COMPLIANCE UPDATES – AUGUST 2025
Government policies
GST Collection Rises 7.5% to Rs 1.96 Lakh Crore in July | Gross Goods and Services Tax (GST) collection in July 2025 increased by 7.5% year-on-year, reaching approximately INR 1.96 lakh crore. This is a rise from the INR 1.82 lakh crore collected in July 2024. The growth was driven by higher domestic revenues, which grew by 6.7% to INR 1.43 lakh crore, and a 9.5% increase in tax from imports, which totalled INR 52,712 crore. The net GST revenue for the month stood at INR 1.69 lakh crore, marking a 1.7% growth compared to the previous year. Additionally, GST refunds saw a significant surge, rising by 66.8% year-on-year to INR 27,147 crore. (Financial Express)
India Remains Firm on Russia Ties | India is unlikely to cease its purchase of Russian crude oil despite threats of penalties from US President Donald Trump, according to officials and analysts. The decision is driven by the need for affordable Russian barrels to manage inflation and the import bill, besides the country’s long-standing strategic relationship with Russia. Following Trump’s announcement of a new 25% tariff on Indian goods, top government officials met and reached a broad consensus to avoid immediate retaliation. Officials reiterated India’s commitment to protecting its national security interests and the agriculture sector, asserting that the country would not succumb to US pressure on issues involving defence ties with Russia or domestic dairy and agricultural interests. (Business Standard)
Goods and services tax
GST Authorities Target Unregistered Businesses Using Cash and UPI | Central and state GST authorities are intensifying scrutiny on unregistered small businesses and service providers with high-value cash and UPI transactions. In a move to expand the tax base, GST officials are seeking data from payment aggregators for businesses receiving over INR 20 lakh per year, which is the GST registration threshold for service providers. While states like Karnataka have already begun sending notices, central GST authorities have directed field officers to identify cash-prone sectors and markets to conduct targeted outreach and bring them into the tax net. The crackdown follows a missive from central authorities noting that a significant part of economic activity remains outside the formal tax framework. (The Indian Express)
GSTN Issues Advisory on Incorrect GSTR-3A Notices | The Goods and Services Tax Network (GSTN) has issued an advisory acknowledging that GSTR-3A notices for non-filing of Form GSTR-4 were incorrectly sent to certain taxpayers due to a “system-related glitch.” This includes taxpayers whose registrations were cancelled before the Financial Year 2024–25. The GSTN team is actively examining the issue and implementing corrective measures to prevent future occurrences. Affected taxpayers who have either duly filed their returns or had their registrations cancelled before FY 2024–25 are advised to ignore these notices, as no action is required on their part. (Goods and Services Tax Network)
Income tax
Income Tax Audit Forms Enabled with Key Changes | The Income Tax Department has enabled updated income tax audit forms 3CA-3CD and 3CB-3CD, along with a common offline utility, on the e-filing portal for the financial year 2024-25. Released on July 18, 2025, the forms incorporate 71 changes as per Notification No. 23/2025. Prominent amendments include a strengthened Clause 22, which requires detailed disclosure of payments and interest due to micro or small enterprises under the MSMED Act. Additionally, the forms now reflect legislative updates such as the inclusion of a new Clause 12 for presumptive taxation for non-resident cruise ship operators and a new Clause 21 for reporting non-deductible expenses on regulatory violations. A new Clause 36B has also been added to capture details of share buybacks. The deadline for filing the tax audit report is September 30, 2025, with taxpayers required to file their ITR by October 31, 2025. (Economic Times)
ITD Raids 200+ Premises Over Fake Tax Deductions | The Income Tax Department has launched a major nationwide crackdown, conducting raids on over 200 premises linked to individuals and entities facilitating fake tax deductions. The operation targeted fraudulent claims made under various heads, including political donations (Section 80GGC), tuition fees, and medical expenses. Investigations revealed organised rackets, often run by ITR preparers and intermediaries, who were filing fictitious returns and using bogus donations to help taxpayers artificially lower their tax liabilities and claim excessive refunds. The department utilised financial data from third-party sources, ground-level intelligence, and AI tools to identify suspicious patterns. The raids, which follow the department’s ‘Nudge’ campaign advising taxpayers to rectify unsupported deductions, are part of a broader effort to curb the widespread misuse of the old tax regime and have been substantiated by recent search and seizure operations in states including Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh. (Economic Times)
Government to Drop Low-Value Tax Cases | Finance Minister has instructed the Central Board of Direct Taxes (CBDT) to withdraw all departmental tax appeals below the revised monetary limits announced in Budget 2024-25 within three months. The initiative aims to reduce the legal burden on taxpayers and streamline the judicial process by targeting 2.25 lakh of the 5.77 lakh pending appeals in FY 2025-26, which involve disputed tax demands exceeding INR 10 lakh crore. The revised limits are INR 60 lakh for the Income Tax Appellate Tribunal (ITAT), INR 2 crore for High Courts, and INR 5 crore for the Supreme Court. (Financial Express)
ITR-3 Online Filing Now Enabled with Pre-Filled Data | The Income Tax Department has finally enabled online filing with pre-filled data for ITR-3 on its e-filing portal, 121 days into the new financial year. This provides a significant relief for taxpayers who earn income from a business or profession, share trading such as futures and options, or hold investments in unlisted shares. With both the online and offline utilities for ITR-3 now available, eligible individuals and Hindu Undivided Families (HUFs) can proceed with their tax return filing. The current ITR deadline for non-audit category taxpayers is September 15, 2025, an extension from the original July 31 date. However, with utilities for ITR forms 5, 6, and 7 still pending and significant delays noted in the rollout of other forms, there is growing speculation among taxpayers and experts about a potential further extension of the deadline. (Financial Express)
