30 Key Recommendations
Suggested by the Select Committee on the Income Tax Bill 2025
30 Key Recommendations
Suggested by the Select Committee on the Income Tax Bill 2025
The Income Tax Bill, 2025 (‘ITB’) was introduced in the Lok Sabha by Finance Minister Nirmala Sitharaman, aiming to replace the Income Tax Act, 1961. On the same day of introduction, the Bill was referred to a Select Committee of the Lok Sabha for detailed examination and recommendations.
The Select Committee, chaired by Baijayant Panda, examined each clause of the ITB and invited input from stakeholders, industry bodies, and experts. The Select Committee submitted its report to the Lok Sabha on July 21, 2025.
The Committee did not suggest significant changes to the ITB 2025, and most of the recommendations aimed to remove ambiguities or correct drafting errors that arose during the simplification of the Income Tax Act, 1961 (‘ITA’). While many valid suggestions are incorporated in the report, some of these recommendations are beyond the Committee’s mandate and may be considered separately by other forums.
A few key recommendations made by the Select Committee in the ITB are given below.
1. No Denial of Refund if ITR is Filed After the Due Date
As per the ITA 1961
Section 239(1) provides that any claim for refund must be made by furnishing a return of income as per the provisions of Section 139.
As per the ITB 2025
Sub-clause (1)(ix) to clause 263 proposes that a person intending to claim a refund under Chapter XX shall be required to furnish a return of income on or before the due date.
Select Committee Recommendation
Sub-clause (1)(ix) to clause 263 leads to an unintended interpretation that the assessee will need to file the Return of Income within the due date if he intends to claim a refund. If a return is filed after the original due date, a literal interpretation of the provisions may result in the denial of a refund.
The clause (ix) does not serve any purpose since it is certainly permissible for a person to furnish a belated return. Thus, the Committee recommends removing sub-clause (1)(ix) from Clause 263 to provide flexibility for allowing refund claims in cases where the return is not filed on time.
2. Deduction for the Pre-Construction Period Interest
As per the ITA 1961
Explanation to clause (b) of section 24 provides that if a loan is taken to acquire a house property but the property is acquired or constructed in the subsequent year, the interest for the pre-acquisition period shall be allowed to be deducted in 5 annual instalments, commencing from the previous year in which the property is acquired or constructed. This provision applies to every house, whether let out, deemed let out, or self-occupied house property.
As per the ITB 2025
Clause 23 of the ITB 2025 retains the same provisions. However, the provision allowing the deduction for the pre-construction period interest has been proposed only in the context of self-occupied properties.
Select Committee Recommendation
The Committee recognised the need to clarify the computation of deductions to promote greater fairness and transparency for property owners. Accordingly, the Committee recommends that the deduction for pre-construction interest be extended to let-out properties, in line with the existing provisions. Further, it is also specified that the standard deduction of 30% is to be calculated on the annual value after deducting municipal taxes.
3. Expenditure Otherwise Allowable is Deductible on an Actual Payment Basis
As per the ITA 1961
Section 43B of the ITA provides a list of several expenses that are allowed as a deduction on a payment basis. Thus, even if an assessee follows the mercantile method of accounting, deduction of the specified expenses shall be allowed if the payment is made on or before the due date of furnishing the return of income, except the sum payable to micro and small enterprises.
As per the ITB 2025
Clause 37 of the ITB 2025 addresses deductions for certain expenditures, which are only allowable on an actual payment basis. This clause corresponds to section 43B of the ITA 2025.
The provisions that have become redundant, applying to earlier years or are no longer relevant, have been omitted (namely, Explanations 1, 3, 3A, and 3B to Section 43B). The existing provisions have been simplified in language and carried forward with no change in intent.
Select Committee Recommendation
The Committee notes that Clause 37(1) does not explicitly clarify whether expenses expressly disallowed under other provisions of the ITB can still be claimed under this clause on the grounds of actual payment.
To address this ambiguity, the Committee recommends inserting the phrase “otherwise allowable” in Clause 37(1) to ensure it is clear that such disallowed expenses cannot be claimed merely because they have been paid. The Committee further suggests incorporating provisions akin to Explanation 2 to Section 43B of the ITA 1961, which is currently omitted in the ITB. This will define the term “any sum payable” and thereby provide greater clarity and remove interpretational doubts.
Additionally, to maintain consistency with the existing law and prevent potential interpretational issues, the Committee recommends replacing the word “advances” with “borrowing” at the end of Clause 37(2)(e).
