How the new Income Tax Bill 2025 will impact taxpayers: 10 points

The Income Tax (No 2) Amendment Bill 2025 proposes a number of important modifications to the six-decade-old Income Tax Act, 1961 in order to streamline the tax system and lessen compliance obligations.

The bill, passed by the Lok Sabha, is built on the principles of being a "S.I.M.P.L.E." law. The Bill is set to be implemented from next year, April 1, 2026 (Tax Year 2026-27).

Here are 10 things that taxpayers need to know when filing income tax returns ( ITR) for Tax Year 2026-27 as this will be applicable from next financial year.

10 features of the new Income Tax (No 2) Amendment Bill 2025 taxpayers must know

1)The new bill reduces the size and complexity of the current Income Tax Act, drastically cutting the number of effective sections and chapters and nearly halving the word count.

2)The Bill also allows individuals to claim refunds without penalty on delayed filings. It says individuals will be allowed to claim TDS refund even if their return of income is filed beyond the statutory timeline provided for filing of the original income-tax return.

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).

3)The amendments made by the Taxation Laws (Amendment) Bill, 2025 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).

4)The Income Tax Bill 2025 grants full tax exemption on the entire commuted pension for individuals receiving payments from approved pension schemes like LIC Pension Fund, regardless of employment status.

5)The revised bill has done away with the confusing concepts of assessment year and previous year, replacing them with easier to understand 'tax year'.

6)The Income Tax (No.2) Bill provides for 'nil' TCS on Liberalised Remittance Scheme (LRS) remittances for education purposes financed by any financial institutions.

7)The provisions relating to the carry forward and set-off of losses have been appropriately amended and the reference to the beneficial owner has been omitted to align with Section 79 of the Income-tax Act, 1961.

8)There seems to be no significant changes made to contentious provisions surrounding search and seizure in the virtual digital space.

The revised bill states that tax authorities can "break open the lock of any door, box, locker, safe, almirah, or other receptacle or override the access code to any computer system ... where the keys thereof are, or the access to such building, place, etc., or the access code to such computer system ... is not available".

While the 'digital space' is missing from the clause, it is included in the definition of computer systems.

9)Under the revised Income Tax (No.2) Bill 2025, the new ITR filing due dates are:

• July 31: All other assessees, including salaried individuals.

• October 31: Companies, and individuals or firms whose accounts require an audit.

• November 30: Assessees who need to furnish a report as per Section 172.

10)Income tax refunds can be claimed only by filing a return of income as per the revised bill. "Clause 433 of the Bill seeks to provide that every claim of refund shall be made by furnishing a return of income," the revised bill says.

The new Income Tax (No 2) Amendment Bill 2025 is a significant step toward creating a more simplified and equitable tax system.