The Lok Sabha's Select Committee has completed an exhaustive review of the proposed Income Tax Bill 2025, recommending more than 330 taxpayer-friendly changes to improve clarity and ease of compliance.
The Committee, chaired by senior MP Baijayant Panda, devoted nearly 25,000 human hours to the exercise, building upon the 60,000 hours already spent by the Income Tax Department in drafting the new legislation. Unlike traditional approaches focused on brevity, the Committee's objective was clarity, Panda said in an interview.
"The most important part of the Committee was the members' very collaborative and cooperative nature," he noted, adding that the recommendations were arrived at after clause-by-clause examination and eight full days of hearings with officials from the finance ministry.
Key Proposals for Change
While the I-T Bill 2025 slashes the word count of the existing Act by 50% from nearly 500,000 words to 250,000, the Committee advised that precision must not be sacrificed for brevity. In several sections, it has proposed reverting to older wording to enhance understanding.
Notable suggestions include:
- Clearer provisions on inter-corporate dividend deductions
- Refined rules for carry-forward of business losses
- More transparency on anonymous donations
- Simplified return filing processes for refund claims
On the contentious issue of LTCG taxation for LLPs and the interpretation of the 18.5% alternate minimum tax, Panda clarified that no policy change was introduced in the new draft. "The intent is not to change the law, but to make it clearer," he emphasized.
Scope and Limitations
While several industry bodies, Chartered Accountants and legal experts urged the Committee to recommend tax rate changes and policy reforms, the panel stuck to its mandate of simplification rather than structural reform. Suggestions outside the scope of simplification are expected to be addressed through the annual Finance Bill during the Budget.
Widening the Tax Net
India's taxpayer base remains narrow despite economic expansion. The Committee believes that the simplified framework proposed in the IT Bill 2025 could encourage more people to enter the formal tax system.
"Many potential first-time taxpayers are willing to pay tax but are deterred by the complex compliance procedures. This new, user-friendly law could change that," Panda remarked.
Drawing parallels with the GST reform, the Committee expects the new Income Tax Bill to broaden the tax base, simplify compliance and reduce the need for costly consultations.
As the government moves toward implementing the reformed Income Tax Act, the extensive deliberations by the Committee mark a critical step in ensuring that India's tax system becomes more transparent, inclusive and future-ready.
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