COMPLIANCE UPDATES – JUNE 2025

Government policies

🟩 India Begins Phased Rollout of Biometric e-Passports with RFID Security | India has officially begun the phased rollout of its next-generation e-passports, equipped with RFID-enabled chips and biometric security features. The initiative, launched this month, brings India in line with over 120 nations including the US, France, and Japan that already use biometric passports. The new navy-blue e-passport features a tamper-proof electronic chip embedded beneath a gold-coloured logo, containing digitally signed personal and biometric data of the holder. This allows for quicker authentication at immigration counters and adds a strong layer of protection against passport fraud. The chip also supports International Civil Aviation Organization (ICAO) standards, including Basic Access Control, Passive Authentication, and Extended Access Control for fingerprint verification. Information is encrypted and protected via Public Key Infrastructure (PKI), rendering the booklet nearly impossible to counterfeit. Despite the upgrade, existing passports will remain valid until expiry and do not need to be replaced immediately. Citizens interested in obtaining an e-passport must register via the Passport Seva Portal, fill out and submit an application, pay online, schedule an appointment, and undergo biometric and document verification at the designated passport office. (Business Today)

🟩 Gujarat Announces Relief Package for Diamond Craftsmen Amid Industry Slump | The Gujarat government has announced a relief package for diamond craftsmen affected by the ongoing slump in trade, primarily caused by the US recession and the Ukraine-Russia war. Announced by Chief Minister Bhupendra Patel following a meeting with the All Gujarat Diamond Association, the package includes a waiver of education fees for the children of diamond workers up to INR 13,500, which will be transferred via Direct Bank Transfer. Additionally, affected craftsmen will receive relief in electricity bills for one year. The scheme applies to those who lost their jobs after March 31, 2024 and have at least three years of work experience in the diamond industry. Small industries in the sector will also receive support in the form of a nine per cent interest subsidy on loans up to INR 5 lakh for three years, provided they have an investment of less than INR 2.5 crore and are active between 2022 and 2024. Only units registered with the Department of Industries before March 31 will be eligible. The industry, centred in Surat, has seen over 71 suicides among craftsmen in the last 16 months, with many shifting to other occupations including textiles. (ETV Bharat)

🟩 RBI Announces Record INR 2.69 Lakh Crore Dividend for Centre in FY25 | The Reserve Bank of India has declared its highest-ever dividend payout of INR 2.69 lakh crore to the central government for the fiscal year 2024-25, marking a 27% increase over the previous year’s INR 2.1 lakh crore. The decision was made during the 616th meeting of the Central Board of Directors in Mumbai, chaired by Governor Sanjay Malhotra, where the board also reviewed the global and domestic economic outlook. The substantial surplus transfer, expected to aid the government’s target of reducing the fiscal deficit to 4.4% this year, follows increased earnings from forex revaluation gains and interest on government bonds. The RBI also raised its contingency risk buffer from 6.5% to 7.5%, in line with the macroeconomic outlook. The transfer was based on the Economic Capital Framework (ECF) set by the Bimal Jalan committee, which was reviewed for potential updates to guide surplus sharing over the next five years. Annual dividend transfers from RBI are derived from profits on investments, currency printing, and valuation gains on foreign reserves. (Financial Express)

🟩 ‘Industrial Ideathon 2025’ to Bring Together Brightest Student Minds | The Delhi Industrial and Infrastructure Development Corporation will host ‘Industrial Ideathon 2025’ in July or August to foster student-driven innovation across key industrial sectors. Delhi Industries minister Manjinder Singh Sirsa announced that over 120 teams from more than 30 top institutions will participate, with each team mandatorily including at least one woman and comprising members from multiple academic disciplines. The event aims to tackle challenges in four sectors: traditional and village industries, frontier technologies, green technologies, and trade and logistics. Sirsa emphasized the initiative as a collaborative platform for students to develop practical solutions, reflecting the government’s focus on digital transformation, youth empowerment, and inclusive growth through entrepreneurship. The total prize pool for the competition will be INR 8 million. (Times of India)

