The government is set to introduce a new law replacing the old regulations related to Income Tax. This law has been named the Income Tax Bill 2025 and will be presented in the Parliament's monsoon session. The bill includes several significant proposals, with companies expected to benefit the most.
Section 80M to be Reinstated
Notably, the reinstatement of Section 80M into the tax law has been recommended, and the government has agreed to it. This provision allows companies tax exemption on dividend income received from another company. This ensures that the same income is not taxed twice.
Simplified Language of the Bill
In this bill, technical jargon and complex language have been removed and replaced with a style that is easy for the common person to understand. The aim is to ensure that taxpayers do not face any difficulty in understanding the rules. However, there have been no major changes to the fundamental principles of the rules.
Corporate World Breathes a Sigh of Relief
Due to the absence of Section 80M, companies had to pay double tax on inter-corporate dividends. This particularly affected companies with multi-layered structures, i.e., one company within another, and then a third. Now that this provision is being reintroduced, the tax burden on companies will be significantly reduced.
Amendments Regarding Search and Seizure
The most discussed aspect of the bill was the rules related to search and seizure. Previously, there was a provision that if a company did not take any kind of tax exemption or incentive, it could pay only 22 percent tax. However, this provision had been removed in the new bill. This caused concerns among companies that this concession would no longer be available. The committee recommended reinstating this provision, and the government accepted it.
Concerns Raised About Faceless Assessment
When tax experts and industry representatives appeared before the committee, they raised several questions about faceless assessment. They stated that it lacked transparency and that the taxpayer's voice was not heard. In addition, they also said that the rates of tax deductions should be limited to make the process simpler.
Relief for Employees Going Abroad
A major change in the new bill was that the language regarding the tax residency of people going abroad for work was not clear. The old law stated that people who go abroad for employment purposes would not be considered tax residents in India. Removing this line created confusion. The committee recommended that this point be added again to clarify the situation. The government has agreed to this as well.
Small Changes, Big Impact
This new bill includes several changes that directly provide relief to taxpayers and companies. Standard deductions, gratuity, and other tax exemptions available to salaried employees have been simplified by bringing them together in one place.
Bill Discussed 36 Times
The parliamentary committee held 36 meetings on this bill. A total of 536 rules were reviewed, and approximately 285 suggestions were included in the report. The committee's aim was to ensure that tax-related rules are so clear that even the average citizen has no difficulty understanding them.
Finance Minister Presented it in February
The new Income Tax Bill 2025 was presented in Parliament by Finance Minister Nirmala Sitharaman in February. Its purpose is to replace the old tax law with a new, simple, and transparent tax system. The rules have been tightened to prevent tax evasion, and the penalty process has also been clarified.
