Select Committee Presented Report on the Income-Tax Bill, 2025 in Lok Sabha

Report, dated 21-07-2025

On July 21, 2025, the Select Committee of the Lok Sabha presented its report on the Income Tax Bill, 2025, which was originally introduced in the House on February 13, 2025. The Committee has reviewed the Bill in detail and proposed several key amendments aimed at improving clarity, alignment with existing laws, and consistency in tax administration.

1. Key Recommendations of the Committee

Below are the major recommendations made by the Committee in its report:

1.1 Alignment of the Definition of ‘Capital Asset’

The Committee recommended that the definition of ‘capital asset’ in the Bill should be aligned with the recent amendments introduced through the Finance Act, 2025, to avoid inconsistency and confusion in interpretation.

1.2 Clarification on Standard Deduction for House Property Income

To remove ambiguity, the Committee advised that the standard 30% deduction allowed under ‘Income from House Property’ should be explicitly computed on the annual value after deducting municipal taxes, ensuring it aligns with existing judicial interpretation and practical application.

1.3 Alignment with MSME Act Definitions

The Committee recommended revising the Bill to align the definitions of “micro” and “small” enterprises with those notified under the Micro, Small and Medium Enterprises Development Act, 2006, ensuring uniformity across statutes and simplifying compliance for businesses.

1.4 Retention and Clarification of Clause 72

It was suggested that the Bill should retain the reference to Clause 72 and include suitable clarificatory amendments to maintain the original legislative intent behind the provision, possibly addressing concerns around continuity and interpretation.

1.5 Restoration of Original Language in Section 131(1A)

To uphold procedural safeguards, the Committee recommended reinstating the original wording of Section 131(1A). Further, it emphasised that the powers conferred under this provision should be exercised only by officers having jurisdiction over the assessee, reinforcing the principles of natural justice and procedural fairness.

2. Conclusion

These recommendations by the Select Committee are aimed at refining the Income Tax Bill, 2025, before its passage. If accepted, they will bring the proposed legislation more in line with established practices, legal clarity, and ease of compliance for taxpayers and authorities alike.

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