Updated ITR Filing Now Live for AY22 and AY23 | The Income Tax Department has enabled utilities for filing updated income tax returns (ITR-U) in Forms ITR-1 and ITR-2 for assessment years 2021-22 and 2022-23. As per the Finance Act, 2025, taxpayers now have an extended window of up to 48 months from the end of the relevant assessment year to file an ITR-U under Section 139(8A) of the Income Tax Act. This provision allows individuals to voluntarily rectify errors or omissions from previous filings, such as not reporting income correctly, by paying additional taxes. However, the ITR-U cannot be filed for a loss or nil return, or if it results in a decrease in total tax liability or an increase in a refund. (Economic Times)
Corporate and allied laws
SEBI Proposes Revamp of Large IPO Norms | The Securities and Exchange Board of India (SEBI) on Thursday proposed significant changes to the structure of large Initial Public Offerings (IPOs) exceeding INR 5,000 crore. The proposals, which are open for public comments until August 21, include reducing the retail investor allocation to 25% from the current 35% in a graded manner, while increasing the share for institutional buyers to 60% from 50%. Sebi noted that despite a surge in IPO activity, direct retail participation in large public issues has remained muted over the past three years. The regulator also proposed expanding the anchor investor framework to include insurance companies and pension funds, alongside mutual funds, with a specific sub-quota to encourage broader institutional participation and promote market stability. (Press Information Bureau)
Finance and banking
ICICI Bank to Charge Payment Aggregators for UPI Transactions | ICICI Bank, India’s second-largest private sector lender, will begin charging a fee from payment aggregators (PAs) for handling UPI transactions on merchant platforms, effective August 1, 2025. The bank has informed PAs that the new fee will be 2 basis points (bps) per transaction, with a cap of INR 6, for those who maintain an escrow account with the bank. PAs that do not have an escrow account with ICICI Bank will be charged a higher fee of 4 bps per transaction, capped at INR 10. The move marks a significant change in the financial ecosystem, impacting payment aggregators and potentially influencing the cost structure for merchants and their customers who rely on UPI for digital transactions. (Business Standard)
US Fed Holds Rates Steady | The US Federal Reserve has decided to keep its benchmark interest rates unchanged in the range of 4.25% to 4.50%, resisting public pressure from President Donald Trump. Ahead of the announcement, Trump called for a rate cut, citing a stronger-than-expected 3% annual GDP growth in the second quarter and low inflation. The Commerce Department confirmed the robust 3% growth rate, which was attributed to improving trade dynamics and a rebound in consumer spending. Despite the strong economic data, the Fed opted to hold rates steady, a decision that maintains a consistent monetary policy stance amidst political calls for a change in borrowing costs. (Financial Express)
Key Provisions of Banking Laws Amendment | The Central Government has notified that several key provisions of the Banking Laws (Amendment) Act, 2025, have come into force from August 1, 2025. The new provisions redefine the threshold of substantial interest, revising it from INR 5 lakh to INR 2 crore, a limit that had remained unchanged since 1968. Additionally, the amendments align the maximum tenure for directors in cooperative banks with the 97th Constitutional Amendment, increasing it from 8 years to 10 years. The Act also permits public sector banks (PSBs) to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF), bringing them in line with practices under the Companies Act. These provisions further empower PSBs to offer market-based remuneration to statutory auditors, which is expected to facilitate the engagement of high-quality professionals and enhance audit standards. (Press Information Bureau)
Accounting and Management
In Focus: Deferred Tax Liability
A deferred tax liability is an accounting concept that represents a future tax obligation arising from temporary differences between the financial reporting of income and its recognition for tax purposes. It occurs when income is recognised in the financial statements before it is taxable, or when expenses are deductible for tax purposes before they are recognised in the financial statements.
One common example involves depreciation methods: a company may use straight-line depreciation for financial reporting while applying accelerated depreciation for tax reporting, leading to lower taxable income in the early years and thus a temporary reduction in taxes paid. Although this results in a lower tax payment in the short term, the difference will reverse in future periods, leading to higher taxable income and, consequently, higher tax payments later.
The deferred tax liability captures this anticipated future tax payment, ensuring that the financial statements accurately reflect the timing differences in tax obligations. It is not an immediate cash outflow but rather an accounting mechanism to align financial and tax reporting over time.
Under Accounting Standard 22 (AS 22), Deferred Tax Liability must be recognised for all such taxable timing differences, using the tax rates and laws that are enacted or substantially enacted as of the balance sheet date. The standard requires that deferred taxes are not discounted to present value.
Entities are expected to reassess the deferred tax liability at each reporting date and adjust it through the profit and loss account if needed. Furthermore, appropriate disclosures must be made in the financial statements, including the nature and amount of timing differences and any changes in DTL during the reporting period.
Payroll and Personal Finance
UDGAM Helps Over 8.5 Lakh People Reclaim Deposits | The Reserve Bank of India (RBI) has launched the UDGAM (Unclaimed Deposits – Gateway to Access Information) portal, a centralised web platform designed to help individuals search for their unclaimed deposits across multiple banks in one place. According to a government response in the Lok Sabha, as of July 1, 2025, a total of 8,59,683 users had registered and accessed the portal. The initiative aims to reunite citizens with their unclaimed funds, which are transferred to the RBI’s Depositor Education and Awareness (DEA) Fund after ten years of inactivity. The portal provides a seamless way for individuals to identify their forgotten accounts and begin the process of reclaiming their money from the respective banks. (Economic Times)