Recommendations on new IT Bill are well-intended, to provide clarity to taxpayers: Grant Thornton

The recommendations regarding context-specific GAAR provisions and refund facilitation made in the report tabled by the Select Committee of Parliament on Monday are well-intended and will help provide clarity to taxpayers and reduce litigation, Riaz Thingna, Partner at Grant Thornton Bharat, said. However, he also clarified that the committee had proposed no substantive changes to the IT Bill of 2025.

According to Thingna, the Finance Ministry rejected some changes suggested by the Select Committee of Parliament, which Baijayant Panda chaired. The Ministry stated that several suggestions received fell outside the committee’s mandate. “It has been indicated that these suggestions may be duly considered and assessed on their merits in appropriate forums at a later stage,” said Thingna.

The committee—which made a total of 285 suggestions to simplify the IT bill further—made several significant recommendations, including the amendment of Clause 181 of the IT Bill, 2025, which pertains to the consequences of impermissible avoidance arrangements under the GAAR provisions, by reinstating the phrase “in the circumstances of the case” employed in the IT Act, 1961. The suggestion aligns the new bill with the existing legislative framework. “By anchoring the application of GAAR to the specific facts of each case, the amendment seeks to uphold a fair balance between robust enforcement and the protection of taxpayer rights,” said Thingna.

The definition of “Capital Asset” has been brought on par with the amendment introduced by the Finance Act 2025 to align the two. Clause 263(1) is proposed to be amended by removing the requirement of filing a tax return by the due date to claim refunds. The committee also proposed two changes in the new clause 37 (old section 43B) to reduce ambiguity. The definition of “Infrastructure Capital Company” is proposed within clause 2(55) to avoid a reference to the old section 80-IA/80-IB of the Income-tax Act 1961.

The finance minister had announced the introduction of the New Income Tax Bill while presenting the Finance Bill 2025. At that time, it was explicitly stated that the objective of the exercise was primarily to rationalise and simplify the law, and it was not intended to be a new piece of legislation reflecting any policy changes.

Thereafter, on 13th February, the draft of the new bill was presented. This draft primarily suggested numerous changes in language, grammar, and the placement of explanations, as well as the removal of cross-references, redundant clauses, and non-obstante clauses. Additionally, tables were included in the Bill to provide greater clarity. The Bill was also presented to the Select Committee set up under the Chairmanship of Baijayant Panda, with the mandate to examine only the provisions of the Bill.