New Delhi, August 11, 2025: Union Finance Minister Nirmala Sitharaman today introduced a revised version of the New Income Tax Bill, 2025, in the Lok Sabha. The bill, which aims to replace the outdated Income Tax Act, 1961, incorporates almost all the recommendations made by the Select Committee, headed by BJP MP Baijayant Panda. This revised bill, titled The Income-Tax (No.2) Bill, 2025, seeks to consolidate and amend income tax laws, providing a clearer and updated framework.
The move comes after the Finance Minister withdrew the original version of the Bill on Friday, August 8, during the Monsoon Session. This withdrawal was to prevent confusion arising from multiple versions and to present a comprehensive bill that integrates the suggestions from the 31-member Select Committee. Parliamentary Affairs Minister Kiren Rijiju had confirmed the presentation of the modified bill today.
Key Changes in the New Income Tax Bill, 2025:
The parliamentary panel had submitted a detailed 4,584-page report with 566 suggestions. While the complete list of changes is extensive, some of the significant modifications include:
* Income Tax Refund Provision: A crucial change is the removal of the provision that denied refunds if an Income Tax Return (ITR) was filed past the due date. The earlier version of the Bill mandated timely ITR filing for refund eligibility. This amendment aims to ease hardship for taxpayers who might miss deadlines for genuine reasons.
* Simplification and Clarity: The new bill emphasizes clearer language and a more structured format, aiming to simplify tax compliance for individuals and administrators. It reduces unnecessary provisions and adopts concise sentences.
* “Tax Year” Concept: The bill eliminates the concept of “assessment year” and introduces “tax year” to align with the financial year, bringing greater clarity.
* Faceless Administration: Provisions for faceless collection of information and assessment of tax cases are retained, empowering the central government to frame new schemes for efficiency, transparency, and accountability through technology.
* Undisclosed Income and Virtual Digital Assets: The definition of undisclosed income for search cases has been expanded to include “virtual digital assets” (such as cryptocurrencies and NFTs). Tax authorities will also have the power to access virtual digital spaces during search and seizure operations.
* House Property Income: Recommendations by the Select Committee ensure fairness in the valuation of vacant properties, clarifying the comparison between actual rent received and “deeming rent.”
* Rebate under Section 87A: The rebate under Section 87A for the new tax regime has been increased, meaning individuals with taxable income up to Rs. 12 lakh will have no tax liability under this regime.
* Enhanced TDS Thresholds: Threshold limits for Tax Deducted at Source (TDS) have been revised to reduce the compliance burden.
* Extended Time Limit for Updated Returns: The time limit for filing updated income tax returns (ITR-U) has been extended from two years to four years from the end of the relevant assessment year.
* Benefits for IFSC: Tax incentives have been introduced to promote the International Financial Services Centre (IFSC) in GIFT City.
* Standard Deduction and Pre-construction Interest: The committee suggests implementing a standard 30% deduction, calculated after municipal tax deductions. Pre-construction interest deductions could also be extended to include let-out properties.
* Elimination of Redundant References: The bill aims to eliminate remaining references to the Income-Tax Act, 1961, to create a self-contained and dispute-resistant new code.
Extended ITR Filing Deadline for FY 2024-25:
In a related development, the Central Board of Direct Taxes (CBDT) has extended the deadline for filing Income Tax Returns (ITR) for the Financial Year (FY) 2024-25. The revised due date is now September 15, 2025, an extension from the original deadline of July 31, 2025. This provides taxpayers an additional 45 days to complete their filings. The extension was granted due to significant changes introduced in the notified ITRs and to allow sufficient time for system readiness and the rollout of ITR utilities for Assessment Year (AY) 2025-26.
New Tax Regime Remains Default Option:
The new tax regime continues to be the default option for taxpayers. Salaried individuals retain the flexibility to opt out and choose the old regime if they wish to while filing their ITR for FY 2024-25. However, a belated ITR, filed after the due date, can only be submitted under the new tax regime.
Income Tax Slabs in the New Regime (FY 2025-26 / AY 2026-27):
The proposed income tax slabs under the new tax regime for FY 2025-26 are:
* Rs. 0 to Rs. 4 lakh: Nil
* Rs. 4 lakh to Rs. 8 lakh: 5%
* Rs. 8 lakh to Rs. 12 lakh: 10%
* Rs. 12 lakh to Rs. 16 lakh: 15%
* Rs. 16 lakh to Rs. 20 lakh: 20%
* Rs. 20 lakh to Rs. 24 lakh: 25%
* Above Rs. 24 lakh: 30%
The introduction of the revised Income Tax Bill, 2025, marks a significant step towards modernizing and simplifying India’s tax framework, aiming for greater transparency, efficiency, and ease of compliance for taxpayers.
