Income Tax Bill 2025 Panel Report: Suggestions on TDS Refunds and Taxation of Trusts
By Author | July 22, 2025
Tags: New Income Tax Act, Income Tax News 2025
Panel Recommends Relief for Taxpayers and Trusts
A Parliamentary panel has suggested important changes to the Income Tax Bill, 2025. These changes aim to support individual taxpayers and non-profit organisations (NPOs). The panel recommended two major reforms:
- Allow TDS refunds even if the return is filed after the due date
- Exempt anonymous donations made to religious-cum-charitable trusts from taxation
Baijayant Panda, BJP MP and chair of the Lok Sabha’s Select Committee, tabled the report in the Lower House on Monday.
Clarifying Tax Rules for NPOs and Anonymous Donations
The panel closely examined Clause 337, which imposes a flat 30% tax on anonymous donations to registered NPOs. The draft provides a limited exemption, only for organisations formed purely for religious purposes.
This clause marks a clear shift from Section 115BBC of the current Income-tax Act, 1961. Under the existing law, religious-cum-charitable trusts enjoy broader exemptions. These trusts often collect donations through boxes or informal channels, where identifying donors is not possible.
“While the Bill aims to simplify the text, the omission regarding religious-cum-charitable trusts could severely affect a large part of India’s NPO sector,” the report noted.
The Committee urged lawmakers to restore language similar to Section 115BBC. That section exempts anonymous donations unless they are directed to specific institutions like schools or hospitals.
From ‘Receipts’ to ‘Income’: A Crucial Legal Correction
The panel objected to the draft bill’s use of the word “receipts” when taxing NPOs. It suggested replacing it with “income”, which reflects the principle that only real income—not gross revenue—should be taxed.
Refund Flexibility for Small Taxpayers
The Committee also addressed refund rules for low-income taxpayers. Under the draft bill, individuals must file returns on time to claim a TDS refund, even if their income is below the taxable limit.
The panel found this requirement too harsh. It argued that forcing taxpayers to file just to avoid penalties creates unnecessary legal risks.
“The law should not compel small taxpayers to file returns only to avoid penalties,” the Committee stated.
The panel advised removing sub-clause (1)(ix) from Clause 263. This change would allow refund claims even when the return is filed late. It would protect low-income individuals from prosecution, especially those who had taxes deducted at source but don’t otherwise need to file.
Toward More Inclusive Tax Reform
The panel’s suggestions focus on clarity, fairness, and inclusivity. These changes aim to make the Income Tax Bill, 2025 more practical and less burdensome. Whether or not the Finance Ministry adopts these proposals, they offer a strong roadmap for modernizing India’s direct tax regime—especially for small taxpayers and mixed-purpose charitable organisations.