4. Penalty for Not Providing Prescribed Electronic Payment Modes Extended to Professionals
As per the ITA 1961
Section 269SU provides that every person carrying on a business whose total sales, turnover, or gross receipts exceed Rs. 50 crores during the immediately preceding previous year, is required to provide a facility for accepting payment through prescribed electronic modes.
As per the ITB 2025
Clause 187 of the ITB 2025 carries the same provision as mentioned in Section 269SU of the ITA 1961.
Select Committee Recommendation
The Committee recommended inserting the word “profession” after “business” to ensure that professionals with total receipts exceeding Rs. 50 crore is also covered under the provision.
5. No Penalty for Failure to Keep, Maintain or Retain Books of Account in Genuine Cases
As per the ITA 1961
Section 271A of the ITA 1961 levies a penalty on a person who fails to keep, maintain, or retain books of account, documents, and other records as required under Section 44AA. The Assessing Officer, JCIT(A) or CIT(A) may direct such a person to pay a penalty of Rs. 25,000.
As per the ITB 2025
The provisions of the existing Section have been textually simplified and retained with the same intent in clause 441 of ITB 2025. However, the word ‘may’ has been replaced with the word ‘shall’ in respect to the levy of penalty by AO.
Select Committee Recommendation
The Committee found that non-compliance with maintaining books of accounts could arise from genuine reasons. To address such cases, the Committee recommended replacing “shall” with “may” in Clause 441.
6. Prescribe the Qualification of Valuers
As per the ITB 2025
Clause 514 is a newly introduced provision in the ITB. It proposes that the Principal Chief Commissioner or Chief Commissioner, or the Principal Director General or Director General, is required to maintain a register of valuers, recording the names and addresses of individuals registered as valuers.
Any person who possesses the prescribed qualifications to value a specific class of assets may apply for registration as a valuer to the relevant authority in the prescribed form, duly verified, and accompanied by the prescribed fee. The application must include a declaration confirming that the applicant will conduct fair and accurate valuations, furnish valuation reports in the prescribed format, charge fees within the prescribed limits, and avoid valuing any asset in which he has a direct or indirect interest.
A registered valuer is required to prepare the valuation report in the prescribed form and have it verified in accordance with the laid-down procedures.
Select Committee Recommendation
The Committee recommended that the qualifications necessary for registered valuers be clearly specified.
7. Refund in Case of Clubbing of Income
As per the ITA 1961
Section 238(1) provides that where the income of one person is included under any provision of this Act in the total income of any other person, the latter alone shall be entitled to a refund under this Chapter in respect of such income.
As per the ITB 2025
Clause 432(1) mirrors the substance of Section 238(1) in a simplified language. It reads as under:
“Where the income of one person is included in total income of any another person under any provision of this Act, the latter shall be eligible for a refund under this Part in respect of such income.”
Select Committee Recommendation
The Committee found that Clause 432 retains the original intent of Section 238 but noted two drafting issues:
(a) The phrase “any another person” in Clause 432(1) was incorrect. The Committee recommended replacing it with “any other person”
(b) The use of the word “Part” instead of “Chapter” (as used in the existing Act) was flagged. The Committee recommended using “Chapter” to maintain consistency.
8. Definition of “Capital Asset”
As per the ITA 1961
Section 2(14) defines the meaning of ‘capital assets’. As per section 2(14)(b), securities held by a Foreign Institutional Investor that has invested in such securities as per the regulations made under the SEBI Act, 1992, are also defined as capital assets.
The Finance Act 2025 amended Section 2(14) to clarify that any security held by investment funds referred to in Section 115UB and invested in accordance with the regulations made under the SEBI Act shall also be treated as a capital asset.
As per the ITB 2025
Clause 2(22) of the ITB 2025 carries the same definition of the capital assets as defined under section 2(14) of ITA 1961.
Select Committee Recommendation
During its examination of sub-clause 2(22) of ITB, the Committee noted the need to align the definition of ‘capital asset’ with the amendments introduced by the Finance Act, 2025. Accordingly, the Committee recommended amending the subclause to incorporate these changes.
9. Definition of “Infrastructure Capital Company”
As per the ITA 1961
Section 2(26A) of the ITA defines “infrastructure capital company” as:
(a) A company that makes investments by way of acquiring shares or providing long-term finance to any enterprise;
(b) Undertaking wholly engaged in the business referred to in Section 80-IA(4) or Section 80-IAB(1);
(c) An undertaking developing and building a housing project referred to in Section 80-IB(10);
(d) A project for constructing a hotel of not less than a three-star category as classified by the Central Government;
(e) A project for constructing a hospital with at least one hundred beds for patients.
