India is on the cusp of a significant tax reform with the much-anticipated Income-Tax Bill, 2025, poised for passage in the upcoming Monsoon Session of Parliament. This landmark legislation, aiming to replace the six-decade-old Income Tax Act, 1961, has undergone a thorough review by a Lok Sabha Select Committee, which has proposed 285 amendments to the draft Income-Tax Bill, 2025, largely focused on simplification and clarity. The report, unanimously adopted by the committee, is expected to be tabled in the Lok Sabha on July 21, 2025.
The Income-Tax Bill, 2025, introduced in February this year, represents a concerted effort by the government to create a more concise, user-friendly, and dispute-free tax regime. The 1961 Act, having been amended 65 times with over 4,000 changes, had become a labyrinth of complex provisions, leading to increased compliance costs and prolonged litigation. The new Bill, with the Select Committee’s suggestions, aims to address these critical challenges.
Key Amendments and Recommendations by the Select Committee:
The Lok Sabha Select Committee, chaired by BJP leader Baijayant Panda, held extensive deliberations and made recommendations that are predominantly “corrective” in nature, ensuring that the core principles of taxation remain intact while enhancing usability. Some of the most significant amendments and recommendations include:
- Reinstatement of Section 80M (Inter-corporate Dividend Deduction): One of the most crucial recommendations, highly anticipated by corporate India, is the proposed revival of Section 80M. This provision allows Indian companies to deduct from their taxable income any dividends received from other domestic companies. Its initial removal in the draft Bill had raised concerns about potential double taxation within multi-tier corporate structures. The government has reportedly accepted this recommendation, offering significant relief to businesses.
- Time-Bound Resolution of Tax Litigations: A major focus of the committee’s recommendations is to expedite the resolution of tax disputes. The panel has strongly advocated for a time-bound mechanism for resolving tax litigations, aiming to reduce the burden of prolonged court cases on both taxpayers and the administration. A committee member noted that the government has already accepted 250 of the 285 recommendations, indicating a strong likelihood of these provisions being incorporated.
- Clarity on Residency Status for Indians Abroad: The Bill will retain the phrase “for the purpose of employment” to remove any ambiguity in interpreting residency rules for Indian citizens working abroad. This aims to provide greater certainty and prevent unintended tax liabilities.
- Restoring Nil Withholding Tax Certificates: The committee has proposed reinstating provisions that allow the tax department to issue a nil withholding tax certificate for specific payments, a clause that was initially removed in the draft. Previously, only low TDS deduction certificates were available.
- Simplification of Language and Structure: A primary objective of the entire exercise is to simplify the tax code. The committee’s recommendations include extensive efforts to refine the language, remove redundant provisions, and logically reorganize sections. This has reportedly reduced the size of the document from an initial 850 pages to around 600, making it more accessible and understandable. The Bill also eliminates provisos and explanations, simplifying them into sub-sections or clauses.
- Delegation of Powers to CBDT: The Bill grants more powers to the Central Board of Direct Taxes (CBDT) to frame new schemes for greater efficiency, transparency, and accountability, particularly in areas like digital tax monitoring, without requiring frequent legislative amendments.
- Broadening Definition of Virtual Digital Assets: The new Bill has a broader definition of Virtual Digital Assets (VDAs), including cryptocurrencies and other digital assets, aiming to simplify their taxation process. It also expands the ambit of “undisclosed income” to include VDAs. Tax authorities will keep a closer eye on digital financial transactions and individuals utilizing offshore accounts, cryptocurrency exchanges, or social media trading are advised to expect heightened examination.
- Enhanced Digital Oversight and Compliance: The Bill strengthens provisions for digital compliance and electronic record-keeping. Tax authorities will have broader access to taxpayers’ electronic records, including social media accounts and online banking, during investigations.
- Dispute Resolution Committee: The existing provisions related to the Dispute Resolution Panel are retained, with a new provision stating that the panel should issue directions, including points of determination, decisions, and reasons for such decisions.
- Removal of Refund Denial if Returns Filed Late: The committee has recommended dropping the provision that denies income tax refunds if returns are filed after the due date, providing relief to taxpayers.
- Introduction of “Tax Year”: The Bill introduces the concept of a “tax year” replacing the “previous year,” aligning with terminology used in other international tax legislations. The “assessment year” concept has also been removed.
- Consolidation of Presumptive Taxation for Non-Residents: All presumptive taxation provisions for non-residents are consolidated into one section in a tabular format for better clarity.
Impact and Way Forward:
The amendments proposed by the Lok Sabha Select Committee are largely seen as positive steps towards achieving the Bill’s objectives of simplification, clarity, and reduction in litigation. By addressing key concerns raised by industry stakeholders and tax professionals, the government aims to foster an environment of greater ease of doing business and compliance. The simplification exercise was guided by three core principles: textual and structural clarity, continuity in tax policy, and no changes to tax rates to maintain predictability for taxpayers.
The new Income-Tax Bill, 2025, once enacted, is slated to come into effect from April 1, 2026. Its passage in the Monsoon Session, beginning July 21, seems highly likely given the unanimous adoption by the committee and the government’s acceptance of most recommendations. This paves the way for a modern and streamlined direct tax framework for India. Taxpayers and businesses will need to familiarize themselves with the updated provisions and adapt their compliance strategies to the new regime, which promises a more transparent, efficient, and less litigious tax administration.
They have not included CMA as accountant in the Bill.
sab mile hua h uper se niche tak so all the best for same bill with new name 🤡