Key changes for corporates, professionals in the Income Tax Bill 2025

The government has unveiled the Income-tax Bill, 2025, proposing a modernized and streamlined version of the Income-tax Act, 1961. The bill retains the core structure of the old law but introduces a range of refinements aimed at improving clarity, compliance, and efficiency across sectors.

As per sources, a key change is that companies opting for the new tax regime will now be eligible for deductions under Section 80M (Clause 148), extending benefits to more corporate taxpayers. Commuted pension and gratuity deductions for family members have also been codified under Clause 93.

In terms of taxation structure, the provisions of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) have been separated under Section 206. Notably, AMT now applies only to non-corporates claiming deductions; LLPs with only capital gains income and no deductions are exempt.

To support the digital economy, Clause 187 adds the term “profession” to existing provisions for businesses, mandating electronic payment modes for professionals with receipts exceeding Rs 50 crore.

The bill also introduces flexibility in refund claims, even if returns are not filed on time, by omitting Clause 263(1)(ix). While the provisions for carry forward and set-off of losses have been re-drafted for clarity, their substance remains unchanged.

Importantly, the bill shifts focus from “receipt” to “income,” aligning with modern accounting principles. Capital gains reinvested by non-profits will now qualify as application of income, and shortfalls in the 85% income application rule, due to delayed receipts can be deferred to the year the income is actually received.

Other changes include aligning the treatment of anonymous donations with existing law, clearer classification of mixed-object non-profits, removal of mandatory 15% income investments, and a sharp cut in TDS correction timelines from six to two years.

The bill also formally incorporates changes from the Finance Act, 2025 and the Taxation Laws (Amendment) Bill, 2025.