New Income Tax Bill Introduces Changes to TDS Refund Claims
A parliamentary committee has made significant recommendations regarding the new Income Tax Bill, 2025, which seeks to replace the Income Tax Act of 1961. The committee has urged the Ministry of Finance to allow individual taxpayers to file returns and claim TDS refunds beyond the established deadlines without incurring penalties. Additionally, it has called for tax exemptions on anonymous contributions to trusts that serve both religious and charitable purposes, aiming to clarify existing ambiguities in the legislation.
Key Recommendations on TDS Refunds
The committee’s report, presented by Baijayant Panda, chairperson of the Select Committee, highlights the need for flexibility in the filing of tax returns. Currently, individuals who are not required to submit tax returns but wish to claim TDS refunds face a mandatory filing requirement. The committee has proposed the removal of this clause, emphasizing that the existing law could inadvertently lead to legal challenges for small taxpayers. Many of these individuals earn below taxable limits but still have tax deducted at source. The committee argues that requiring a return solely for the purpose of claiming a refund is unnecessary and could lead to penalties for non-filing. By eliminating this requirement, the committee aims to ease the burden on taxpayers and streamline the refund process.
Taxation of Anonymous Donations
Another critical area addressed by the committee is the taxation of anonymous donations to non-profit organizations (NPOs) that serve both charitable and religious purposes. The committee has expressed concerns over the current provisions in the Income Tax Bill, which propose a uniform 30 percent tax on such donations. This marks a departure from the existing law, which allows broader exemptions for anonymous donations to trusts engaged in both charitable and religious activities. The committee has recommended that the bill be amended to ensure that these organizations are not unfairly taxed, recognizing the unique nature of their funding sources. They argue that the taxation of NPO receipts contradicts the principle of real income taxation and should be revised to reflect only the net income of these organizations.
Impact on Religious-Cum-Charitable Trusts
The committee has also pointed out an oversight in the Income Tax Bill concerning religious-cum-charitable trusts. Despite the bill’s aim to simplify tax regulations, the omission could adversely affect many organizations within India’s NPO sector. The committee has urged the reintroduction of provisions similar to those found in Section 115BBC of the Income Tax Act, 1961, which provided specific exemptions for anonymous donations to such trusts. The current bill’s approach could lead to a significant increase in tax liabilities for these organizations, which often rely on anonymous donations to fund their activities. The committee’s recommendations aim to protect these trusts and ensure they can continue to operate effectively without facing undue financial burdens.
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