As the draft Income Tax Bill, 2025 undergoes parliamentary scrutiny, it has sparked concerns among tax practitioners about a possible increase in the long-term capital gains (LTCG) tax on Limited Liability Partnerships (LLPs)—despite government assurances that no structural or rate changes are being proposed. The Income Tax Department has categorically clarified that the new Bill does not include any change in tax rates.
The proposed legislation, aimed at overhauling and modernising the Income Tax Act, 1961, has received over 332 suggestions from the parliamentary select committee. As per the parliamentary agenda, the Bill is slated to be passed during the ongoing monsoon session itself.
Posts on X have debated that the draft Bill’s provisions on Alternate Minimum Tax (AMT) could effectively raise the LTCG tax on LLPs from 12.5% to 18.5%. Several tax practitioners have voiced concerns that the way AMT provisions have been redrafted may result in higher effective tax liability for LLPs currently benefiting from lower LTCG rates.
Amid this growing chatter, the Income Tax Department responded to one such post on X, stating unequivocally that the Bill does not introduce any tax rate changes.
“As explained in our FAQs, the Income Tax Bill, 2025 primarily aims at language simplification, removal of redundant/obsolete provisions, consolidating the existing provisions without any structural or policy changes and without disturbing the long-settled taxation principles,” the Department said in its post.
It further clarified: “AMT was applicable under the IT Act, 1961 to such taxpayers who claimed specified deductions. The provisions of AMT in the Income Tax Bill, 2025 would be identical. Any ambiguity in this respect shall be duly addressed.”
Drafting Clarifications Likely
According to official sources, the intent behind the Bill is strictly limited to simplification and consolidation. “If there are any further clarifications or drafting errors leading to a lack of clarity in the law, the tax department is open to suggestions and making it absolutely clear that the aim of the Bill is only simplification. Any changes, if at all in rates, have to be brought in through the budget process and not as part of the Income Tax Bill,” a senior government official told CNBC-TV18.
The draft legislation is seen as a long-overdue modernization of India’s direct tax laws, intended to replace a framework that dates back over six decades. While stakeholders have largely welcomed the move, they are closely watching how provisions—particularly those related to capital gains, exemptions, and minimum tax mechanisms—are finalized in the law.
The Bill remains under committee review and is expected to undergo further revisions before being tabled in Parliament for final passage.
