Does the brand new Earnings Tax Invoice 2025 pave means for double taxation of dividends?, ETCFO
The adjustments launched within the new Earnings Tax Invoice 2025 have raised issues because it has omitted sure provisions, elevating questions on whether or not they have been intentional exclusions or oversights.
For instance, the New Tax Invoice has omitted part 80 M of the Earnings Tax Act 1961 that offers with dividend taxation for a holding firm. This part allowed a father or mother firm to say a deduction on dividends obtained from its subsidiary earlier than distributing them to shareholders, thereby avoiding double taxation.
“Within the new regulation the supply is lacking, elevating issues that dividends might now be taxed twice—as soon as on the firm degree (25%) and once more on the shareholder degree (as much as 40%),” stated CA Anand Bhatiya, President Bombay Chartered Accountant Society.
Additional he stated that the invoice’s language means that the Alternate Minimal Tax (AMT) for Restricted Legal responsibility Partnerships (LLPs) which was earlier utilized selectively might now prolong to all LLPs, growing tax legal responsibility.
Furthermore, the brand new provisions might create interpretational gaps, resulting in authorized ambiguities that might improve litigation.
“The substitute of the time period “however” with “irrespective” in authorized provisions might alter settled jurisprudence, resulting in new authorized interpretations and elevated disputes,” Bhatiya acknowledged.
Previous wine in new bottle?
The Earnings New Tax Invoice 2025 is making rounds in conversations of the {industry} leaders of India Inc since its introduction within the parliament and referral to the joint parliamentary committee by the Union Finance Minister, Nirmala Sitharaman.
Reviews counsel that the finance ministry has tapped the Institute of Chartered Accountants of India (ICAI) to advocate enhancements within the invoice. Sitharaman in her speech within the parliament stated that the invoice seeks to streamline tax processes, promote compliance, and guarantee larger transparency within the tax atmosphere.
Tax consultants imagine that the invoice has succeeded in consolidating scattered provisions, making certain larger readability and ease of interpretation for taxpayers. “Furthermore, with elevated digital integration, compliance shall be streamlined, however companies should brace for stricter scrutiny to curb tax evasion,” stated Rajat Mohan, Senior Companion, AMRG & Associates.
Whereas some consultants agree that the invoice might serve these functions, others additionally level that the brand new invoice is basically an previous wine in a brand new bottle, with an excellent packaging, implying that the invoice is extra of a literal simplification with a modified format however the substance remaining largely the identical.
“The expectation was a elementary simplification for taxpayers, easing compliance and administration, however what we obtained is extra of a structural rearrangement fairly than coverage simplification,” stated Bhatiya.
Optimistic elements for India Inc
The New Earnings Tax Invoice has successfully eliminated repealments and changed the alphanumeric sections with tabular numeric sections making it simpler to recall and reference, which additional simplifies compliance.
“There have been a number of repealments over time, and now they’ve been completely deleted, streamlining the tax code,” stated Ashish Tiwari, CFO, TCI Group.
The invoice additionally proposes AI-driven tax assessments and on-line tax submitting interfaces which can make compliance smoother and scale back paperwork for companies, consultants stated. They stated that by defining ‘digital digital property’ and ‘digital modes,’ the invoice brings much-needed readability to cryptocurrency taxation and on-line earnings.
“The brand new dispute decision framework encourages mediation, aiming to chop down litigation time and guarantee quicker settlements,” stated Mohan.
The brand new invoice is proposed to be applied from April 1 subsequent 12 months, till then consultants counsel that there’s nonetheless time for additional session.
“A second spherical of industry-wide discussions ought to be carried out with enterprise associations, CA our bodies, and company leaders. Broader engagement with {industry} our bodies like CII, FICCI, and PHD Chamber of Commerce might be useful,” stated Tiwari.
Furthermore, with the invoice’s digital focus, consultants additionally stated that stronger privateness safeguards are wanted to stop potential misuse of the federal government’s expanded digital investigative powers.
Mohan stated for stronger dispute decision, the federal government can arrange specialised panels, undertake digital hearings, and guarantee time-bound settlements for all instances.
