Finance Minister Nirmala Sitharaman has introduced a new Income Tax Bill 2025 in the Lok Sabha, which aims to replace the six-decade-old Income-Tax Act of 1961. This revised draft, tabled on August 11, 2025, incorporates most of the recommendations from a Select Committee headed by Baijayant Panda.
Thank you for reading this post, don't forget to subscribe!The government had previously withdrawn an earlier draft from February to make necessary corrections and incorporate suggestions from the committee. The new bill consolidates all proposed amendments into a single, comprehensive document to avoid confusion.
Key Changes Based on Committee Recommendations
The parliamentary panel pointed out several drafting errors and proposed amendments to make the bill clearer and fairer. The revised bill addresses these points:
- Property Income: For vacant properties, the bill now explicitly compares actual rent to a “deemed rent.” It also prevents temporarily unused business premises from being taxed as house property.
- Deductions: The bill clarifies that the 30% standard deduction on house property income applies after municipal taxes have been deducted. It also extends the deduction for pre-construction interest to properties that are let out.
- Pension: Non-employees receiving pensions from a fund will now be allowed to claim commuted pension deductions.
Features from the Previous Draft
The new bill retains several key features from the original draft, which was billed as a major reform of India’s direct tax code:
- Simplified Rules: The bill uses simplified language and consolidated deductions to make it easier for taxpayers to comply.
- Modern Administration: It introduces a modernized tax administration with a “tax year” concept and enhanced powers for the CBDT. It also promotes a “trust first, scrutinize later” approach to reduce litigation.
- No Major Policy Changes: The bill does not change existing tax slabs, capital gains rules, or income categories.
