At TwoTax, we’re here to help you understand recent changes in simple terms. This month’s newsletter covers important updates in accounting rules, regulations, tax laws, GST, and more. We explain how these changes may affect you or your small business, with no jargon – just clear, practical takeaways.

Accounting Updates

• ICAI guidance on environmental commitments:The accounting body (ICAI) issued a new advisory for companies in mining and similar sectors. It says that if a company promises environmental work (like planting trees) in the future, it does not need to recognize a liability (debt) right away. Instead, record the expense only when the project actually starts or conditions are met. This means businesses won’t prematurely book large costs on their balance sheets until there’s a real trigger.
• Audit letters (MRL FAQs):Auditors and accountants got helpful FAQs on the Management Representation Letter (MRL). This is the official document where company management confirms facts to auditors. The FAQs explain what managers should cover – such as compliance with laws, fraud checks, related-party deals – and give examples of how to write the letter. This makes audits smoother and helps everyone know what to expect.
• Audit Quality Model (AQMM) expanded:The ICAI’s audit quality checks are being strengthened. More audit firms will now have to undergo the Audit Quality Maturity Model. From April 2026, firms auditing big companies and financial institutions must meet AQMM standards, and their AQMM level will be published. This push for transparency aims to improve audit quality across the board.

Regulatory Changes

• ICAI/Accounting Standards:The government aligned India’s accounting standards with global IFRS changes. For example, rules on how loans are classified (current vs. non-current) are stricter – a loan must be due >12 months after the balance-sheet date and legally extendable to count as non-current. Companies must also start disclosing supplier-financing arrangements (like reverse factoring) in their cash-flow notes to show any hidden financing. These updates take effect from FY 2025–26 and bring more transparency to company finances.
• MCA Rule Updates:The Ministry of Corporate Affairs (MCA) made some form and rule changes for companies. A key form (RD-1, used in company mergers/schemes) has been revised with new fields (effective 15 Sept 2025). MCA also tweaked the Ind AS (accounting standards) rules as above. For small businesses, the main takeaway is to use the new form for any merger or approval filings after the effective date.
• SEBI Proposals & Rules:The stock market regulator (SEBI) is reviewing several rules. For example, it’s considering easing minimum public shareholding requirements for big company listings to make fundraising easier. SEBI also proposed changes to related-party transaction rules and stockbroker regulations to simplify compliance. These proposals are in consultation stage, but they show a trend: efforts are underway to ease investment and fundraising rules while protecting investors.
• RBI Guidelines:The Reserve Bank of India introduced new co-lending guidelines. Under these, banks can team up with NBFCs to jointly give loans. A bank must now keep at least 10% of each co-lent loan on its books and follow certain safety steps (like escrow accounts and risk-sharing). This aims to expand credit by having banks and NBFCs share loans. While this mostly affects banks/NBFCs, it could ultimately make more credit available to businesses.

Indian Tax Law Changes

• New Income Tax Act, 2025:In a big reform, India has replaced the old Income-tax Act of 1961 with a new Income-tax Act, 2025, effective from 1 April 2026 (FY 2026-27 onward). The new law keeps all current tax rates the same, but introduces some key changes:
• Single “Tax Year”:The old terms “Previous Year” and “Assessment Year” are gone. Now there’s just one common Tax Year. This simplifies references in the law, making it a bit easier to follow.
• Digital-first compliance:All tax filings and communications are faceless (done online). Expect to file returns, get notices, and interact with tax officers electronically – fewer in-person visits. This move to digital should save time for taxpayers.
• Crypto and digital assets taxed:For the first time, cryptocurrencies and other virtual digital assets (VDAs) are explicitly defined as capital assets. That means any gains from selling crypto will now be taxed like capital gains.
• No rate changes:Importantly, the income tax slabs and rates for individuals and companies remain unchanged under the new Act. In other words, your tax percentage is the same as before.
• Taxation Laws Amendment Bill:Along with the new Act, the government passed a Taxation Laws (Amendment) Bill, 2025 (effective 1 April 2025) to fine-tune tax provisions. Key highlights include:
• Unified Pension Scheme (UPS) tax break:A new government pension scheme allows retirees to withdraw up to 60% of their pension corpus tax-free on retirement. If you move the money into a central pool, the withdrawal remains tax-free. (Otherwise, any withdrawal beyond the 60% becomes taxable.) This gives more flexibility and savings for retirement savings.
• Foreign investment incentives:India extended tax exemptions to certain foreign funds. Notably, Saudi Arabia’s Public Investment Fund (and its fully owned firms) can now earn tax-free income in India for infrastructure investments, just like earlier exemptions for other foreign investments. This encourages overseas investment in Indian projects.
• Search & seizure simplification:Tax assessments that start during a search operation will now automatically stop once the search begins. This avoids overlapping proceedings and makes life simpler for taxpayers caught up in searches, preventing double taxation.

