The new Income Tax Bill 2025 aims to simplify the current tax system. It features clearer language along with important updates for income tax return (ITR) filers. Among the several other reforms, the bill introduces changes to various rules related to ITR filing. Once approved by the President, the new law will take effect from April 1, 2026.

The New Income Tax Bill will replace the Income Tax Act, 1961. It includes all the relevant tax laws updated till the Finance Act, 2025.

Finance Minister Nirmala Sitharaman explained the reasons for bringing the new income tax law and said that some parts of the Income Tax Act, 1961, have become outdated, hence a new legislation was needed.

FM Sitharaman emphasised that the new income tax law is aimed at making the language simple and does not introduce any new rate.

She also expressed gratitude to the Select Committee of Parliament, which scrutinised the bill.

A total of 75,000 person-hours have gone into the drafting of the Bill, FM said.

Parliament on Tuesday, August 12, passed the new Income Tax Bill, with the Rajya Sabha returning the legislation to the Lok Sabha.

The Rajya Sabha returned the legislation with a voice vote to the lower house. The new bill will replace the Income Tax Act, 1961.

In the original Income Tax Bill furnished in February 2025, Clause 263 (I) (ix) made it mandatory for income tax payers to file income tax return if they intend to claim a refund.

Clause 263(I) of the original bill mentioned persons who are required to file a return and it included, "a person who intends to make a claim of refund...".

The Select Committee objected to the provision saying: "The Committee observe that the current mandatory requirement to file a return solely for the purpose of claiming a refund could inadvertently lead to prosecution, particularly for small taxpayers whose income falls below the taxable threshold but from whom tax has been deducted at source."

It further said, "In such scenarios, the law should not compel a return merely to avoid penal provisions for non-filing. The Committee, therefore, recommend to remove sub-clause (1)(ix) to Clause 263 to provide flexibility for allowing refund claims in cases where the return is not filed in due time."

As per the revised bill, return filing is mandatory for claiming any refund. This provision is mentioned in Clause 433.

Yes. Under Clause 433 of the revised bill, refunds can be claimed only by filing a return of income.

"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.

As per Clause 431 of the Income Tax Bill 2025, a person will become eligible for refund if s/he has paid excess tax in a tax year.

"If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any tax year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess," the Bill says.

Where the income of one person is included in the total income of any other person, the latter alone will be eligible for a refund, according to Clause 432 (I).

Under Clause 432 (2), if a person is unable to claim or receive a refund due to him, on account of death, incapacity, insolvency, liquidation or other cause, his legal representative or the trustee or guardian or receiver, shall be entitled to claim or receive such refund for the benefit of such person or his estate.

A belated return can be filed within 9 months from the end of the relevant tax year or the completion of the assessment year.

The Bill says: Any person who has not furnished a return within the due date may furnish the return for any tax year at any time within nine months from the end of the relevant tax year, or before the completion of the assessment, whichever is earlier.

The provisions related to Return of Income are mentioned under Clause 263 of the revised Income Tax Bill, 2025.

Every person, as mentioned below, shall, for a tax year, on or before the due date, furnish a return of his income or the income of any other person in respect of which he is assessable during the said tax year:

• A company;
• A firm;
• A person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable, during the tax year exceeded the maximum amount which is not chargeable to income tax.
• A person who has sustained a loss in the tax year under the head "Profits and gains of business or profession” or under the head “Capital gains” and who intends to claim that such loss, or any part thereof, is to be carried forward as per this Act.
• A resident holding any asset located outside India, or has signing authority in any account located outside India
• A resident beneficiary of any asset located outside India

The following are 13 top features of the revised Income Tax Bill:

• The Income tax (No.2) Amendment Bill 2025 streamlines TDS, exemptions and other compliance-heavy provisions.

• 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 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 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.

• Almost all of the recommendations of the Select Committee have been accepted by the Government.

• In addition, suggestions have been received from stakeholders about changes that would convey the proposed legal meaning more accurately.

