A Parliamentary Panel has proposed significant amendments to the anticipated Income Tax Bill, 2025, specifically addressing concerns around Tax Deducted at Source (TDS) refunds and the taxation framework for trusts. The report, presented to the Lok Sabha on Monday, July 21, 2025, by the Select Committee chaired by BJP MP Baijayant Panda, aims to refine the upcoming legislation that will supersede the Income Tax Act of 1961.
Thank you for reading this post, don't forget to subscribe!Key recommendations from the panel include:
1. Relaxed TDS Refund Rules for Individuals:
- Current Bill’s Stance: The proposed Clause 263(1)(ix) mandates that individual taxpayers must file their income tax returns by the due date to claim TDS refunds. This could disproportionately affect small taxpayers whose income falls below the taxable threshold but have incurred TDS.
- Panel’s Suggestion: The committee advocates for the removal of sub-clause (1)(ix) from Clause 263. This change would enable individual taxpayers to claim TDS refunds even if their returns are filed past the deadline, without incurring penalties. The panel stressed that the law should not compel a return solely to avoid penal provisions in such cases.
2. Reevaluation of Trust Taxation and Anonymous Donations:
- Current Bill’s Stance: Clause 337 of the new Bill proposes a flat 30% tax on anonymous donations received by all registered Non-Profit Organizations (NPOs), with limited exceptions only for those exclusively religious in nature.
- Panel’s Concerns: The panel voiced strong opposition, highlighting that this provision would negatively impact “religious-cum-charitable trusts”—a category recognized and afforded broader exemptions under the existing Section 115BBC of the 1961 Act, provided donations aren’t specifically for their educational or medical institutions.
- Panel’s Suggestion: The committee strongly urges the reintroduction of a provision mirroring the explanation in Section 115BBC of the 1961 Act. They pointed out the impracticality of identifying donors for traditional collection methods (e.g., donation boxes) and deemed taxing such contributions unjust. The panel noted that the Bill’s oversight regarding these hybrid trusts could severely affect a significant portion of India’s NPO sector.
3. Shifting from “Receipts” to “Income” for NPO Taxation:
- Current Bill’s Stance: The draft Bill suggests taxing the “gross receipts” of NPOs.
- Panel’s Suggestion: The panel argued against this, stating it contradicts the fundamental principle of taxing only “real income.” They recommended replacing ‘receipts’ with ‘income’ to ensure that only net income is subject to taxation.
Overall, the committee’s report, encompassing 285 recommendations, emphasizes the need for enhanced clarity and fairness in the new tax framework, particularly in areas impacting small taxpayers and the non-profit sector, while acknowledging the Bill’s stated aim of simplification.