Direct Tax Developments

• Revised tax rules for benefits:The tax authorities issued clarifications on what counts as a taxable “perk” (benefit) and who gets covered. Now, only employees earning more than ₹4 lakh per year have to include free meals or gifts as taxable perks (i.e. below ₹4 lakh this doesn’t apply). Also, if you (or your dependent) get medical care abroad, the exemption limit is on total income: only those with income over ₹8 lakh had to worry about limits. In practice, this mostly affects higher-paid employees; many taxpayers won’t see a change.
• Updated tax forms:A few tax forms were tweaked. For example, Form 10CCF (used by IFSC insurance offices) was updated to allow “Nil” for certain income fields, simplifying reports for offshore units. These changes are very specialized; most individuals and domestic businesses won’t need to worry about them.
• ITR checklist and e-filing guides:The ICAI’s tax committee released handy checklists for filing Income Tax Returns (ITR 1 and 4). These guides explain who can use each form, what documents to keep ready, and step-by-step filing tips. This is great news for individuals and small businesses who file taxes electronically – the checklists act like a cheat-sheet to avoid common mistakes.

Indirect Tax (GST) Updates

• GST invoicing and exemptions guides:The ICAI also published new handbooks on GST. One is a Handbook on GST Invoicing, updated with all amendments through May 2025. It explains invoicing rules in plain language and even covers the new e-invoicing system for larger businesses. Another is a Handbook on Exempted Supplies, listing every good and service exempt from GST (updated to April 2025). These guides are useful references for small businesses to ensure they invoice correctly and claim any exemptions properly.
• Digital compliance (e-invoicing):The trend toward digital compliance continues. The government is expanding e-invoicing to more businesses (where invoices are pre-approved by the GST portal). If your annual turnover is above a certain threshold (note: it keeps being lowered periodically), you must use e-invoicing. Also, electronic accounting and digital record-keeping are strongly encouraged. TwoTax can help set up your billing system to meet these requirements.
• Other GST changes:While the GST Council’s 2025 budget session had modest changes (mostly rate clarifications), one important update for taxpayers is about refunds: If you export goods or are eligible for a tax refund, know that government is pushing for quicker digital processing of refunds. (And as noted below, a court has recently ruled that certain refunds must be given in cash rather than credits.)

Key Court Rulings & Taxpayer Implications

Important legal rulings this month clarified taxpayer rights:

