This move of the government reflects a paradigm shift where the main objective of a search or requisition is to identify income that has not been disclosed, an FAQ issued by the income tax department said
New Delhi: The government on Tuesday said that tax officers would determine only undisclosed income for block assessments in search cases and not the total income of the assessee as proposed in the amendments to Finance Bill, 2025. The amendment, which was approved by the Lok Sabha, will be made effective retrospectively from September 1, 2024.
The government has brought in amendments to Chapter XIV-B of Income Tax Act through which the concept of assessment of ‘total income’ has been replaced with the assessment of ‘undisclosed income’. This amendment was part of the 35 amendments that the Lok Sabha approved to the Finance Bill, 2025, on Tuesday.
However, this move of the government reflects a paradigm shift where the main objective of a search or requisition is to identify income that has not been disclosed, an FAQ issued by the income tax department said.
“The changes to Chapter XIV-B aim to focus only on assessing undisclosed income and place trust in the taxpayer to disclose regular income in the block income tax return," the FAQ said.
According to the FAQ, the regular income of the assessee facing an assessment following a search operation will be taxed separately at the applicable rate. Regular income will continue to be determined based on entries or transactions recorded in the books of account or documents maintained in the normal course before the initiation of the search or requisition, the FAQ said.
EY in its analysis of Finance Bill, 2025, amendments, said that last year, the government introduced a significant shift in search assessments from assessment of each individual year separately to a single consolidated assessment for a block period comprising specified years.
In this regard, the New Block Assessment Regime provided for assessment of undisclosed income, as well as regular income. According to EY, the amended Finance Bill, 2025, in a way, now reinstates the pre-2003 block assessment regime to restrict the scope of assessment under the New Block Assessment Regime to only undisclosed income.
