What are the changes in the New Income Tax Bill, 2025, which will be tabled by Nirmala Sitaraman today?

Finance Minister Nirmala Sitharaman will introduce the new Income Tax bill, 2025, on Monday at the Lok Sabha, which was introduced and tabled on February 13 this year.  The bill is set to replace the current Income Tax Act 1961. 

The new bill will include amendments made by the 31-member Select committee headed by BJP MP Baijayant Panda. One major goal was to make procedures simple and deal with the long-standing challenges in Tax management. The old act, which contains archaic language and was edited over 4000 times, had become complicated to decipher.

The committee made around 285 recommendations and submitted a 4,500-page report to the parliament last month, which proposed reforms.                                                                

According to Panda, the new law, once passed, will cut down legal confusion and help individual taxpayers and MSMEs avoid unnecessary litigation.

The new draft bill will:

-cut down on  sections which will be reduced from 819 to 536,

-reduce the number of chapters to 23 

-focus on simplicity, transparency and use of technology

-Replace “Previous Year” and “Assessment Year” systems with a single ‘Tax Year’ concept. 

-Remove ambiguous provisions to reduce disputes.

-Give greater powers to the CBDT to facilitate digital tax administration.

Here are some of the major changes that can be expected from the new Income Tax Bill, 2025 after the suggestions of the committee:

-Relief in tax fund to taxpayers, which allows one to claim refunds even if the return is filed late. 

-A reintroduction of section 80M deduction on inter-corporate dividends. 

-Advance NIL-TDS certificates can be obtained by taxpayers who do not have a tax liability.

-The additional tax burden will be removed based on the deemed rent.

-A 30% standard deduction will apply to house property income after deducting municipal taxes. 

-Home loan interest deduction will be available on a rented property as well.                  

-More clarified procedural rules for the Advance ruling fee, TDS on PF withdrawal and clarification on penal powers.

-Defining MSME in alignment with the MSME Act.

-Correction of technical and linguistic errors made while drafting  

-Commuted pension deduction will be extended to non-employee individuals as well.  

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