Goods and services tax

🟩 Supreme Court Allows Input Tax Credit for GST Appeal Pre-Deposits | In a significant decision for Goods and Services Tax (GST) registered taxpayers, the Supreme Court on May 19, 2025, upheld the Gujarat High Court’s ruling that allows taxpayers to use their input tax credit (ITC) from the electronic credit ledger (ECL) for mandatory pre-deposit payments when filing GST litigation case appeals. The Supreme Court dismissed the government’s special leave petition challenging the Gujarat High Court’s judgement, which cited precedents like the Bombay High Court’s Oasis Realty case and a GST Policy wing circular from July 6, 2022. This ruling confirms that a taxpayer can utilize the amount available in their Electronic Credit Ledger to pay the 10% of the disputed tax required under sub-section (6) of Section 107 of the CGST Act, thereby easing working capital constraints for businesses. Experts believe this will particularly benefit exporters who often have accumulated ITC and will help streamline ongoing court proceedings. (Economic Times)

🟨 GSTN Defers Locking of Inter-State Supply Data in Monthly Returns | The GST Network (GSTN) has postponed the implementation of a feature that would have made Table 3.2 in the monthly GSTR-3B tax payment form non-editable. This table records inter-state supplies made to unregistered persons and composition taxpayers. Originally, GSTN had announced on April 11, 2025, that this auto-populated data would be locked from the April 2025 tax period. However, following numerous representations and grievances from taxpayers regarding the accuracy of the auto-populated figures, GSTN has decided to keep Table 3.2 editable for the time being. Taxpayers are advised to accurately report or amend any auto-populated entries as needed. This deferral offers relief, particularly to sectors like retail, FMCG, hospitality, and e-commerce, where sales to unregistered buyers are common and system-generated numbers might not always align with actual company records. (Economic Times)

Income tax

🟨 ITR-U Form Notified to Correct Errors in Filed Returns | The Central Board of Direct Taxes has notified the ITR-U (updated income tax return) form under Section 139(8A) to allow taxpayers to correct errors or omissions in previously filed ITRs or to file returns missed entirely, beyond the belated or revised deadlines. Effective from April 1, 2025, under changes introduced in Budget 2025, taxpayers can now file an updated return within 48 months from the end of the relevant assessment year, an extension from the earlier 24-month limit. The ITR-U, introduced initially in Budget 2022, applies to those who missed the original deadline or need to rectify discrepancies. For instance, a taxpayer who failed to file for AY 2023-24 can now submit an ITR-U until March 31, 2026. However, filing an ITR-U attracts a progressively increasing additional tax: 25% if filed within 12 months, 50% within 24 months, 60% within 36 months, and 70% if filed between 36 and 48 months. The notification was issued via Notification No. 49/2025 dated May 19, 2025, as part of the Income-tax (Eleventh Amendment) Rules, 2022. (Financial Express)

🟩One-Time Set-Off of LTCL Against STCG Under New Income Tax Bill 2025 | The Income Tax Bill 2025 introduces a significant one-time relief allowing long-term capital losses (LTCL) incurred up to March 31, 2026, to be set off against short-term capital gains (STCG) from tax year 2026–27 onwards. This marks a departure from existing provisions under the Income Tax Act, of 1961, which only permitted LTCL to be set off against LTCG. Under clause 536(n) of the new bill, any capital loss computed under the old act and carried forward can now be offset against any capital gains, regardless of type, under the new regime. This benefit is applicable for up to eight assessment years post-March 2026. Experts note that the move allows taxpayers to reduce their tax burden and improve cash flow by utilizing unabsorbed LTCL more efficiently. However, this is a one-time transitional measure and will not apply to losses incurred after April 1, 2026, which must still follow the traditional matching of LTCL with LTCG only. Taxpayers may consider strategically realizing long-term losses before April 2026 to benefit from this provision. (Economic Times)

