Income-tax Law: Key Amendments & Recent Updates | CA Inter

The Income-tax Act is a living statute; amendments flow through each financial year, and the most critical updates for CA Inter students centre on the new default tax regime u/s 202(1), recent slab revisions, and foundational constitutional principles that govern all Indian taxation.

If you're preparing for CA Inter Taxation, understanding why taxes exist in our legal structure — not just how to calculate them — is what separates rote learners from toppers. This article anchors you in the constitutional bedrock, walks through the most testable recent changes, and offers the exact MCQs you'll encounter.

Constitutional Foundation: Article 265

Before any amendment makes sense, you must internalise Article 265 of the Constitution of India. This single principle governs every tax levy in the nation.

Article 265 states: no tax shall be levied or collected except by authority of law. This means an executive order, administrative circular, or even a presidential decree cannot create a tax; only Parliament (for Union taxes) or a State Legislature (for State taxes) may do so through legislation. This principle appears in nearly every CA Inter taxation question about legislative competence and validity.

Why does the ICAI test this repeatedly? Because it forms the boundary between legal and illegal taxation. A student who can cite Article 265 when asked "On what constitutional basis does the Income-tax Act exist?" answers with authority.

The New Tax Regime: A.Y. 2026-27 Default Slab Structure

From A.Y. 2026-27 onwards, the default regime u/s 202(1) introduces revised exemption limits and tax slabs. These are the figures you must memorise for the exam:

The basic exemption limit (BEL) for an individual under the new regime is ₹4,00,000. Note: verify the current financial year's applicable slab with the latest ICAI study material, as slabs are reviewed annually.

This is a shift from the older regime. The ICAI tests both regimes in Inter examinations, so you must know why a taxpayer chooses one over the other — hint: look at deductions and surcharges.

Agricultural Income: Section 2(5) Definition

One of the most frequently tested amendments concerns what counts as "agricultural income" for exemption purposes.

Section 2(5) defines agricultural income narrowly: it is rent or revenue derived from land situated in India and used for agricultural purposes, including any process ordinarily undertaken by a farmer to render the produce fit for the market.

Critically, the following are not agricultural income:

• Dividends from an agricultural company
• Salary paid to a farm manager or employee
• Interest on a loan to a farmer
• Income from agricultural land used for non-agricultural purposes (e.g. a shop on farm land)

Examiners love a scenario question: "A farmer leases 5 hectares to a tenant who grows wheat; the farmer receives monthly rent. Is this agricultural income?" Yes — but only the rent component; any income from trading seeds or fertilisers is not. Master this distinction and you'll spot the trap answer.

Income Tax is Levied on Income, Not Capital

Another bedrock principle the ICAI tests in almost every exam session: the Income-tax Act taxes income, not capital. Section 2(45) defines "income" to include salaries, profits, gains, and other receipts — but expressly excludes most capital receipts.

A student who confuses capital gains with income, or who thinks a lump-sum advance is taxable income, loses marks on even elementary questions. The legislation is precise: capital is taxed only when it is characterised as income (e.g. short-term capital gains, or income from a business of buying and selling assets).

When an exam question asks "What is the scope of the Income-tax Act?", the answer is income.

Constitutional Allocation of Tax-Making Powers

The Seventh Schedule of the Constitution divides tax-making powers between Parliament and State Legislatures. For income tax (excluding agricultural income), Entry 82 of the Union List (List I) grants Parliament exclusive power to legislate.

This is why the Income-tax Act is a Central Act, not a State Act. State Legislatures cannot enact an "income-tax" law; they may only tax agricultural income (Entry 46 of the State List). This constitutional boundary appears in CA Inter questions about jurisdiction and applicability.

Practice Questions

You can practise thousands more free MCQs on the Conferenza app to sharpen your speed and accuracy under exam conditions.

Recommended Lectures & Study Material

CA Inter Taxation — Income-tax Law is best learned through structured lectures followed by rigorous practice. Conferenza offers multiple expert faculty options:

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• CA Inter Taxation — Income-tax Law lectures by CA Arushi Aggarwal — from ₹3000
• CA Inter Taxation — Income-tax Law lectures by CA Shirish Vyas — from ₹1799
• CA Inter Taxation — Income-tax Law lectures by Chirag Goyal — from ₹6499
• CA Inter Taxation — Income-tax Law lectures by CA Aagam Dalal — from ₹3499
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Pair your lectures with the CA Inter / CMA Inter Income Tax Books Combo (LAWgical Provisions + Questionnaire) — ₹1099, which covers all key amendments and provides question practice aligned to the exam pattern.

FAQs

Q: Is the basic exemption limit the same for all individuals in A.Y. 2026-27?
A: The basic exemption limit for individuals under the default regime is ₹4,00,000. However, different BELs apply to senior citizens and very senior citizens; always check the current year's slab with ICAI study material.

Q: Can a State Legislature levy a tax on non-agricultural income?
A: No. Entry 82 of the Union List grants Parliament exclusive power to legislate on income tax (excluding agricultural income). State Legislatures have no power here; they may only tax agricultural income under Entry 46 of the State List.

Q: Is rent received from agricultural land always agricultural income?
A: Yes, if the land is situated in India and used for agriculture, rent or revenue derived is agricultural income under section 2(5). However, if the land is used for non-agricultural purposes (e.g. a commercial shop), the income is not agricultural income.

Q: Are there other recent amendments to the Income-tax Act I should know for CA Inter?
A: The new default tax regime is the most significant recent change. Other amendments appear regularly each financial year; your lecturer and study material will highlight exam-relevant ones. Always refer to the current year's ICAI notification for the most up-to-date amendments.

Master these foundational principles and recent amendments, practise the MCQs repeatedly, and you'll answer taxation questions with the confidence of a working tax professional. Start with all courses by Bhanwar Borana or choose another faculty partner that fits your learning pace.