New Income Tax Bill brings major reforms: Simpler laws, expanded deductions and faster refunds

Srinagar, Aug 12: The new Income Tax Bill aims to simplify decades-old direct tax laws by extending dividend deductions for companies under the new tax regime, clarifying the taxation of partnership firms, and easing compliance for taxpayers, according to CBDT sources. It also incorporates major amendments from recent finance legislations, streamlining several provisions for greater clarity and efficiency.

Tax administration has been made more efficient, transparent, and taxpayer-friendly, with reforms like the Annual Information System, which also uses verified third-party data to pre-fill returns, the central processing of returns – reducing average processing time by 1/10th (to nearly 10 days) and enabling faster refunds, and faceless assessments and faceless appeals ensuring impartiality and efficiency by eliminating physical interface and geographical barriers.

Important highlights of the Reforms:

• Expanded Section 80M Benefit: Companies under the new concessional tax regime can now claim Section 80M deductions for dividends received from other firms.
• Clearer Family Deductions: The rules around deductions for commuted pension and gratuity received by family members are now explicitly define.
• Separation of MAT and AMT: Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) are now distinct, reducing room for confusion.
• AMT Trigger Clarified: Non-corporate taxpayers—including LLPs—are liable for AMT only if they claim specific deductions, not otherwise.
• Mandatory E-Payments for Professionals: Professionals with annual receipts exceeding ₹50 crore must now use electronic payment methods, aligning with those in business.
• Refunds Allowed Even After Late Filing: Taxpayers who miss the ITR deadline can still claim refunds.
•  Simplified Loss Handling: Rules for carrying forward and offsetting losses have been rephrased for clarity, though their essence remains intact.
• Shift from "Receipts" to "Income": The bill re-emphasizes income-based taxation, a move toward consistency with the original 1961 Act

Changes Benefitting Non-Profit Organizations:

• Capital Gains Usage Clarified: NGOs using capital gains to acquire assets can continue treating them as income application.
• Flexible Income Recognition: NGOs can now recognise late-arriving income in the year it’s actually received rather than lose out on 85% utilisation requirements.
• Simplified Anonymous Donation Rules: Tax rules for anonymous donations have been aligned across all types of NGOs, including those with multiple objectives.
• No Mandatory Investment of Unspent Funds: The requirement to invest 15% of unspent income in specified instruments has been removed, easing compliance pain points.

Also the correction window for TDS statements has been reduced from six years to two years, helping prevent delays and disputes.