Select Committee of Parliament tables report on Income Tax Bill, 2025 in Lok Sabha

Select Committee of the Parliament, led by BJP leader Baijayant Panda, tabled its report on Income Tax Bill, 2025 in the Lok Sabha on Monday. As announced in the Budget 2025, Finance Minister Nirmala Sitharaman had tabled the Income Tax Bill, 2025 in Lok Sabha on February 23. The Bill aims at simplifying the income tax law, repealing the Income Tax Act, 1961. The new act will come into force from April 1, 2026.

“Baijayant Panda, Chairperson of the Select Committee of Lok Sabha, presented the Report of the Select Committee on the Income-Tax Bill, 2025 to the Lok Sabha on July 21, 2025. The Bill was introduced in Lok Sabha on February 13, 2025, and (was) referred to the Select Committee on the same day through a motion moved by Smt. Nirmala Sitharaman, Minister of Finance and Corporate Affairs,” said a communiqué from the select committee.

“The Committee, comprising 31 members of Lok Sabha, was tasked with examining the Bill and submitting its report by the first day of the Monsoon Session, 2025,” the note added.

The committee has made the recommendation pertaining to definition of capital asset, definition of infrastructure capital company, deductions from income from house property, deductions allowed on actual payment basis only, expenditure on scientific research, definitions of “micro” and “small” enterprises, consideration received from transfer of capital asset, deduction in respect of employer contribution to pension scheme of central government, among others.

Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co, said, "The Parliamentary Committee has stayed true to its intent of the Income Tax Bill being a textual simplification exercise as against a policy re-write. Key stakeholder recommendations that seem to have made their way through relate to correction in drafting errors, removal of ambiguities arising from languages changes to the extant Act, and coherent presentation of tax provisions."

"In a major relief, the Committee has noted that the benefit of tax deduction relevant to inter corporate dividends in multi-tiered structures must also be extended to companies that elect the 22% tax rate (as is currently the case). While the market had expected this to be an oversight, corporates had begun factoring in the cascading impact of dividend taxes in tiered structure in the absence of any clarification. This is indeed a welcome change. On the other hand, several stakeholders had urged the Parliamentary Committee to reconsider the extent of search and seizure powers in relation to virtual digital space in light of safeguarding privacy and third-party rights, risk of overboard searches, etc.. However, at first blush, no key changes seem to have been recommended," Puri added.

These are among the 31 major recommendations made by the panel. The panel has made a total of 285 suggestions to simplify the Bill further.

“The Income-tax Act passed in 1961 has been subjected to numerous amendments since its passage sixty years ago. As a result of these amendments the basic structure of the Income-tax Act has been overburdened and language has become complex, increasing cost of compliance for taxpayers and hampering efficiency of direct-tax administration,” Sitharaman had said in the statement of objective of the Bill.