Income Tax Bill 2025: Panel Seeks Relief for Small Taxpayers, NGOs
A Select Committee of the Lok Sabha, led by BJP MP Baijayant Panda, presented its report on the new Income Tax Bill in Parliament on Monday, July 21. Some of its key recommendations include:
Easier TDS Refunds for Small Taxpayers
The committee urged the Finance Ministry to allow individual taxpayers to claim refunds of Tax Deducted at Source (TDS) even if they file their Income Tax Return after the deadline, without facing penalties.
The panel pointed out that many small taxpayers — especially those with income below the taxable limit — are forced to file returns just to claim refunds. Missing the deadline could unintentionally lead to legal trouble for these individuals. To fix this, the panel recommended removing a clause (Clause 263 (1)(ix)) that currently restricts refund claims if returns are late.
Fairer Tax Rules for Non-Profit Organisations (NPOs)
The committee also raised concerns about how the new bill treats NPOs.
- No tax on gross receipts: It opposed taxing all ‘receipts’ of NPOs, saying only net income (after expenses) should be taxed — in line with current tax principles.
- Clarify rules for anonymous donations: The panel criticized a proposed 30% flat tax on anonymous donations to most NPOs. Under the new bill, only NPOs set up entirely for religious purposes are exempt. This excludes many hybrid trusts that are both religious and charitable.
Currently, the law (Section 115BBC) allows religious-cum-charitable trusts to receive anonymous donations without tax — as long as the money isn’t specifically earmarked for schools or hospitals that the Trust runs. The panel warned that removing this protection would hurt many genuine trusts that collect donations through cash boxes or traditional means, where tracking donors isn't always possible.
While the new Income Tax Bill aims to simplify rules, the panel said some of its provisions could have serious unintended consequences — especially for small taxpayers and charitable organizations.