As per the ITB 2025
Clause 2(55) of the ITB 2025 carries the same definition of the “infrastructure capital company” as defined under Section 2(26A) of ITA 1961.
Select Committee Recommendation
The Committee noted that the definition of ‘infrastructure capital company’ depends on cross-references to provisions of the repealed ITA 1961. Therefore, it recommends that the Ministry incorporate the complete definition of ‘infrastructure facility’ within the new Bill itself by eliminating the references to the old Act.
10. Definitions of “Micro” and “Small” Enterprises
As per the ITA 1961
Micro and small enterprises are defined under Section 43B of the ITA 1961, adopting the same meanings as assigned in clauses (h) and (m) of Section 2 of the Micro, Small and Medium Enterprises Development Act, 2006.
As per the ITB 2025
Clauses 66(12) and 66(34) of the ITB 2025 carry the same definition of “micro” and “small” enterprises.
Select Committee Recommendation
The Committee recommended that the definition be redrafted to directly incorporate the definitions of “micro” and “small” enterprises as notified under the Micro, Small and Medium Enterprises Development Act, 2006, instead of merely referring to “as assigned in Section 2(m)” of that Act. This is to ensure uniformity in the definitions of “micro” and “small” enterprises across both the MSMED Act and the Income-tax Act.
11. Define “Status” for Commissioner (Appeals)
As
per the ITA 1961
A person aggrieved by the orders passed by various Income tax authorities can prefer an appeal against such order before CIT(A) under Section 246A.
Clause (a) of Section 246A(1) specifies that any assessee, deductor, or collector aggrieved by specified orders, such as those relating to assessment, adjustments, tax determination, loss computation, or the status under which he is assessed, may appeal to the Commissioner (Appeals).
This section does not define the word ‘Status,’ but the same is defined in Section 246 [Appeals to Joint Commissioner (Appeals)]
As per the ITB 2025
Clause 357 of the ITB 2025 streamlines the provisions relating to appeals before the Commissioner (Appeals), in line with Section 246A of ITA 1961. However, it also omits a clear definition of the term ‘status’, leaving its meaning ambiguous.
Select Committee Recommendation
The Committee suggested defining the term “status” to ensure clarity in appeal proceedings, consistent with the language employed in Clause 356, which corresponds to Section 246 of the Income-tax Act, 1961.
12. Carry Forward and Set-off of Losses in Certain Situations
Clause 119 of the ITB 2025 addresses the carry-forward and set-off of losses in specific situations and for certain companies. The clause corresponds to Sections 78 and 79 of the ITA 1961 and aims to simplify and merge their provisions with the same intent.
Under Clause 119, if there is any change in shareholding between the two relevant dates (i.e., the year of loss and the year of set-off), even if only once, the loss would not be permitted to be carried forward and set off. However, the Committee has suggested that if, in subsequent years, the original shareholding is restored and the 51% continuity condition is met, then the losses should be allowed to be carried forward.
Additionally, the Committee has recommended inserting a definition of “beneficial owner” under Clause 119 to align with the policy objective of reducing tax litigation and ensuring clarity. The term ‘beneficially held’ in the ITA 1961 has been replaced by ‘beneficial owner’ in the ITB 2025. However, the term beneficial owner has not been defined in Clause 119, leading to ambiguity.
13. Interpretation of “Wholly for Charitable or Religious Purposes”
As per the ITA 1961
Under the existing framework, institutions with mixed purposes (charitable and religious) are eligible for exemption if their objectives align with Section 11 of the Act. The phrase “wholly for charitable or religious purposes” was interpreted in a practical manner by the judiciary, considering composite activities.
As per the ITB 2025
Clause 332 introduces ambiguity by using the term “wholly for charitable or religious purposes,” without clarifying treatment for mixed-objective NPOs. This raised concerns about the exclusion of long-standing institutions from tax exemptions.
Select Committee Recommendation
The Committee recognised confusion among NPOs, especially those with combined charitable and religious aims. To avoid litigation and clarify the applicability of Clause 332 for both existing and newly formed trusts, it is recommended that the clause be redrafted to remove ambiguity.
