CRACKS IN THE CODE: THE NEW INCOME TAX BILL RISKS REINTRODUCING DOUBLE TAXATION ON FIRMS AND BURDENING FAMILY OFFICES.

SIMPLIFY THE TAX SYSTEM and cut through the jargon—these were the objectives when finance minister Nirmala Sitharaman tabled the Income-tax Bill, 2025 in the Lok Sabha on February 13. Yet, two changes to key provisions—taxation on income of companies, vis-a-vis inter-corporate dividend income, and application of alternative minimum taxation (AMT)—have left the industry worried.

- ASHUTOSH KUMAR

For example, under Section 115BAA of the existing law, domestic companies opting for the concessional tax regime of 15% or 22% cannot claim any income-linked deduction, barring a few exceptions such as deduction on employee cost, and inter-corporate dividend (Section 80M), on fulfilling certain conditions. Section 80M was introduced to avoid double taxation on dividends. However, while Clause 200 of the new Bill extends the same benefits to firms under the 15% regime, it has left out those under the 22% regime. This means these companies would not be able to claim a deduction on inter-corporate dividends.