The 31-member select committee of the Lok Sabha on the Income Tax Bill, 2025 has recommended over 30 changes in the bill including in definitions, clarification on various deductions as well as reinstatement of a few provisions dropped in the bill. The report by the committee headed by BJP leader Baijayant Panda was presented in the Lok Sabha on Monday.
The committee has suggested changes in definition of capital asset, infrastructure capital company, MSME, while clarifying property-related deductions, and reinforcing the ‘actual payment’ rule for business expenses.
The committee has proposed the reinstatement provision enabling the tax department to issue a nil withholding tax certificate for specific payments. This clause was initially omitted from the draft bill, which previously only permitted certificates for low TDS deductions. It has also recommended permitting refund claims even where returns are not filed on time.
The report also addresses concerns of charitable and not-for-profit entities by advocating clearer definitions, replacing "receipts" with "income" for tax purposes, and restoring the concept of "deemed application". Further, it urges inclusion of professionals under electronic payment norms, prescribes qualifications for valuers, and recommends contextual fairness in GAAR provisions.
In a major relief, the committee has noted that the benefit of tax deduction relevant to inter corporate dividends in multi-tiered structures must also be extended to companies that chose the 22% tax rate, as is the case now.
The Income Tax Bill, 2025 was tabled in February and referred to the select committee for proposing changes, if any. The Income Tax Bill has been drafted to simplify the tax rules of the country. The bill has stayed away from making any structural changes and focused more on simplifying the language. The select committee in its report has also not recommended any significant changes.
Rohinton Sidhwa, Partner, Deloitte India, says that most of the amendments in the latest round are corrective and meant to fix errors in drafting from the first draft released for public comment.
The report has clarified that recommendations involving policy-level changes fall beyond the scope and objectives of the IT Bill, 2025. In fact, the finance ministry has rejected some changes suggested by stating “that several suggestions received were outside the purview of the Committee’s mandate.”
“Key stakeholder recommendations that seem to have made their way through relate to correction in drafting errors, removal of ambiguities arising from languages changes to the extant Act, and coherent presentation of tax provisions,” says Gouri Puri, partner, Shardul Amarchand Mangaldas & Co.