Updated Income Tax Proposal for 2025: Discover the Top 10 Significant Alterations Expected in the Bill Presented Today
The Income Tax Bill, 2025 is set to undergo a significant transformation, aiming to replace the complex Income Tax Act, 1961 with a more simplified, modern, and taxpayer-friendly version. The bill, which was originally introduced in February during the Budget session of Parliament, has been revised and will be presented today in the Lok Sabha.
The revised bill, spanning 536 sections and 16 schedules, is the result of the Select Committee of the Lok Sabha's 285 recommendations, submitted last month in a detailed 4,500-page report. The committee proposed numerous improvements on technical, procedural, and practical aspects related to taxpayers.
One of the key changes is the simplification of the language, reducing the number of sections from 819 to 536, and removing archaic language and redundant provisions. This makes the law easier to read, understand, and comply with for individuals without legal expertise.
Tax rates remain the same under the new tax regime introduced in Budget 2025, allowing taxpayers to continue choosing between the old and new tax regimes based on their financial planning.
The bill also introduces several taxpayer-friendly provisions. For instance, it extends tax exemption on lump-sum pension payments from approved funds to a broader group, including non-employee individuals receiving pensions. This move ensures parity in tax treatment.
Another significant change is the removal of a controversial earlier clause denying income tax refunds for returns filed after the due date. This benefits taxpayers who miss deadlines due to genuine reasons like illness or technical problems, enabling them to claim refunds.
The bill also clarifies that no Tax Collected at Source (TCS) will be charged on education-related remittances made through the Liberalised Remittance Scheme (LRS) funded by financial institutions.
The revised bill aims to reduce complexity and litigation risk. Ambiguous or contradictory provisions have been removed, and the concept of "Tax Year" has been introduced to eliminate the dual system of "Previous Year" and "Assessment Year".
The bill also proposes other benefits for specific entities, such as relief measures for Limited Liability Partnerships (LLPs) and updates to transfer pricing rules to reflect contemporary business realities.
Moreover, the bill suggests allowing tax refunds even if the return is filed late, aligning the definition of MSME with the MSME Act, reintroducing section 80M deduction on inter-corporate dividends, and changing the terminology 'occupied' to avoid confusion between residential and commercial classification.
The bill also empowers the CBDT to make rules in the new draft bill while promoting digital administration. The 30% standard deduction for house property income will now be applicable after deducting municipal taxes.
Union Finance Minister Nirmala Sitharaman withdrew the old draft of the Income Tax Bill, 2025 from the Lok Sabha last week, paving the way for the presentation of the revised bill today. The new bill is expected to take effect from April 1, 2026.
[1] The Hindu BusinessLine
[2] Business Today
[3] Financial Express
[4] Livemint
[5] India Today
- The revised Income Tax Bill, 2025, presented in the Lok Sabha today, introduces Defi-related changes aimed at simplifying the finance-related landscape for individuals, making tax compliance easier.
- Business news outlets such as The Hindu BusinessLine, Financial Express, and Livemint are reporting on the tax bill's changes to dividend distribution, with the reintroduction of section 80M deduction on inter-corporate dividends.
- General news sources like India Today and Business Today are covering the tax bill's proposals for political entities, like extending tax exemptions to non-employee individuals receiving lump-sum pension payments and aligning the definition of MSME with the MSME Act.
- Market watchers like Livemint and Business Today are also discussing the bill's impact on investment, such as the elimination of Tax Collected at Source (TCS) on education-related remittances made through the Liberalised Remittance Scheme (LRS) funded by financial institutions.