14. “Receipts” vs. “Income” for NPOs
As per the ITA 1961
Exemption is granted to charitable trusts based on “income” as per real income principles computed in a commercial sense, with accumulation and application of such income being allowed.
As per the ITB 2025
Clause 335 proposes the term “regular income” but, in sub-clauses, uses the word “receipts,” which diverges from established practice. This raises concerns about taxing gross receipts instead of net income.
Select Committee Recommendation
The Committee opposed the use of “receipts”. It recommended replacing it with “income” to maintain consistency with the principle of real income taxation, ensuring only net income is subject to application, accumulation and taxation.
15. Anonymous Donations
As per the ITA 1961
Section 115BBC imposes a 30% tax on anonymous donations but exempts wholly religious and religious-cum-charitable trusts from this provision.
As per the ITB 2025
Clause 337 proposed a blanket 30% tax on anonymous donations for all NPOs, exempting only wholly religious trusts, and not religious-cum-charitable ones.
Select Committee Recommendation
The Committee noted that the omission of religious-cum-charitable institutions from the exemption is a burden to hybrid NPOs. It is recommended to restore a provision similar to the Explanation under Section 115BBC, thereby exempting religious-cum-charitable trusts from this harsh treatment.
16. Deemed Application of Income
As per the ITA 1961
Explanation 2 to Section 11(1) allowed for deemed application of income in certain cases, especially where income was not actually applied due to non-receipt or other valid reasons.
As per the ITB 2025
Clause 341 simplifies income application provisions but omits the deemed application clause, affecting NPOs that receive delayed income.
Select Committee Recommendation
Recognising its practical relevance, the Committee recommended reinstating the deemed application provision in Clause 341 to preserve the operational flexibility available to NPOs under the existing law.
17. Deduction for Contribution to Pension Scheme
As per the ITA 1961
As per sub-section 80CCD(1B), “An assessee referred to in sub-section (1), shall be allowed a deduction in computation of his total income, whether or not any
deduction is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees.”
As per the ITB 2025
Clause 124(3) of the ITB 2025 carries forward the same provisions as mentioned in Section 80CCD(1B) of the ITA 1961.
Select Committee Recommendation
The Committee observed that the absence of the phrase “by such individual” in Clause 124(3) created ambiguity regarding who must make the contribution. To address this, it recommended inserting the phrase after “amount paid or deposited.” After the insertion, the clause will read as:
“An assessee referred to in sub-section (1), or any other assessee, being an individual, shall be allowed a deduction in computation of his total income of the whole of the amount paid or deposited by such individual in the tax year in his account under a pension scheme notified or as notified by the Central Government, which shall not exceed fifty thousand rupees.”
18. Deduction in Respect of Donations to Certain Funds and Charitable Institutions
As per the ITA 1961
Section 80G of the ITA provides that any assessee who has paid any sum by way of donation is eligible to claim a deduction under this provision to the extent of 50% to 100% of the donation made. For certain donations, the deduction is limited to 10% of the adjusted gross total income.
As per the ITB 2025
Clause 133 of the ITB 2025 deals with similar provisions. However, sub-clause (2) states the following:
“Where the aggregate of the sums referred to in sub-section (1)(a)(xxiii) and (xxiv), sub-section (1)(b)(ii) to (v) and (vii) exceeds 10% of the adjusted gross total income, then the amount in excess of 10% of the gross total income shall be ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed under sub-section (1).”
Select Committee Recommendation
While examining Clause 133 of the Bill, the Committee observed an inconsistency in the use of terms. The provision initially refers to adjusted gross total income, but subsequently refers only to gross total income, creating a disconnect. This inconsistency could unintentionally allow higher deductions than intended.
To avoid this and maintain alignment with legislative intent, the Committee recommended replacing the second mention of “gross total income” with “adjusted gross total income” in Clause 133(2), thereby ensuring consistency and preventing unintended tax benefits.
19. Deduction to the Business of Processing Biodegradable Waste
As per the ITA 1961
Section 80JJA provides a 100% deduction to an assessee deriving income from any of the following businesses:
(a) Collecting and processing or treating biodegradable waste for generating power;
(b) Producing bio-fertilisers, bio-pesticides, other biological agents or biogas; or
(c) Making pellets or briquettes for fuel or organic manure.
As per the ITB 2025
Clause 145 of the ITB 2025 seeks to provide a similar deduction. The clause corresponds to Section 80JJA of the ITA 1961. The provision of the existing section has been textually simplified and retained with the same intent in this clause. However, the word ‘other biological agents’ has been replaced with ‘biological agents’.
