the word 'indirectly'. This means indirect participation is excluded, but 'direct' participation by Indian residents is still counted and must remain under the 5 percent threshold to claim the safe harbour. Statement 3 is correct: 35 additional capital goods for EV battery manufacturing were exempted from BCD. Therefore, exactly two statements are correct.

Question 4

Match the following provisions amended or introduced in the Union Budget 2025-26 with their respective strategic objectives: List I (Provision) A. Exemption of Basic Customs Duty on cobalt powder and lithium-ion scrap; B. Amendment to Section 9A of the Income Tax Act (removing indirect participation clause); C. Extending sunset clauses for IFSC units to 2030; D. Exemption of BCD on 28 capital goods for mobile phone battery manufacturing. List II (Objective) 1. To facilitate the relocation of offshore fund managers to India; 2. To support the nascent black mass recycling industry domestically; 3. To deepen the localization of electronics supply chains in India; 4. To foster a predictable long-term tax environment for global financial hubs in India.

Accepted Answer

(a) A-2, B-1, C-4, D-3 — Exempting cobalt powder and lithium scrap (A) directly aids the domestic recycling and extraction of black mass (2). The Section 9A amendment (B) eases safe harbour norms to attract offshore fund managers to operate in India without fear of unintended taxation (1). Extending IFSC sunset clauses to 2030 (C) provides long-term predictability for financial hubs like GIFT City (4). Exempting BCD on mobile battery capital goods (D) aims to localize and scale electronics manufacturing (3).

Question 5

Assertion (A): The Finance Bill 2025 eliminated the requirement to track 'indirect participation' by Indian residents when calculating the 5 percent threshold limit under Section 9A of the Income Tax Act. Reason (R): Tracking the indirect participation of Indian residents through multiple layers of large global offshore investment funds created severe compliance burdens, defeating the purpose of the safe harbour regime.

Accepted Answer

(a) Both A and R are true and R is the correct explanation of A — Both statements are factually correct. Section 9A originally stipulated that Indian residents could not hold more than 5 percent in an offshore fund, directly or indirectly, to claim safe harbour. The reason (R) for removing 'indirectly' was precisely that global funds found it practically impossible to track indirect retail investments of Indian residents through complex international fund structures, which deterred them from utilizing Indian fund managers. Thus, R perfectly explains A.

Parliament Passes Finance Bill 2025 with Tax and Customs Amendments

SC Upholds Impeachment Inquiry Against HC Judge