The Select Committee of the Lok Sabha, chaired by Bharatiya Janata Party (BJP) Vice President and Lok Sabha MP Baijayant Panda, will examine the Income-Tax Bill 2025 on March 6 and 7, 2025. This key legislative review aims to simplify tax laws, modernize tax definitions, and provide greater clarity on various tax-related provisions.
On March 6, the Committee will hear oral evidence from representatives of the Institute of Chartered Accountants of India (ICAI) and Ernst & Young (EY). The following day, March 7, representatives from the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII) will provide their insights.
Lok Sabha Speaker Om Birla had constituted a 31-member Select Committee to undertake a comprehensive review of the new Income Tax Bill. This bill, tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman on February 13, 2025, seeks to replace the existing Income Tax Act of 1961, introducing a range of reforms that impact individuals, businesses, and non-profit organizations.
Key Highlights of the Income Tax Bill 2025
Simplified Tax Terminology
- The bill replaces outdated terms, introducing "tax year" instead of the existing financial and assessment year system.
- Definitions of "virtual digital asset" and "electronic mode" have been incorporated to accommodate the rise of digital transactions and cryptocurrencies.
Scope of Taxable Income
- Retains the existing principle that Indian residents are taxed on global income, while non-residents are taxed only on India-sourced income.
- Clarifies the concept of deemed income, particularly regarding payments made to specific individuals.
Deductions and Exemptions
- The bill consolidates previous deductions (under Sections 10, 80C to 80U of the 1961 Act) into Clauses 11 to 154, offering new provisions for startups, digital businesses, and renewable energy investments.
Capital Gains Tax Reforms
- Maintains short-term and long-term capital gains categorization but explicitly includes virtual digital assets under Clauses 67 to 91, ensuring proper taxation for cryptocurrency and digital assets.
Non-Profit Taxation Framework
- Introduces a clearer compliance structure under Clauses 332 to 355, defining taxable income, compliance requirements, and commercial activity restrictions for non-profits.
The government expects that the proposed changes will simplify tax compliance, promote digital and startup investments, and establish a transparent and equitable taxation framework. The Select Committee’s discussions on March 6-7 will play a critical role in shaping the future of India's taxation landscape.
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