Select Committee Recommendation
The Committee noted that the term “other biological agents” was specifically used in the original provision to indicate an inclusive and broader scope. To maintain consistency with the intent of the existing law and avoid narrowing the scope of eligible businesses, the Committee recommended inserting the word “other” in Clause 145(1)(b) of the ITB 2025.
20. Marginal Rebate of Income Tax
As per the ITA 1961
Section 87A of ITA 1961 deals with the income tax rebate. A resident individual with a total income of up to Rs. 5,00,000 can claim a tax rebate of up to Rs. 12,500 under Section 87A. However, if a resident individual opts for the new tax regime under Section 115BAC, he is eligible for a tax rebate of up to Rs. 60,000 if his total income does not exceed Rs. 12,00,000. Additionally, a marginal rebate is available if the total income slightly exceeds Rs. 12,00,000.
As per the ITB 2025
Clause 156 of ITB 2025 covers similar provisions for the income tax rebate. However, with respect to the marginal rebate, clause 156(2)(b) proposes the following:
“the income exceeds twelve lakh rupees, the income tax payable on the total income reduced by total income which is in excess of twelve lakh rupees”
Select Committee Recommendation
The Committee observed that the clause lacks clarity and is open to multiple interpretations, potentially leading to unintended tax consequences. To address this and maintain consistency with the current law, the Committee recommended rephrasing Clause 156(2)(b) in line with the language used in Section 87A of the Income-tax Act, 1961.
21. Reinstatement of “In the Circumstances of the Case” under GAAR
As per the ITA 1961
Section 98 provides that if an arrangement is declared to be an impermissible avoidance arrangement, then the tax consequences of such arrangement, including denial of any tax benefit or benefit under a tax treaty, shall be determined in the circumstances of the case, in a manner considered appropriate.
As per the ITB 2025
Clause 181 of the ITB 2025 carries the same provisions with simplified text. However, it omits the phrase “in the circumstances of the case”.
Select Committee Recommendation
The Committee observed that the omission of the phrase “in the circumstances of the case” could weaken procedural safeguards. Considering stakeholder concerns, the Committee recommended reinstating the phrase to preserve fairness and ensure that GAAR provisions are applied with due regard to the specific facts and context of each case. This would help maintain a balanced approach between effective tax enforcement and taxpayer protection.
22. Insertion of the Definition of Co-operative Bank
Select Committee Recommendation
Clause 189 of the ITB 2025 proposes the definitions for the purposes of the chapter on “Mode of Payment in Certain Cases, etc.” The Committee noted that the term “co-operative bank” is used in Clauses 185(2), 186(2), and 188(1)/(2) of the ITB 2025 but is not defined under Clause 189.
To enhance clarity, ensure consistency, and align with related provisions, the Committee recommended that the term “co-operative bank” be defined explicitly in Clause 189. This would help eliminate ambiguity, facilitate the uniform application of the relevant provisions, and provide clear legal guidance to stakeholders.
23. Disallowance of Deductions While Processing of Return
As per the ITA 1961
Section 143(1) allows for the processing of returns filed under Section 139 or in response to a notice under Section 142(1). Sub-clause (v) of Section 143(1)(a) provides that deductions under Section 10AA or Chapter VI-A - Heading C (“Deductions in respect of certain incomes”) shall be disallowed if the return is filed after the due date under Section 139(1).
As per the ITB 2025
Clause 270(1) of the ITB corresponds to Section 143(1) of the ITA 1961. It proposes that the processing of returns filed under Section 263 or in response to a notice under Section 268(1). Sub-clause (v) of Clause 270(1)(a) proposes disallowance of deductions under Section 144 or any provision of Chapter VIII if the return is filed beyond the due date specified under Section 263.
Select Committee Recommendation
The Committee observed that the proposed blanket disallowance of all deductions under Chapter VIII goes beyond the scope of the existing law, which restricts such disallowance to deductions under Heading-C only. To maintain consistency with the current legal position, the Committee recommended that Clause 270(1)(a)(v) be modified to restrict the disallowance only to deductions under Heading-C of Chapter VIII. Other than this correction, the Committee accepted the clause as a textual simplification of the existing provision.
24. Application for Advance Ruling
As per the ITA 1961
Sub-section (2) of Section 245Q provides that an application for advance ruling shall be made in quadruplicate and be accompanied by a fee of Rs. 10,000 or such fee as may be prescribed, whichever is higher.
