New Income Tax Bill gets Lok Sabha nod

Time of India

2 days ago

The Lok Sabha approved the new income tax bill, eliminating alternate minimum tax on LLPs and allowing refund claims even without timely return filings. Replacing the 1961 Act, the bill simplifies language, redefines terms like 'tax year,' and incorporates select committee recommendations. It maintains loss carry forward provisions, tweaks MSME definitions, and reintroduces deductions for inter-corporate dividends.
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The Lok Sabha on Monday gave its nod to the new income tax bill , which does away with alternate minimum tax on limited liability partnership (LLP) firms and allows refund claims even if taxpayers do not file returns within the due date.The Income Tax (NO.2) Bill, which will replace the Income Tax Act , 1961 from the next financial year, was introduced by Union finance minister Nirmala Sitharaman and passed in the Lok Sabha amid din without a debate. It will now go to Rajya Sabha for its approval. The bill cuts down wordage and chapters by almost half and presents the clauses in simpler and easier to understand language.It does away with the confusing concepts of assessment year and previous year, replacing them with "tax year".The original Income Tax Bill, 2025, which was introduced in February, was withdrawn by the minister on Friday and the new bill incorporating "almost all recommendations" of the select committee, headed by parliamentarian Baijayant Panda, which had scrutinised the original bill, was introduced.The bill has maintained status quo on loss carry forward provisions, exempted non-profit organisations from taxing anonymous donations received by purely religious trusts and tweaked the definition of MSMEs (micro, small and medium enterprises) in alignment with the MSME Act, which were part of the recommendations of the panel.It has also reintroduced deductions in respect of certain inter-corporate dividends for companies opting for concessional rate of taxes in line with the provisions of the existing Income-tax Act, 1961 and nil tax collected at source on Liberalised Remittance Scheme remittances for education purposes financed by any financial institutions.The bill has added the term 'profession' alongside 'business' under electronic payment rules, which means professionals with income of more than ₹50 crore annually must use prescribed electronic modes of payment.The bill has also clearly defined deductions for commuted pension and gratuity received by family members.Experts said some of the pain points have been removed."The revised Income-tax Bill, 2025 demonstrates the government's receptiveness to parliamentary recommendations, incorporating targeted amendments to enhance clarity, ease of compliance and consistency with existing legislation," said Sandeep Jhunjhunwala, partner, Nangia Andersen LLP."To give a few examples, the provisions of levying alternate minimum tax on LLPs has been done away with, the rigours placed on charitable trust have been removed, the provisions of transfer pricing and the definition of 'associated enterprise' to whom these provisions apply, have been relaxed," said Dinesh Kanabar, CEO, Dhruva Advisors.