• Tax treaty rule (Mumbai Tribunal):A tax tribunal ruled that India cannot apply changes from the multilateral tax instrument (MLI) unless the government issues a specific notification. In simpler terms, any new global tax treaty rules (meant to prevent profit-shifting) don’t automatically apply in India. Taxpayers (especially foreign investors) benefit, because they keep existing treaty protections until the law is explicitly updated.
• Rebate on stock gains (Ahmedabad Tribunal):A major decision said that low-income taxpayers can claim the ₹25,000 tax rebate (Section 87A) even if their only income is short-term capital gains (like selling stocks for a quick profit). Earlier, there was doubt whether gains taxed at a flat 15% (like some share trades) were eligible. The Tribunal said yes – if your total income is under the limit (₹7 lakh for FY 2023-24), you get the rebate. This helps small investors and part-time traders reduce their tax.
• GST attachment limit (Supreme Court):The top court struck down a state tax department’s attempt to re-attach a businessman’s bank accounts after one year. The law said provisional attachment of assets expires after one year; the department tried to renew it. The Court said this violates the statute – once a year passes, the order ends and can’t simply be reissued on the same grounds. This is good news: businesses whose funds were frozen must note that after a year, the taxman needs fresh justification to keep them frozen.
• GST deposit refund (Karnataka HC):In another case, a taxpayer had paid sales-tax appeal deposits partly in cash and partly using GST credit (electronic tax credits). The high court ordered the tax authority to refund all of it in cash to the taxpayer. The principle: if a court rules in your favor, any deposit (even if paid via GST credit) should be returned in cash, not just the cash portion. This ensures fair refunds and was clarified by the court.

Special Focus: Gaming, Insolvency, and Digital Compliance

• Online Gaming Regulation:A new law – the Online Gaming Act, 2025 – was enacted on 22 Aug 2025. It creates a national authority to oversee e-sports and online games. Highlights:
• E-sports recognized as sport:Competitive video gaming will get support and infrastructure like other sports.
• Ban on gambling:All real-money online games (skill or chance) are now banned nationwide. No matter who’s offering them, if it involves playing with real money, it’s illegal under this Act.
• Strict penalties:Anyone running or promoting banned games faces jail up to 3 years or fines up to ₹1 crore. Even platforms that facilitate or advertise such games are liable. (Independent directors can avoid penalties if they show they exercised due diligence.)
• What this means:If you’re in the gaming industry or thinking of developing games, only non-monetary gaming (e-sports, educational, social games) are allowed. Consumers can enjoy e-sports on legal platforms. All real-money gaming sites must shut down, and users should be careful to avoid illegal gambling sites.
• Insolvency law changes:To help businesses in distress, Parliament introduced an Insolvency and Bankruptcy Code Amendment Bill, 2025. Key aims:
• Faster decisions:Courts have 14 days to accept or reject a corporate insolvency application once it’s filed. They must decide based on a few clear conditions (like proving a default).
• Proof by data:If a bank submits default records from the official government utility, that counts as sufficient proof to start the process.
• Out-of-court resolution:New rules let creditors and debtors arrange settlements without going to court, making resolution faster and cheaper.
• Cross-border insolvency:Provisions are being added so India can handle cases where a debtor’s assets or creditors are in multiple countries (helpful for businesses with global ties).
• What this means:If a small business is facing genuine failure, there is now a clearer, quicker path to either restructure debts or close in a controlled way. Companies and lenders should prepare for a tighter timeline but an easier process overall.
• Digital Compliance Mechanisms:The move to digital is accelerating. Remember:
• Faceless assessments:The new tax law already mandates that most tax scrutiny will happen online, without in-person visits. Expect to get emails or portal notices instead of physical letters.
• E-filing and e-returns:Continue using the government’s online portals for filings (income tax, GST, etc.). TwoTax can assist if you need help with any new e-forms.
• Electronic invoicing:As noted above, if your turnover is above the government’s threshold, use the e-invoice system (your billing software connects to the GST portal to generate invoice numbers).
• Record-keeping:Keep digital backups of invoices and receipts. Digital ledgers are now standard; be ready for any tech tools your accountant recommends.
• These tools can save time and reduce errors. At TwoTax, we guide you through setting up online filing and e-invoicing, so you’re never caught off guard by a new compliance step.

We hope this newsletter has made the latest rules clear and actionable. Change is constant, but you’re not alone – At TwoTax, we help you navigate these changes easily. If you have any questions or need assistance with your accounting or taxes, feel free to reach out. 

Stay informed and take care,

The TwoTax Team