New I-T Bill restores exemption for anonymous donations to trusts, TDS refund claim filing procedure

New Delhi | The new Income Tax Bill, passed by Lok Sabha on Monday, has retained the provisions regarding ITR filing for TDS claims and tax exemptions for anonymous donations made to all religious-cum-charitable trusts, as in the existing tax laws.

The original Income Tax Bill, which was brought in Parliament in February, had done away with this exemption and the ITR filing flexibility for claiming TDS refunds.

Income Tax (No.2) Bill has added the word "profession" in clause 187 to enable professionals with total receipts exceeding Rs 50 crore in a year to have the facility of prescribed electronic modes of payment.

Additionally, the provisions related to carrying forward and setting off of losses have been re-drafted for improved presentation.

As regards the TDS correction statements, the time period for filing statements has been reduced to two years from six years in the Income Tax Act, 1961.

"This is expected to reduce the grievances of deductees substantially," sources in the Central Board of Direct Taxes (CBDT) said.

Income Tax (No.2) Bill, which will replace the Income Tax Act, 1961, incorporates almost all the recommendations of the Select Committee which submitted its report to Parliament on July 21. The original Income Tax Bill, 2025, was introduced in the Lok Sabha in February and was referred to the Committee.

The Select Committee had suggested restoration of the provisions of Income Tax 1961 with regard to taxation of donations to non-profit organisation (NPOs) or charitable trusts.

With regard to NPOs, the government in the new bill has exempted from tax anonymous donations received by purely religious trusts. However, such donations received by a religious trust that may also have other charitable functions, like running hospitals and educational institutions, will be taxed as per law.

Clause 337 of the Income Tax Bill, 2025, proposed a flat 30 per cent tax on anonymous donations received by all registered NPOs, with a narrow exemption extended only to those established wholly for religious purposes -- a "significant divergence" from the existing I-T Act.

The Income-tax Act, 1961, provided a more comprehensive exemption: anonymous donations were not taxed if received by any trust or institution created or established wholly for religious and charitable purposes, unless such a donation was specifically-directed towards a university, educational institution, hospital, or medical institution run by that same trust or institution.

CBDT sources said, "Provisions relating to taxation of anonymous donation (in Income tax(No.2) bill) have been aligned with the existing provisions of the Income-tax Act, 1961 and exemption has been made available to mixed object registered non-profits organisation also."

Another point with regard to taxation of NPOs as flagged by the Committee was the proposal to tax 'receipts' of NPOs. The Committee opposed taxing 'receipts' as it contravenes the principle of real income taxation under the Income Tax Act. It recommended reintroducing the term 'income' to ensure only net income of NPOs is taxed.

CBDT sources said, "The concept of receipt has been changed with the concept of income as was there in the Income-tax Act, 1961".

With regard to the refund of TDS claims by individuals who are otherwise not required to file tax returns, the committee suggested the removal of the provision in the Income Tax Bill that makes it mandatory for an assessee to file I-T returns within the due date.

The Income Tax (No.2) Bill does away with the requirement and provides "flexibility" to individuals by allowing refund claims in cases where the return is not filed in due time with the omission of Clause 263(1)(ix).

Also, the amendments made by the Taxation Laws (Amendment) Bill, 2025, which was passed by the Lok Sabha on Monday, have also been made part of the new income tax Bill.

Accordingly, the new income tax bill includes a provision related to tax exemptions for subscribers of the Unified Pension Scheme (UPS).

It also incorporates changes in the scheme of block assessment with regard to Income Tax search cases, and provides for certain direct tax benefits to public investment funds of Saudi Arabia.