As per the ITB 2025
Clause 383 of ITB 2025 retains the core framework of Section 245Q. With respect to the filing of an application for advance ruling, sub-clause (2) of Clause 383 provides as under:
“The application shall be made in quadruplicate and be accompanied by a fee of ten thousand rupees or such fee, as prescribed.”
Select Committee Recommendation
The Committee highlighted and addressed two key drafting concerns:
(a) Removal of the Requirement to File in Quadruplicate
The requirement to submit the application in quadruplicate is outdated, as Rule 44E was amended to remove this requirement, effective May 5, 2022, due to the transition to digital/email-based filing. To align Clause 383 with the prevailing rules, the Committee recommended removing the phrase “in quadruplicate”, which is accepted by the Ministry.
(b) Clarification of Fee Determination
The phrase “Rs. 10,000 or such fee as prescribed” in Clause 383(2) lacked clarity compared to the earlier expression “Rs. 10,000 or such fee as may be prescribed, whichever is higher” under Section 245Q. The Committee raised concerns about potential ambiguity, revenue loss, and litigation. The Ministry accepted this and agreed to remove the reference to Rs. 10,000 entirely, allowing the fee to be fully prescribed through rules. The corrected clause will now read:
“(2) The application shall be accompanied by such fee, as prescribed.”
25. TDS on Salary and Provident Fund
As per the ITA 1961
Section 192 governs TDS on salary. It mandates tax deduction at the average rate on the estimated income under the head “Salaries” at the time of payment.
Sub-section (6) of Section 192 specifically deals with the valuation of salary paid in foreign currency, stating that such salary must be converted into Indian Rupees at the prescribed exchange rates for the purpose of TDS.
Further, Section 192A mandates 10% TDS on taxable payments from recognised provident funds, where the accumulated balance is included in total income and is Rs. 50,000 or more. This section contains a non-obstante clause, meaning it overrides other provisions of the Act.
As per the ITB 2025
Clause 392 of the Bill consolidates the provisions of Sections 192 and 192A.
(a) Sub-clauses (1) to (6) of Clause 392 provide for TDS on salary at the average rate, based on estimated income for the tax year. However, there is no provision corresponding to the current Section 192(6) regarding salary paid in foreign currency.
(b) Clause 392(7) provides for 10% TDS on the accumulated balance withdrawn from a recognised provident fund, where such amount is taxable and is Rs. 50,000 or more. Unlike Section 192A, this clause does not contain a nonobstante clause.
Select Committee Recommendation
(a) Clarity on TDS Rate for Recognised Provident Fund
The Committee observed that Clause 392(7)(a) lacked clarity on whether TDS should apply at the average rate (as used for salary under Clause 392(1)) or at the flat rate of 10% (as stated in Clause 392(7)). To avoid misinterpretation and ensure consistency with current law, the Committee recommended inserting a non-obstante clause to clarify that 10% TDS shall apply in such cases. The Ministry accepted this recommendation.
(b) Inclusion of a Provision for Salary Paid in Foreign Currency
The Committee noted that the Bill inadvertently omitted provisions corresponding to Section 192(6), which governs the conversion of foreign currency salary into INR at prescribed rates for TDS purposes.
The absence of such a provision could lead to inconsistent valuation, confusion, and potential litigation. The Committee recommended that a suitable provision be inserted in Clause 392 to prescribe conversion at the notified forex rates. The Ministry also accepted this recommendation.
26. Certificate for Lower or Nil Deduction/ Collection of Tax
Clause 395 of the ITB consolidates and simplifies several provisions of the ITA, such as Sections 195(2), 197, 197A, 203, 206C(9), and 206C(10), which relate to certificates for lower or nil deduction/collection of tax.
The Committee noted that Clause 395(1) removes the term “Nil deduction” which is explicitly present in Section 197 of the existing Act. The Department stated that “lower deduction” is meant to include “nil deduction” as well, and that clarification will be issued via administrative instructions. However, the Committee felt that replacing “nil” with “lower” may lead to ambiguity, especially in practical cases such as foreign banks seeking exemption from TDS on customer payments or lossmaking entities or non-residents availing of treaty benefits.
To avoid confusion and ensure clarity in law, the Committee recommended that the word “nil” be reinstated in Clause 395(1), rather than relying on future administrative guidance.
