2 days ago
- Business
- New Indian Express
I-T Bill 2025: Relief for corporates on dividend taxation, LLP AMT burden
The New Income Tax Bill, 2025, has introduced significant amendments in corporate taxation, aimed at simplifying compliance and providing greater certainty to businesses. A key concern of double taxation on dividend income has been addressed, alongside clarifications on the Alternate Minimum Tax (AMT) for LLPs, inter-corporate dividend deductions, and the concept of 'beneficial ownership'.
'By removing the restrictive clause that would have denied refunds for belatedly filed returns and refining provisions akin to Section 79 by omitting the 'beneficial owner' reference, the Bill reduces potential litigation and enhances clarity. The restoration of inter-corporate dividend deductions for companies opting for concessional tax rates further strengthens the framework,' said Abhinav Sogani, VP & Global Tax Head, Tata Consumer Products.
The draft Bill had initially appeared to withdraw deductions for inter-corporate dividends for companies under the concessional 22% tax rate, raising fears of cascading taxation in multi-tier structures. 'The final Bill corrects this by allowing such companies to claim deductions on dividends received from domestic companies, foreign companies, or business trusts—provided the dividends are onward distributed. This is critical in preventing double or even triple taxation of the same income and supports efficient capital flows,' noted Aditi Goyal, Partner, Tax Practice, Trilegal.
For the FMCG industry, Sogani said, the reforms bring simplicity and legal certainty, enabling faster growth and reaffirming the government's commitment to a transparent, business-friendly environment.
On LLPs, the clarification has been welcomed by industry. The draft Bill tabled in February had suggested that AMT at 18.5% would apply to all LLPs, even those not availing any tax holidays or deductions. This would have effectively nullified the concessional 12.5% rate on long-term capital gains and weakened LLPs as an investment vehicle. The revised Bill confirms that only LLPs availing specified deductions will be subject to AMT, restoring parity with the current framework under the Income Tax Act, 1961.
The Bill also resolves ambiguities around shareholding continuity under clause 119, which governs carry-forward and set-off of losses. The draft's use of the phrase 'shall continue to be the beneficial owner' had raised concerns about uninterrupted 51% shareholding between the loss year and set-off year. According to Goyal, the final Bill clarifies this by prescribing a point-to-point comparison between two dates and by reverting to the established phrase 'beneficially held,' thereby avoiding any unnecessary look-through to ultimate individual shareholders.
