Select Committee Report on New Income Tax Bill Presented in Lok Sabha

On Monday (July 21) the Select Committee of the Lok Sabha submitted its report on the Income Tax Bill, 2025 to the House.

The report was given over to the Speaker by BJP leader, Baijayant Panda, who is the head of the panel. The Bill was introduced by Finance Minister Nirmala Sitharaman, on February 13, 2025. It was referred to the Select Committee the same day by the Lok Sabha.

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The Committee made up of 31 people was empowered to study the Bill clause by clause and report its findings at the latest, the first day of Monsoon Session.

The panel proposed significant amendments in its report to amend definitions and eliminate ambiguity, and to harmonise the new law with those that are known.

The Committee advised that the definition of the term capital asset should be changed in line with the changes made under the Finance Act, 2025. It requested further clarity in definition of infrastructure capital company to ensure that it would not have any cross-reference with the eliminated Income Tax Act, 1961.

It demanded a reduction in ambiguity in deduction of house property income, payment of expenses and expenditure on scientific research. It requested the Finance Ministry to harmonize definition of micro and small companies with the MSME Act.

The panel would prefer the term parent company to be spelt out. It highlighted loopholes on provisions of capital gains, carry-forward of losses, contributions to pension schemes and donations to charities.

In the case of non-profits, the Committee noted misunderstanding regarding the terminology used such as the distinction in meaning of income vs. receipts, receipt of anonymous donations, and elimination of the deemed application concept. It offered to rectify them in order to prevent the imposition of unwanted taxes and lawsuits.

It requested the need to introduce more specific regulations concerning deductions that were made on the house property income, to pay the cost in fact, and the consumption done on scientific research. It requested the Finance Ministry to match meanings of micro and small business with MSME Act.

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The panel would like the phrase parent company to be defined well. An example of systems which it highlighted to be lacking in provisions were capital gains, carry-forward of losses, contributions into pension schemes and contributions into charities.

The Committee of non-profits raised the issue of misunderstanding between the meanings of the income and receipts, anonymous contributions, and the elimination of the deemed application notion. It requested it have them fixed to prevent accidental taxes and court battles.

Alternations proposed in the report also include clarity on the fees on advance ruling, TDS on provident funds, low-tax certificates, powers to impose penalty and returns to be filled by small taxpayer claiming refund.

It advised the Ministry to see that all old references to 1961 Act be completely repealed and substituted to provide a clean commencement to the new law.

The recommendations proposed by the Committee focus on modernisation of the Indian tax code with the aspects of being fair, transparent, and reducing the disputes. House will now debate the report and take the Bill forward.

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