Corporate and allied laws

🟩 MCA Notifies New Accounting Standard for Foreign Currency Transactions | The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules 2025, primarily modifying Ind AS 21 to guide companies on handling foreign currency transactions when the exchangeability between two currencies is lacking. Effective from annual reporting periods beginning April 2025, this new rule will enable companies to more accurately estimate the spot exchange rate in situations of undue short-term currency volatility or lack of transparency regarding exchange values. The amendments define currency exchangeability and outline conditions for entities to conclude when their functional currency is not exchangeable, allowing them to translate “affected foreign currency” items at fair value using an estimated spot exchange rate. Industry sources believe this improvement in financial reporting will enhance investor trust in Indian firms with substantial foreign operations, including export-intensive ones, potentially leading to increased capital inflows from global patient capital such as sovereign and pension funds. (Financial Express)

🟨 Corporate Affairs Ministry to Strike Off Over 3,300 Companies | The Ministry of Corporate Affairs (MCA) is preparing to remove more than 3,300 company names from official records, following applications submitted by Registrars of Companies (RoCs) across various states and Union Territories. These companies sought removal under Section 248(2) of the Companies Act, primarily due to failing to commence business within one year of incorporation or not conducting any business or operations for two immediately preceding financial years. Public notices were issued by RoCs in April to invite objections to these proposed removals. Maharashtra accounts for over 700 of these companies, followed by Delhi with nearly 500, and Karnataka with more than 350. As of March this year, India had 18,50,932 active companies out of 28,52,449 registered companies. (Economic Times)

Finance and banking

🟥 RBI Tightens DLG Rules, Excludes Fintech-Sourced Cover for NBFC Provisions | The Reserve Bank of India (RBI) has instructed finance companies to exclude default loss guarantees (DLGs) provided by fintech firms when calculating provisions for stressed loans, a move that impacts independent digital lending service providers. In a communication issued in May, the RBI directed Non-Banking Finance Companies (NBFCs) to disregard “credit enhancements under DLG arrangements as of March 31, 2025, from the computation of expected credit loss,” with provisions to be implemented by September 30. This means NBFCs must now make full regular provisions on loans sourced from digital platforms, diminishing the appeal of these loans for new business generation. Previously, NBFCs factored in these DLGs, typically capped at 5% and often held as fixed deposits by fintechs to share risk, when computing expected credit losses. Industry experts suggest this directive will push NBFCs to bolster their underwriting skills and could negatively impact fintechs’ origination volumes and fee income. (Economic Times)

🟩 KYC Update to Get Easier as RBI Proposes New Rules | The Reserve Bank of India (RBI) has released draft amendments to its Know Your Customer (KYC) directions, aiming to simplify the periodic KYC update process for customers. This move addresses existing pendency in KYC updates, including those for government scheme beneficiaries, and numerous customer complaints about challenges faced during the process. The draft proposes that a self-declaration will suffice if there’s no change in KYC information or only an address change, with business correspondents (BCs) enabled to record these electronically or authenticate physical submissions. Low-risk customers will be allowed to transact for one year after their KYC due date or until June 30, 2026, whichever is later. Banks are mandated to provide at least three advance intimations, including one by letter, to customers before their KYC due date. The RBI also advises on digital modes for onboarding new customers, such as Aadhaar biometric-based e-KYC, e-documents, and DigiLocker. The public is invited to submit comments on these draft amendments until June 6, 2025. (Hindustan Times)

Customs and foreign trade

🟨 Government Modifies Import Rules for Certain Gold, Silver Items | The Indian government, through the Directorate General of Foreign Trade (DGFT), has updated import policies for specific unwrought, semi-manufactured, and powdered gold and silver items, effective May 19, 2025. This move aims to enhance consistency between import tariffs and customs regulations, aligning with changes introduced in the Finance Act 2025. Previously restricted gold forms, such as unwrought or semi-manufactured gold with 99.5 per cent or more purity, can now be imported under specific conditions by agencies nominated by the RBI or DGFT, qualified jewellers authorized by the International Financial Services Centres Authority (IFSCA) through the India International Bullion Exchange (IIBX), or valid tariff rate quota (TRQ) holders under the India-UAE free trade agreement. Conversely, some silver products that were previously freely importable, like unwrought silver with 99.9 per cent or more purity, now face similar restrictions. These changes also address loopholes, like the mislabeling of gold as platinum alloys to evade higher duties, by introducing new Harmonized System (HS) codes for better tracking and control. (The Hindu)

