A Parliamentary committee reviewing the new Income Tax Bill 2025 has recommended that the Ministry of Finance allow individual taxpayers to file returns and claim TDS refunds after the deadline with no penalties. The committee also advocated for a tax break on anonymous donations to trusts with religious and charitable purposes.
The report, presented to the Lower House by BJP Select Committee Chairperson Baijayant Panda, examined the Income Tax Bill, 2025, which aims to replace the Income Tax Act of 1961.
Key Highlights
- Panel recommends taxpayers allowed to claim TDS refunds post-deadline without penalty, easing late-filing burden.
- Exemption proposed for anonymous donations to religious‑cum‑charitable trusts; new clarity for nonprofit taxation.
New Income Tax Bill: Panel Suggests Top Changes
Regarding TDS refund claims by individuals who are not otherwise required to file tax returns, the committee proposed eliminating the Income Tax Bill clause that requires I-T returns to be filed by the deadline, according to PTI.
The committee notes that the current requirement to submit returns solely for refund purposes may unintentionally result in legal action, particularly for small taxpayers with earnings below the taxable limit but who have received tax deductions at the source.
"In such cases, the law should not require a return solely to avoid penalties for non-filing. The committee, therefore, recommends that sub-clause(1)(ix) be removed from Clause263 to provide flexibility for allowing refund claims in cases where the return is not filed on time," according to the report.
According to a PTI, the committee asked for clarification on how anonymous donations to non-profit organizations (NPOs) with both religious and charitable missions are taxed and asked that any ambiguities be eliminated.
Because it goes against the Income Tax Act's real income taxation principle, the panel opposed taxing NPO "receipts." In order to guarantee that taxes are only applied to NPOs' net income, they argued for the reintroduction of the term "income."
The committee suggested tax exemption for both religious and charitable trusts, recognizing that many organizations have two or more goals. It also noted the significant disparities in the treatment of anonymous donations to registered NPOs.
Notwithstanding its goal of textual simplification, the committee pointed out a mistake in the Bill pertaining to religious-cum-charitable trusts. Many organizations in India's NPO sector may suffer as a result of this omission.
A uniform 30% tax on anonymous donations would be imposed on all registered non-profit organizations under Clause 337 of the Income Tax Bill, 2025. Organizations founded solely for religious purposes would be the only exception.
This is a substantial change from Section 115BBC of the 1961 Income-tax Act. More extensive exemptions are provided by the current law, which exempts anonymous contributions to trusts or organizations founded for both religious and charitable reasons. This exemption does not, however, apply in situations where the donations are made expressly to colleges, universities, hospitals, or clinics run by the same organization or trust.
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Since these "religious-cum-charitable" organizations usually receive funding through traditional channels where it is impossible to identify donors, the current regulation rightly recognizes them as a distinct and valid category eligible for benefits on anonymous donations.
The Select Committee report said, "The committee strongly urge the reintroduction of a provision analogous to the explanation found in Section 115BBC of the 1961 Act."
