Revised New Income Tax Bill, 2025: Here are 10 major changes likely in the bill to be presented today in the Lok Sabha
It aims to simplify the complicated Income Tax Act of 1961. The bill has significant changes based on the suggestions of a 31-member Select Committee, which delivered a 4,584-page report with 566 recommendations. Here are the 10 major changes likely to be included in the bill:
Major Changes
1. Refunds Allowed Even for Late Returns
Taxpayers can now claim refunds even if they file their returns after the due date. This change offers relief to those who miss deadlines for various reasons.
2. Section 80M Deduction on Inter-Corporate Dividends
Companies using special tax rates under section 115BAA can claim deductions on inter-corporate dividends. This move is expected to benefit holding companies and financial groups.
3. NIL-TDS Certificate Facility
Taxpayers without any tax liability can get advance NIL-TDS certificates. This reduces unnecessary tax deductions and improves cash flow certainty.
4. No Tax on Deemed Rent for Empty Homes
Homeowners will not be taxed on notional rent for vacant second homes. This change provides relief to those with unoccupied properties.
5. 30% Standard Deduction on House Property
A 30% standard deduction will apply to house property income after deducting municipal taxes. This allows for simpler tax calculations.
6. Home Loan Interest Deduction on Rented Property
Homeowners can claim deductions on home loan interest for rented properties. This benefits those who rent out their homes.
7. Simplified Procedural Rules
The bill clarifies procedural rules for advance ruling fees, TDS on PF withdrawal, and penalty powers. This reduces ambiguities and disputes.
8. MSME Definition Aligned with MSME Act
The definition of Micro, Small, and Medium Enterprises (MSMEs) has been aligned with the MSME Act. This makes it easier for small businesses to comply with tax rules.
9. Improved Legal Language and Structure
The entire law has been rewritten for clarity and better organization. This reduces ambiguities and disputes.
10. Broader Commuted Pension Deduction
Tax benefits on commuted pensions have been extended to non-employee individuals. This provides relief to retirees.
Impact on Taxpayers and Investors
The revised bill aims to give relief to taxpayers, encourage investment, and simplify compliance. Experts believe that these changes will make tax laws more predictable and reduce litigation and disputes. The bill's focus on simplicity, transparency, and digital tax administration is expected to help both individuals and businesses.
Industry Reactions
The Confederation of Indian Industry has welcomed the changes, calling them practical, well-timed, and beneficial for business. However, some experts have noted that areas like digital asset taxation still need clarity.
What's Next
The revised bill will be presented in the Lok Sabha today. Its passage is expected before the winter session. If approved, the new law will take effect from the April 2026 assessment year, bringing major changes to India's tax system.
Key Highlights
- The new bill simplifies the Income Tax Act, 1961, by reducing sections from 819 to 536 and chapters to 23.
- It focuses on simplicity, transparency, and the use of technology in tax administration.
- The bill replaces the "Previous Year" and "Assessment Year" systems with a single 'Tax Year' concept.
- Ambiguous provisions have been removed to reduce disputes.
Here are some tips for saving on income tax
Tax-Saving Investments
1. PPF (Public Provident Fund)
Invest up to ₹1.5 lakh per year to get tax deductions under Section 80C.
2. ELSS (Equity-Linked Savings Scheme)
Invest in equity mutual funds to get tax deductions under Section 80C.
3. Life Insurance
You can claim premium payments as tax deductions under Section 80C.
4. NPS (National Pension System)
Contribute to NPS to get tax deductions under Section 80C and Section 80CCD(1B).
Tax-Saving Expenses
1. Home Loan Interest
You can claim tax deductions on home loan interest under Section 24.
2. Medical Insurance
You can claim premium payments as tax deductions under Section 80D.
3. Charitable Donations
Donating to eligible charities allows you to claim tax deductions under Section 80G.
Other Tips
1. Claim HRA Exemption
If you are a salaried employee, you can claim House Rent Allowance (HRA) exemption.
2. Use Standard Deduction
You can claim a standard deduction of ₹50,000 if you are a salaried employee or ₹10,000 if you are a pensioner.
3. File Returns on Time
Make sure to file your tax returns on time to avoid penalties and interest.
4. Keep Track of Tax-Saving Receipts
Save receipts for tax-saving investments and expenses to claim deductions
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