🟥 Ludhiana Hosiery Industry Protests Imports from Turkey and Bangladesh | Hosiery and textile industrialists in Ludhiana, Punjab, staged a symbolic protest on Tuesday, May 27, 2025, burning imported garments to voice their frustration over rising imports from Turkey and Bangladesh. The industry leaders are concerned about the growing threat to the domestic market, fearing a further decline in demand for local products. Vinod Thapar, chairman of the Knitwear Club, stated the protest also highlighted a perceived lack of national solidarity from Turkey and Bangladesh during a recent conflict between India and Pakistan, despite India’s humanitarian aid to Turkey. Industrialists claim that duty-free imports from Bangladesh under SAFTA, coupled with Turkish brands routing products through Bangladesh to avoid duties, are severely damaging Ludhiana’s textile ecosystem. They are calling for a boycott of garments from these nations and urging Indian citizens to prioritize Indian-made brands and reconsider leisure travel to Turkey. Ludhiana, a major hub for winter wear, has approximately 12,000 textile and hosiery units, employing over 500,000 people and contributing significantly to the domestic market and exports. (The Indian Express)

🟥 Government Curbs Imports of Cabinet Hinges and Roller Chains | The Indian government on May 26, 2025, imposed import restrictions on cabinet hinges and roller chains that are priced below specific values, a measure aimed at curbing cheap inbound shipments, particularly from countries like China. Imports of cabinet hinges with a CIF (cost, insurance, freight) value of less than INR 280 per kilogram, and roller chains and their parts with a CIF value of less than INR 235 per kilogram, will now be restricted. This means importers will require permission or a license from the Directorate General of Foreign Trade (DGFT) for these goods if their prices fall below the stipulated rates. The move, notified by the DGFT, marks a shift from previous unrestricted import policies for these items. Hinges are predominantly imported from China, Italy, and Germany, while roller chains mainly come from China, Germany, and Japan. This initiative is part of a broader government strategy to bolster domestic manufacturing and reduce India’s import dependency on countries like China, especially given that India’s trade deficit with China widened to USD 99.2 billion in 2024-25. (Deccan Herald)

Accounting and management

🟩 SEBI Mandates Annual Internal Audit for All MII Activities | The Securities & Exchange Board of India (SEBI) has revised guidelines for the internal audit mechanism of Market Infrastructure Institutions (MIIs), including stock exchanges, depositories, and clearing corporations, to strengthen governance. Effective 90 days from May 19, 2025, every MII must conduct an internal audit of all functions and activities at least once per financial year, performed by an independent audit firm. New rules also prohibit executive directors, including the managing director, from being part of audit committees. Auditors and Key Management Personnel (KMPs) have the right to be heard during audit committee meetings considering reports, but no voting rights. MIIs are required to establish a policy for internal auditor appointments, approved by the audit committee, with auditors reporting solely to this committee. The internal auditor will also appraise the audit committee on critical issues every six months, in the absence of management, enhancing transparency and oversight in India’s financial markets. (Financial Express)

Payroll and personal finance

🟩 RBI Allows Minors Above 10 to Independently Operate Bank Accounts | The Reserve Bank of India (RBI) has issued new guidelines permitting minors aged 10 and above to independently open and manage their own savings or term deposit bank accounts. This significant update applies to all commercial banks and cooperative banks, including primary (urban), state, and district central cooperative banks. While minors of any age can still open accounts through a natural or legal guardian, the new rule, effective July 1, 2025, grants greater financial autonomy to older children. Banks retain the flexibility to set account limits and terms based on their risk management policies, which must be communicated to the young account holders. Additionally, banks can now offer services like Internet banking, ATM/debit cards, and chequebooks, provided these align with their risk assessment. The RBI has mandated that minor accounts, whether operated independently or by a guardian, must never go into overdraft and must always maintain a credit balance. Banks are required to update their internal policies to reflect these changes by July 1, 2025, and adhere to all Know Your Customer (KYC) norms. (India Today)