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

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

• Deductions in respect of certain inter-corporate dividends for companies opting for concessional rate of taxes have been re-introduced in line with the provisions of the existing Income-tax Act, 1961

• 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.

• 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.

• It is believed that starting April 1, 2026, when the new income tax law comes into force, income tax officials could get the authority to access individuals' digital accounts, such as emails, social media, bank accounts, trading platforms, and online investments, if they suspect tax evasion.

(Source: PTI).

The Income Tax Bill (No.2) 2025 - a major legislative move to replace the 63-year-old law governing income taxation for individuals and corporations - was passed in the Lok Sabha on Monday in just three minutes, without any debate.

The Bill will now go to the Rajya Sabha for approval and thereafter to the President for assent. It will become law once the Presidential assent is provided.

(With PTI input)

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.

Source: PTI

Under the revised bill, capital asset means property of any kind held by an assessee, whether or not connected with his business or profession.

It includes any unit-linked insurance policy to which the exemption under Schedule II (Table: Sl. No. 2) of the new bill does not apply.

However, capital assets don't include the following:

• any stock-in-trade, other than the securities referred to above, consumable stores or raw materials held for business or profession;

• personal effects, including any movable property such as wearing apparel and furniture but excluding jewellery, ornaments made from precious or semi-precious stones, archaeological collections, drawings, sculptures, paintings, any work of art.

• agricultural land in India (subject to certain conditions mentioned in the bill).

• Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 as may be notified by the Central Government.

As per the revised bill, agricultural income means any rent or revenue derived from land that is situated in India and is used for agricultural purposes.

It also means any income derived from such land by,

(i) agriculture; or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in item (ii);

(c) any income derived from any building on or in the vicinity of land where it is required as a dwelling house or as a storehouse, or other outbuilding connected with the land.

(d) any income derived from saplings or seedlings grown in a nursery.

(Please check the bill for complete details)

The Income Tax (No.2) Bill 2025 does not change any income tax rule that is already in effect for taxpayers as amended till the Finance Act 2025.

The purpose of this bill is to replace the Income Tax Act, 1961 with a simpler set of tax rules that will ultimately improve compliance.

The only major impact of the revised bill tabled in the Parliament is that anyone can understand complex tax laws with little effort compared to the Income Tax Act, 1961.

The revised bill has incorporated changes recommended by the select committee and also removed some drafting errors noticed in the original bill tabled in February 2025.

The revised Income Tax Bill 2025 has defined a "Tax Year" as the 12 months of the financial year commencing on April 1.

"For the purposes of this Act, “tax year” means the twelve months period of the financial year commencing on the 1st April," the revised Bill says in Clause 3 (1).

Further, in the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with:

(a) the date of setting up of such business or profession; or

(b) the date on which such source of income newly comes into existence, and ending with the said financial year.

Clause 21 of the revised Income Tax Bill 2025 talks about the calculation of the annual value of property. It says, the annual value of any property shall be higher of the following:

• the sum for which it might reasonably be expected to let from year to year; or
• the actual rent received or receivable by the owner, if the property or any part of it is let.

The annual value of the property shall be reduced by the taxes, including service taxes, levied by a local authority in respect of such property, actually paid during the tax year by the owner, irrespective of when such taxes became payable.

• Unrealised rent cannot be included in the actual rent received or receivable.

• If a property is held as stock-in-trade and is not let wholly or partly at any time during the tax year, then the annual value of such property or part thereof shall be nil for two years from the end of the financial year in which the certificate for the completion of construction is obtained.

• The annual value will be nil if the owner occupies the property for his own residence or cannot actually occupy it for any reason. However, this will apply only in respect of two such houses specified by an assessee. It will not apply if the house or any part of it is let out at any time during the tax year, or if the owner derives any benefit from it.

Clause 20 of the revised Income Tax Bill 2025 provides for taxation of the annual value of a property, including any buildings or lands, owned by an assessee under "Income from house property".

"The annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee, shall be chargeable to income-tax under the head “Income from house property," it says.

The above will not apply if the property is occupied by the assessee for his business or profession. In case the property is used for business or profession, the income will be taxed as income tax.

