Lok Sabha select committee proposes 285 changes to Income Tax Bill, 2025

Business Standard

7 days ago

Dropping of provision that denies refunds if returns are filed after the due date and reinstatement of the inter-corporate dividend deduction were among the 285 suggestions made by the select committee of Lok Sabha examining the Income Tax Bill, 2025 -- which was adopted on Wednesday.
The Income Tax Bill, 2025, will replace the Income Tax Act, 1961. The government aims to implement the new Income Tax law from April 1, 2026.
Overall, the committee has recommended about 285 changes, most of which involved simplifying the language of the draft legislation. The committee will present its report in the Lok Sabha on July 21, the first day of the Monsoon session.
The committee, headed by Bharatiya Janata Party (BJP) Lok Sabha member Baijayant Panda, has suggested the removal of a controversial provision that denies refunds if returns are filed after the due date.
The New Income Tax Bill, 2025 drafted by the finance ministry required that a person seeking refunds under chapter XX must mandatorily file income tax returns within the due date. On top of that, as per section 433 of the New IT Bill states that a refund should be sought only while filing a return, which created a contradiction.
'The Select Committee has appropriately deleted clause 263(1)(ix), so that there is no unnecessary litigation in this matter which would have impacted all the taxpayers. Taxpayers remain ever grateful for this by maintaining that there are no policy changes in the provisions related to refunds in the New IT Bill, 2025,' said Vivek Jalan, partner with Tax Connect Advisory Services.
Deduction under section 80M (Clause 148 of New bill) for Inter Corporate Dividends for companies availing the benefit of special rate of tax under section 115BAA (Clause 200 of the New bill) which is available in the Current Income Tax Act, was also erroneously missed out in the New Income Tax Bill 2025. The select committee has now recommended reinstatement of the inter-corporate dividend deduction.
In the IT Bill 2025, presented on February 25, in clause 395, only low TDS (Tax Deducted At Source) deduction certificate was available to the taxpayers. Now, in addition to low deduction TDS Certificate, even NIL TDS certificate can be availed by taxpayers.
'This aligns the new IT Bill with the current IT Act, 1961 and would provide consequential relief to taxpayers whose funds get blocked by deduction of TDS where no tax is applicable to them at all. This is beneficial primarily to businesses which incur losses in a tax year or tax exempt entities like charitable organisations,' Jalan added.
'The panel has suggested 285 changes to the Bill. The government, if it deems fit, will incorporate the changes in the Bill, take approval from the Cabinet before moving the bill for consideration and passage in the Lok Sabha,' a member of the select committee said, requesting anonymity.