Parliamentary panel proposal on dividend in IT bill may bring relief to India Inc

Economic Times

17-07-2025

A parliamentary panel that reviewed the Income Tax Bill 2025 has recommended that a provision dealing with the deduction available for inter-corporate dividends be restored, a significant relief for India Inc, said people familiar with the deliberations.The parliamentary select committee unanimously adopted its report on Wednesday, recommending over 285 tweaks, which have been accepted by the government, they said.
This means that the biggest revamp of the six-decade-old income tax law is expected to pass quickly in the upcoming monsoon session of Parliament.
Industry had made a strong pitch to the government and the parliamentary panel to restore Section 80M, reasoning that its omission would result in cascading and double taxation in multi-tier structures. The section allows Indian companies to deduct from taxable income dividends they get from another corporate entity. It helps avoid double taxation on the same dividend income.
The bill had removed the provision for companies availing of the 22% corporate tax slab. Indian companies have the option to pay 22% income tax if they don't avail of any exemptions and incentives since FY20.The panel, headed by Baijayant Panda, will present its report to the Lok Sabha on the first day of the monsoon session of parliament on Monday.The government has accepted most of the changes proposed by the committee, one of the persons told ET. The government has already listed the bill for consideration and passage in the upcoming session.Another key suggestion by the committee was the restoration of the language relating to residency for those going overseas to work. The previous wording — 'for the purpose of employment'— has been retained to clear up any ambiguity, the person said. Besides, the provision dealing with the issuance of a nil withholding the tax certificate by tax department in respect of certain payments has been reinstated.The panel has further simplified the language of a number of provisions to remove any lack of clarity, one of the persons said, adding that no substantive changes had been suggested.The panel held 36 sittings and dealt with all 536 sections.'Maximum deliberations and discussions were on around Section 247(1), which deals with searches and seizure, but no major changes or amendments in the section were suggested,' the person added.Several of those who appeared before the panel raised concerns about faceless assessment and sought a reduction in the number of rates for tax deducted at source and further simplification of the regime, the person said.Finance minister Nirmala Sitharaman had on February 13 introduced the Income Tax Bill 2025 to replace the old law with a simple, easy-to-understand one that aimed to reduce ambiguity and litigation.The bill had introduced presumptive taxation for non-residents, revised treatment for business and professional income, and strengthened General Anti-Avoidance Rules (GAAR), while streamlining the penalty and compliance framework. It also clubbed the tabulation of deductions from salaries, such as standard deduction and gratuity, in one place.Tax experts said that the select committee discussed recommendations made by various sections of society. 'As the select committee has had the unique opportunity of receiving many salutary suggestions concerning major overhaul of many existing provisions in the tax law, it is hoped that finance ministry will give due consideration to these suggestions as well and bring about these far-reaching changes in due course through its Budget presentations,' said Sudhir Kapadia, senior advisor, EY.Since the remit of the select committee was restricted to further clarifying or improving the language of the bill, as opposed to suggesting fundamental changes in provisions, it is expected that the changes suggested in their report will only address any inadvertent omissions or lack of clarity in language, he said.