New Income Tax Bill: Select Committee Presents Report In Lok Sabha

The Select Committee of the Lok Sabha on July 21, 2025, presented its detailed report on the Income Tax Bill 2025, marking a significant step towards reforming India’s tax code. The report includes key recommendations to improve clarity, modernisation, and legal certainty under the new law.

Key Changes Proposed in the Committee Report

The 31-member panel led by BJP MP Baijayant Panda focused on refining definitions and removing ambiguities present in the Bill. Among the noteworthy suggestions is updating the term ‘capital asset’ to match recent changes under the Finance Act 2025. The report also urges replacing outdated cross-references from the repealed Income Tax Act 1961 to ensure consistency.

One major recommendation involves clarifying the term ‘infrastructure capital company’ and standardising definitions for micro and small enterprises with the MSME Act. This alignment is expected to reduce confusion among stakeholders and strengthen the Bill’s framework.

Redefining Tax Provisions for Fairer Treatment

To address potential tax disputes, the report proposes sharper definitions around deductions such as house property income, actual expense payment, and research spending. The committee noticed inconsistent tax treatment in donation norms and pension contributions, calling for these clauses to be revised comprehensively.

For non-profit institutions, the report underlines the need to differentiate between ‘income’ and ‘receipts’ more clearly. The removal of ‘deemed application’ has raised concerns that some entities might accidentally trigger taxes. Recommendations include repairs to avoid unintended legal impacts.

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Additional Amendment Proposals for Smooth Transition

The Select Committee recommends that transitional clauses be strengthened by fully repealing references to the 1961 law. It also presses for clarity on advance ruling fees, TDS applicability on provident fund withdrawals, and simplified returns for small taxpayers eligible for refunds. Suggested revisions also target easing provisions around penalty powers and certification for low-tax entities.

Conclusion

The Select Committee’s report on the Income Tax Bill 2025 lays the groundwork for a more streamlined and equitable tax regime. With focus on clarity, consistency, and compliance, the proposed amendments are expected to facilitate a modern tax code while reducing litigation and promoting transparency.

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