The Select Committee of the Lok Sabha, led by chairperson Baijayant Panda of the Bharatiya Janata Party, has submitted its detailed report on the Income Tax Bill, 2025, in Parliament. The report has 32 substantive observations and recommendations.
The New Income Tax Bill, introduced by Finance Minister Nirmala Sitharaman on February 13 this year, was referred to the Select Committee for scrutiny and suggestions. The panel, comprising 31 Lok Sabha members, has presented its report on July 21 — the first day of the Monsoon Session of Parliament. The report has suggested crucial amendments to address ambiguities, ensure alignment with existing laws and simplify compliance for taxpayers.
Some key observations and recommendations of the Select Committee of the Lok Sabha:
1. Capital Asset Definition Update:
The definition of “capital asset” under sub-clause 2(22) should be aligned with amendments from the Finance Act, 2025, particularly for FIIs and investment funds.
2. House Property Income Clarity:
The Select Committee, after deliberations on Clause 22, identified the need to clarify the computation of deductions to enhance fairness and transparency for property owners. It recommended two key amendments: firstly, in Clause 22(1)(a), to explicitly state that the standard 30% deduction be computed on the annual value after deducting municipal taxes. Secondly, in Clause 22(2), it has recommended to ensure that the deduction for pre-construction interest is available for let-out properties in addition to self-occupied ones, aligning it with the existing Act.
3. Actual Payment Basis Deductions:
Clause 37 should insert “otherwise allowable” to prevent misuse, and reinstate provisions similar to Explanation 2 of Section 43B for clarity.
4. MSME Definitions Harmonisation:
Sub-clauses 66(12) and 66(34) should adopt the definitions from the MSME Development Act, 2006.
5. Parent Company Definition:
For the sake of clarity and to eliminate any scope of misinterpretation, the Committee recommended that the phrase ‘parent company’ featuring in clause 71(1)(b) be examined and clearly defined by the Ministry.
6. Capital Gains Provision Clarification:
After careful examination of the provisions contained in Clause 79, the Committee noted that though the provision under sub-clause (1) was textually simplified, no reference to Clause 72 was found in the said provision which provides for computation of income chargeable under the head ‘capital gains’, thereby relinquishing the original legislative intent and giving way to ambiguity and possible litigation. Therefore, the Committee recommended that the language of sub-clause (1) be modified to retain the reference
to Clause 72 and the provision under Clause 79(1) be suitably amended to stay true to its original intent.
7. Carry Forward of Losses:
Clause 119 should allow losses to be carried forward if the 51% shareholding is later restored. The term “beneficial owner” should be clearly defined.
8. Pension Deduction Ambiguity:
The Committee reviewed Clause 124 about pension scheme deductions. It noticed that the clause follows Section 80CCD of the old tax law. There was no change in intent, as confirmed by the Finance Ministry. But Clause 124(3) missed the words “by such individual”.
This missing phrase could cause confusion later. So, the Committee said the phrase should be added. The revised sub-section (3) will now clearly say that: An individual can claim a deduction of up to Rs 50,000 for contributions made by that individual to a notified pension scheme.
9. Donations Deduction:
Clause 133(2) should replace “gross total income” with “adjusted gross total income” to avoid unintended higher deductions.
10. Section 87A Rebate Redraft:
11. Clause 156(2)(b) should be amended to correct a drafting anomaly in determining income tax rebate for individuals earning up to Rs 12 lakh.
12. GAAR Safeguard Reinstatement:
Clause 181 should reinstate “in the circumstances of the case” to ensure fair application of anti-avoidance provisions.
13. Digital Payment Scope Expansion:
Clause 187 should include “profession” alongside “business” to extend digital payment mandate to professionals with receipts above Rs 50 crore.
14. Co-operative Bank Definition Needed:
Clause 189 should define “co-operative bank” to avoid ambiguity in multiple references.
15. Jurisdiction in Evidence Collection:
Clause 246(2)(b) should be amended to ensure powers are exercised within an officer’s jurisdiction.
16. TDS Refund Without Late Filing Penalty:
Clause 263(1)(ix) should be removed to allow refund claims even if returns are filed after the due date, especially for small taxpayers.
18. Chapter VIII Deduction Restriction:
Clause 270(1)(a)(v) should restrict disallowance to Heading C deductions only, not the entire chapter.
19. Charitable-Religious Trust Exemption:
Clause 332 should be redrafted to address confusion among mixed-purpose trusts about “wholly for charitable or religious purposes”.
20. Receipts vs Income for NPOs:
Clause 335 should use the term “income” instead of “receipts” to align with real income taxation principles.
21. Anonymous Donation Tax Clarity:
Clause 337 should exempt religious-cum-charitable trusts from 30% tax on anonymous donations, in line with Section 115BBC.
22. TDS on PF Balances:
Clause 392(7)(a) should include a “non-obstante” clause to remove ambiguity about applicable TDS rates on PF.
23. NIL Certificate for TDS:
Clause 395 should explicitly include the term “NIL” to ensure clarity on zero deduction certificates.
24. Refund Entitlement on Clubbed Income:
Clause 432(1) should clarify that if one person’s income is included in another’s, the latter is eligible for a refund.
25. Penalty for Not Maintaining Books:
Clause 441 should replace “shall” with “may” to give discretion to authorities in imposing penalties.
26. More Time for Liaison Office Filings:
Clause 505 should extend the statement filing deadline from 60 days to 8 months for non-resident liaison offices.
27. Valuer Qualifications:
Clause 514 should prescribe specific qualifications for registered valuers, referencing Companies Act rules.
28. Repealed Act References Cleanup:
Clause 536 should consolidate references to repealed laws and clarify the status of rules and circulars under the new regime.