Income Tax Bill 2025: Select Committee report presented in Lok Sabha, recommends many changes, including TDS refund, secret donation

The Select Committee of Lok Sabha, constituted under the chairmanship of BJP MP Baijayant Panda, has also suggested extensive changes in the way the income of non-profit organizations (NPOs) is managed.

Income Tax Bill 2025: The report on the Income Tax Bill 2025 was presented in the House on Monday by the Select Committee of Lok Sabha. The committee has recommended several major changes to it, which will replace the nearly six-decade-old Income Tax Act, 1961. The 4,575-page report suggests allowing individual taxpayers to claim tax deduction at source (TDS) refund by filing income tax returns after the due date without any penalty. Along with this, it has been suggested to keep anonymous donations made to religious and charitable trusts tax free.

New Income Tax Bill introduced

The Lok Sabha Select Committee, headed by BJP MP Baijayant Panda, has also suggested extensive changes in the way income of non-profit organizations (NPOs) is managed.

The Select Committee says that the ambiguity regarding taxation of anonymous donations to NPOs, especially those with charitable and philanthropic purposes, should be removed. The committee has opposed taxation of 'receipts' of non-profit organizations (NPOs), as it violates the principle of real income taxation under the Income Tax Act.

The Select Committee has recommended reintroducing the term 'income' in its suggestions to ensure that only the net income of NPOs is taxed. Noting that there is a 'significant difference in respect of anonymous donations' received by registered NPOs, the committee suggested that both religious and charitable trusts should be exempted from such donations.

30 percent tax on secret donations

Section 337 of the Income Tax Bill, 2025 proposes to impose a 30 percent tax on secret donations received by all registered NPOs, with limited exemption only for NPOs established for religious purposes. This is completely different from the current section 115BBC of the Income Tax Act, 1961. More extensive exemptions have been provided in the existing law.

According to this, if a trust or institution is formed solely for religious and charitable works, then secret donations are not taxed. It is worth noting that such organizations usually receive contributions through traditional means (such as donation boxes), where it is impossible to identify the donor. The parliamentary committee report said, "The Committee strongly urges reintroduction of a provision in line with the explanation given in section 115BBC of the 1961 Act." 

The 31-member Select Committee of the Lok Sabha, which examined the new Income Tax Bill, 2025, also suggested that taxpayers should be allowed to claim TDS refund even after the last date for filing ITR without paying any penalty. Regarding the refund of TDS refund claims of persons who are not usually required to file tax returns, the committee suggested that the provision in the Income Tax Bill should be deleted, which makes it mandatory for the taxpayer to file income tax returns within the due date.