Income Tax Bill 2025: AMT Expansion May Increase Tax Burden on LLPs and Partnership Firms

Last updated: 21 March 2025

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The proposed Income Tax Bill 2025 includes significant changes to the alternative minimum tax (AMT) that could lead to a higher tax burden for LLPs and partnership firms. Key amendments aim to remove the preferential tax rate for long-term capital gains (LTCG) under AMT and potentially extend its application to all LLPs and partnerships, not just those claiming specific deductions. Industry experts and bodies have raised concerns about these changes, fearing unintended consequences and increased tax liabilities for businesses.

The Income-Tax Bill, 2025, has proposed significant changes to the alternative minimum tax (AMT) framework, potentially increasing the tax burden on partnership firms and limited liability partnerships (LLPs) with long-term capital gains (LTCG). The proposed amendments aim to remove preferential tax treatment for LTCG under the AMT regime and expand its applicability beyond firms claiming deductions under Chapter VI-A of the IT Act, 1961. Key Changes in AMT Provisions Currently, LLPs and par

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FAQ :

The Bill proposes to remove the preferential tax rate for long-term capital gains (LTCG) under the alternative minimum tax (AMT) regime and expand its applicability beyond firms claiming specific deductions.

LLPs and partnership firms with long-term capital gains may face a higher tax burden as the preferential rate of 12.5% for LTCG under AMT is likely to be removed, aligning it with the general AMT rate of 18.5%.

Tax experts believe that by omitting a crucial provision from the IT Act, 1961, the Bill extends AMT applicability to all LLPs and partnership firms, regardless of whether they claim deductions under Chapter VI-A.

Concerns include the potential financial strain on LLPs and partnership firms, unintended consequences from the expanded AMT applicability, and a possible increase in tax outflows for businesses, impacting investment structures.

Currently, deductions under Chapter VI-A include those for infrastructure development (80-IA to 80-IE), job creation (80JJAA), and waste recycling (80JJA).

The Income Tax Bill 2025 is currently under review by a Select Committee in the Lok Sabha.

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CCI News Desk

Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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