27. Powers Regarding Discovery and Production of Evidence
As per the ITA 1961
Section 131(1A) empowers specified senior officers (like Principal Director General, Director General, etc.) to exercise the powers of discovery and investigation even if no proceedings are pending, but only in relation to a person or class of persons within their jurisdiction. This ensures that powers are territorially restricted to prevent overreach.
As per the ITB 2025
Clause 246(2)(b) allows similar powers to certain officers for inquiry or investigation without any reference to jurisdiction. The omission of the jurisdictional requirement raises the possibility that officers may act beyond their territorial authority.
Select Committee Recommendation
The Committee noted this critical omission and recommended restoring the jurisdictional requirement in Clause 246(2)(b), aligning it with Section 131(1A) of the existing Act.
The Ministry accepted this recommendation, and the clause will be amended to include jurisdictional limits.
28. Extended Timeframe for Non-Resident Liaison Office Statements
As per the ITA 1961
Section 285 of the ITA 1961 provides as follows:
“Every person, being a non-resident having a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999, shall, in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within such period, a statement in such form and containing such particulars as may be prescribed.”
The wording ‘such period, a statement’ was substituted for “sixty days from the end of such financial year, a statement” by the Finance (No. 2) Act, 2024, w.e.f. 1-4-2025.
As per the ITB 2025
Clause 505 of the ITB 2025 carries the exact provisions as defined under section 285 of ITA 1961.
Select Committee Recommendation
The Committee observed a drafting error in Clause 505, as it does not incorporate the amendment made by the Finance (No. 2) Act, 2024, and continues to use the phrase “sixty days from the end of such financial year, a statement.”
Additionally, the CBDT, vide Notification No. 14/2025 dated 07-02-2025, amended Rule 114DA to mandate the filing of the statement in Form 49C within eight months from the end of the relevant financial year.
Hence, the necessary correction should be carried out in clause 505 of the ITB 2025.
29. Definition of ‘Parent Company’
As per the ITA 1961
Any transfer of a capital asset by a holding company to its subsidiary company or vice versa is not regarded as a transfer provided the specified conditions are satisfied. However, Section 47A provides that the exemption shall be withdrawn if, before the expiry of 8 years from the date of transfer, the capital asset is converted into stock-in-trade or the parent or holding company, or its nominees, no longer hold the entire share capital of the subsidiary company.
As per the ITB 2025
Clause 71 of ITB 2025 provides for similar conditions whereby the exemption from taxation as capital gains is withdrawn.
Select Committee Recommendation
For the sake of clarity and to eliminate any scope of misinterpretation, the Committee suggested that the phrase ‘parent company’ featured in clause 71(1)(b) may be examined and clearly defined by the Ministry of Finance.
30. Insertion of Reference ‘Mode of Computation
of Capital Gains’
As per the ITA 1961
Section 50CA provides that if the consideration received or accruing from the transfer of an unquoted share is less than its fair market value (determined as prescribed), such fair market value shall be deemed as the full value of consideration for the purposes of Section 48, which deals with the computation of capital gains.
As per the ITB 2025
Clause 79 of ITB 2025 retains the substance of Section 50CA using simplified language.
Select Committee Recommendation
The Committee noted that Clause 79 does not specifically make reference to Clause 72 (corresponding Section 48 of ITA 1961), which may cause ambiguity and unintended applicability to other provisions under the capital gains head. To avoid litigation and preserve legislative intent, the Committee recommended restoring a reference to Clause 72, aligning with the original language of Section 50CA.
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Global Mobility Services
Personal Taxation
Training
Due Diligence
Foreign Exchange Management Laws
Due Dilligence
Advisory Services
Assistance in compounding of offences
Transactions Services
Investment outside India
Your Partners for Frictionless Advice
Goods
Transaction Advisory
Business Restructuring
Classification
Due Diligence
Training
Advisory
Trade Facilitation Measures
Corporate
Corporate Structuring
VAT Advisory
Residential Status
A Glimpse of the People Behind Taxmann
Naveen Wadhwa
Research and Advisory [Corporate and Personal Tax]
Chartered Accountant (All India 24th Rank)
14+ years of experience in Income tax and International Tax
Expertise across real estate, technology, publication, education, hospitality, and manufacturing sectors
Contributor to renowned media outlets on tax issues
Vinod K. Singhania Expert on Panel | Research and Advisory (Direct Tax)
Over 35 years of experience in tax laws
PhD in Corporate Economics and Legislation
Author and resource person in 800+ seminars
V.S. Datey Expert on Panel | Research and Advisory [Indirect Tax]
Holds 30+ years of experience
Engaged in consulting and training professionals on Indirect Taxation
A regular speaker at various industry forums, associations and industry workshops
Author of various books on Indirect Taxation used by professionals and Department officials
Manoj Fogla Expert on Panel | Research and Advisory [Charitable Trusts and NGOs]
Over three decades of practising experience on tax, legal and regulatory aspects of NPOs and Charitable Institutions
Law practitioner, a fellow member of the Institute of Chartered Accountants of India and also holds a Master's degree in Philosophy
PhD from Utkal University, Doctoral Research on Social Accountability Standards for NPOs
Author of several best-selling books for professionals, including the recent one titled 'Trust and NGO's Ready Reckoner' by Taxmann
Drafted publications for The Institute of Chartered Accountants of India, New Delhi, such as FAQs on GST for NPOs & FAQs on FCRA for NPOs.