The new tax regime for individuals, HUF, and others is placed under Clause or Section 202 (I) of the revised Income Tax Bill 2025. It mentions the following tax rates and slabs under the new regime as announced in Budget 2025:

The provision of the Section 87A rebate under the Income Tax Act, 1961, is mentioned under various clauses of Chapter IX of the modified new income tax bill 2025. Here's what it says:

• Tax rebate is to be allowed while computing income tax.

• Rebate applies on income tax calculated before allowing the deductions.

• An individual resident in India is entitled to a deduction of 100% of income tax payable or ₹12,500, whichever is less, from the income tax chargeable on the total income for any tax year if such total income does not exceed ₹5,00,000.

• If the total income under the new tax regime (provided under Section 202 (1) of the revised income tax bill), then followed rebates are allowed:

a. 100% of the income tax payable or ₹60,000, whichever is less, to be allowed as deduction.

b. If total income is over ₹12 lakh and the income-tax payable on such total income exceeds the amount by which the total income is in excess of ₹12 lakh, then an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds ₹12 lakh.

The above deduction should not be more than the income tax payable as per the tax rate provided under section 202 (I).

The Finance Minister has tabled the revised Income Tax Bill 2025, named as "THE INCOME-TAX (No.2) BILL, 2025" in the Lok Sabha.

Finance Minister Nirmala Sitharaman has tabled the Income Tax Laws (Amendment) Bill, 2025 in the Lok Sabha. The revised bill has clarified tax provisions related to the taxation Unified Pension Scheme (UPS).

The Revised Income Tax Bill 2025 has incorporated changes recommended by the Select Committee about the definition of the term "Relative". Here's the expected change, according to KPMG:

Income Tax Act, 1961: There is no tax on the receipt of immovable property, sum of money, etc, from a relative under income from other sources.

Original Income Tax Bill 2025: It defined relative as any lineal descendant (including maternal as well as paternal) or ascendants. However, this raised confusion over whether the maternal or paternal lineage would apply only to "descendants" or to ascendants as well.

Revised Income Tax Bill 2025: As per the Select Committee's recommendation, the revised bill removes the ambiguity. The term "relative" will mean any lineal ascendant (maternal as well as paternal) or descendant.

(Please note the Bill is yet to be tabled in the Parliament.)

The Revised Income Tax Bill 2025 has incorporated most of the changes recommended by the Select Committee. Here's is what to expect on taxation of pre-construction home loan interest, according to KPMG:

Income Tax Act, 1961: Deduction of pre-construction period interest on borrowed capital is available for self-occupied property as well as let-out property. A 30% standard deduction is also available.

Original Income Tax Bill 2025: It restricted the availability of the deduction of the pre-construction interest only for self-occupied property.

Revised Income Tax Bill 2025: Deduction of pre-construction interest on borrowers' capital for let-out property also. Further, standard deduction is required to be computed at 30% of the annual value of the property before computing municipal tax.

The Lok Sabha has been adjourned till 2 pm today. Speaker Om Birla adjourned the lower house amid an uproar over the electoral rolls by opposition members. The Rajya Sabha has also been adjourned till 2 pm.

The Government is, however, still expected to table the revised bill in the Parliament today.

The Government is expected to present the revised bill in the Parliament today. However, there is no confirmation yet. The Finance Ministry on Friday said, "Therefore, a decision has been taken by the Government to withdraw the Income-tax Bill, 2025 as reported by the Select Committee. A fresh All would be introduced in the Lok Sabha in due course which would replace the Income-tax Act, 1961."

In a statement last week, the Finance Ministry said the Income Tax Bill 2025 was withdrawn to incorporate changes suggested by the Select Committee. Moreover, drafting corrections were also needed in the previous version of the Bill.

"The Select Committee has laid its repo, in the Lok Sabha on the 21. of July, 2025. Almost all of the recommendations of the Select Committee have been accepted by the Government. Suggestions have also been received from other sources which are required to be incorporated to convey the correct legislative meaning. There are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing," the Finance Ministry said.