The Lok Sabha on Monday approved the Income Tax (No. 2) Bill, 2025, introducing significant changes while preserving certain taxpayer benefits from the existing Income Tax Act, 1961.
One major retention is the exemption on anonymous donations made to religious-cum-charitable trusts, along with continued flexibility in filing income tax returns (ITR) for taxpayers seeking TDS refunds. The initial draft of the Bill, tabled in February, had proposed removing these provisions but they were reinstated following the recommendations of a Select Committee.
The updated Bill now allows professionals with annual receipts exceeding ₹50 crore to use prescribed electronic payment modes, expanding a facility earlier available only to businesses. Provisions on the carry-forward and set-off of losses have also been re-drafted for clarity.
In a bid to address taxpayer concerns, the time limit for filing TDS correction statements has been cut from six years to two years — a move the Central Board of Direct Taxes (CBDT) says will substantially reduce grievances.
Changes for Non-Profit Organisations (NPOs)
The government has aligned the taxation of anonymous donations with the framework of the 1961 Act, extending exemptions not only to purely religious trusts but also to organisations with mixed religious and charitable objectives. Earlier drafts had proposed a flat 30% tax on such donations, except for purely religious bodies.
Additionally, the Bill replaces the earlier proposal to tax NPO “receipts” with the taxation of “income,” ensuring that only net earnings, not gross collections, will be subject to tax.
Relief for Individual Taxpayers
The legislation removes the earlier requirement for individuals, otherwise exempt from filing ITRs, to submit returns within the due date solely to claim TDS refunds. This change restores flexibility for such taxpayers.
Other Incorporated Amendments
The Bill also embeds provisions from the recently passed Taxation Laws (Amendment) Bill, 2025, including tax exemptions for subscribers to the Unified Pension Scheme (UPS) and updated rules for block assessments in search cases. It further grants certain direct tax benefits to Saudi Arabian public investment funds.
With these revisions, the Income Tax (No. 2) Bill, 2025, aims to modernise tax administration while retaining safeguards from the legacy system that protect both charitable institutions and individual taxpayers.