Has been a faculty and resource person at various national and international forums
the UAE
Chartered Accountant (All India 36th Rank)
Has previously worked with the KPMG
S.S. Gupta Expert on Panel | Research and Advisory [Indirect Tax]
Chartered Accountant and Cost & Works Accountant
34+ Years of Experience in Indirect Taxation
Bestowed with numerous prestigious scholarships and prizes
Author of the book GST – How to Meet Your Obligations', which is widely referred to by Trade and Industry
Sudha G. Bhushan Expert on Panel | Research and Advisory [FEMA]
20+ Years of experience
Advisor to many Banks and MNCs
Experience in FDI and FEMA Advisory
Authored more than seven best-selling books
Provides training on FEMA to professionals
Experience in many sectors, including banking, fertilisers, and chemical
Has previously worked with Deloitte
Contact Us
Taxmann Delhi
59/32, New Rohtak Road
New Delhi – 110005 | India
Phone | 011 45562222
Email | sales@taxmann.com
Taxmann Mumbai
35, Bodke Building, Ground Floor, M.G. Road, Mulund (West), Opp. Mulund Railway Station Mumbai – 400080 | Maharashtra | India
Phone | +91 93222 47686
Email | sales.mumbai@taxmann.com
Taxmann Pune
Office No. 14, First Floor, Prestige Point, 283 Shukrwar Peth, Bajirao Road, Opp. Chinchechi Talim, Pune – 411002 | Maharashtra | India
Phone | +91 98224 11811
Email | sales.pune@taxmann.com
Taxmann Ahmedabad
7, Abhinav Arcade, Ground Floor, Pritam Nagar Paldi
Ahmedabad – 380007 | Gujarat | India
Phone: +91 99099 84900
Email: sales.ahmedabad@taxmann.com
Taxmann Hyderabad
4-1-369 Indralok Commercial Complex Shop No. 15/1 – Ground Floor, Reddy Hostel Lane Abids Hyderabad – 500001 | Telangana | India
Phone | +91 93910 41461
Email | sales.hyderabad@taxmann.com
Taxmann Chennai No. 26, 2, Rajan St, Rama Kamath Puram, T. Nagar
Chennai – 600017 | Tamil Nadu | India
Phone | +91 89390 09948
Email | sales.chennai@taxmann.com
Taxmann Bengaluru
12/1, Nirmal Nivas, Ground Floor, 4th Cross, Gandhi Nagar
Bengaluru – 560009 | Karnataka | India
Phone | +91 99869 50066
Email | sales.bengaluru@taxmann.com
Taxmann Kolkata Nigam Centre, 155-Lenin Sarani, Wellington, 2nd Floor, Room No. 213
Kolkata – 700013 | West Bengal | India
Phone | +91 98300 71313
Email | sales.kolkata@taxmann.com
Taxmann Lucknow
House No. LIG – 4/40, Sector – H, Jankipuram Lucknow – 226021 | Uttar Pradesh | India
Phone | +91 97924 23987
Email | sales.lucknow@taxmann.com
Taxmann Bhubaneswar
Plot No. 591, Nayapalli, Near Damayanti Apartments
Bhubaneswar – 751012 | Odisha | India
Phone | +91 99370 71353
Email | sales.bhubaneswar@taxmann.com
Taxmann Guwahati
House No. 2, Samnaay Path, Sawauchi Dakshin Gaon Road
Guwahati – 781040 | Assam | India
Phone | +91 70866 24504
Email | sales.guwahati@taxmann.com