From tax refunds to home loan perks: What’s new in the Income Tax Bill 2025

Finance Minister Nirmala Sitharaman will present the new Income Tax Bill, 2025 in the Lok Sabha on Monday. The bill, first introduced on February 13, 2025, aims to replace the outdated Income Tax Act, 1961, which has been amended over 4,000 times and is now considered overly complex.

The new bill incorporates 285 recommendations from a 31-member Select Committee headed by BJP MP Baijayant Panda. The reforms focus on simplifying tax procedures, improving transparency, and reducing legal disputes for individual taxpayers and MSMEs.

Major features

• Sections reduced from 819 to 536 and chapters cut to 23 for simpler navigation.
• Introduction of a single “Tax Year” system, replacing “Previous Year” and “Assessment Year”.
• Removal of ambiguous provisions to reduce litigation.
• Greater powers for the CBDT to enable digital tax administration.
• Stronger focus on simplicity, transparency, and technology adoption.

Key benefits and expected changes

• Tax refund relief even if returns are filed late.
• Reintroduction of Section 80M deduction on inter-corporate dividends.
• Advance NIL-TDS certificates for taxpayers with no tax liability.
• Removal of additional tax burden based on deemed rent.
• 30% standard deduction on house property income after municipal taxes.
• Home loan interest deduction extended to rented properties.
• Clearer rules on Advance Ruling Fee, TDS on PF withdrawal, and penal powers.
• MSME definition aligned with the MSME Act.
• Correction of technical and linguistic errors in previous provisions.
• Commuted pension deduction extended to non-employee individuals.

Why a new bill?
Parliamentary Affairs Minister Kiren Rijiju said that Finance Minister Nirmala Sitharaman will introduce the new Income Tax Bill, as cleared by a Select Committee, in the Lok Sabha on Monday. Rijiju's statement came in the wake of apprehensions voiced on the withdrawal of the Income Tax Bill from the Lok Sabha on Friday.

The minister made it clear that the apprehensions were ill founded as the new bill to be introduced will incorporate all the changes which have been suggested by the Select Committee and which have been accepted by the government. Rijiju said it was a normal parliamentary procedure when the amendments to a bill already introduced in the Lok Sabha are too many.

The Select Committee of the Lok Sabha, chaired by BJP member Baijayant Panda, made 285 suggestions to the Income Tax Bill, which were accepted by the government.

Rijiju said the need for a new bill arose as it would have been a tedious process to introduce each of the amendments and seek approval of the House separately.