A parliamentary committee reviewing the Income Tax Bill 2025 has recommended reinstating the provision for inter-corporate dividend deductions, a move seen as a significant win for Indian businesses, The Economic Times reported, citing people familiar with the matter.
The select committee, chaired by Baijayant Panda, unanimously approved its report on Wednesday, incorporating over 285 changes to the bill. According to sources quoted by ET, these recommendations have already been accepted by the government, paving the way for the passage of the most extensive overhaul of India’s six-decade-old income tax law during the upcoming monsoon session of Parliament.
One of the major demands from industry stakeholders was the restoration of Section 80M, which allows companies to claim a deduction on dividends received from other corporate entities. The omission of this section in the draft bill, especially for companies opting for the 22% corporate tax regime, had raised concerns of double taxation in layered company structures.
Introduced in FY20, the 22% tax rate option allows companies to pay a lower rate if they forego exemptions and incentives. The panel’s recommendation to bring back the deduction provision will help maintain tax neutrality in such cases, ET noted.
The panel is expected to formally present its report to the Lok Sabha on the first day of the monsoon session, scheduled for Monday. The government has already listed the bill for consideration and passage, an official told the publication.
Another important recommendation includes the retention of the phrase “for the purpose of employment” in the residency clause, aimed at clearing confusion for individuals moving abroad for work. The nil withholding tax certificate provision has also been reinstated, as per the report.
In addition, the committee has made efforts to simplify the language in various sections to eliminate ambiguity. However, no major substantive changes have been proposed, a person involved in the process told ET.
The committee conducted 36 meetings and examined all 536 sections of the draft bill. Among the most debated provisions was Section 247(1), which deals with search and seizure, although no major amendments were recommended for it.
Stakeholders who deposed before the panel reportedly raised concerns regarding the faceless assessment system, suggesting it needed further review. There were also calls for reducing the number of TDS rates and further simplification of the tax regime.
The Income Tax Bill 2025, introduced by Finance Minister Nirmala Sitharaman on February 13, seeks to replace the outdated law with a more straightforward, less litigation-prone framework. The draft includes presumptive taxation for non-residents, redefined treatment of business and professional income, strengthened General Anti-Avoidance Rules (GAAR), and streamlined procedures for penalties and compliance. It also consolidates all salary-related deductions—like standard deduction and gratuity—into a single section.
Commenting on the review, an tax expert, told ET that while the committee was not empowered to recommend sweeping structural changes, it had received several constructive suggestions from diverse stakeholders. He expressed hope that the Finance Ministry would consider implementing broader reforms through future Budget presentations.
He emphasised that the panel’s focus was mainly on addressing language clarity and inadvertent exclusions, rather than making foundational policy revisions.
