Union finance minister Nirmala Sitharaman on August 11 introduced the revised Income Tax Bill 2025 in the Lok Sabha. Since there are changes in how we pay Income Tax every year, this year there are 10 major changes to the bill.

The Bill was revised based on the 285 recommendations made by the select committee in Lok Sabha in July. The recommendations proposed reforms to the Bill introduced during the budget session in February.

The original Bill was sent to the select committee for a review so that it could be reviewed to replace the Old Income Tax Bill of 1961. According to a report by Financial Express, the select committee suggested improvements on some technical and procedural aspects related to taxpayers.

Old Income Tax Bill

The Income Tax Bill, 1961 remains the core for the administration. However, the provisions and legal language associated with it have been considered complex over the years. The draft bill of 2025 states the following

• Making language simple and the provisions clear
• The Income Tax Act has been organized in 536 sections and 16 schedules, so that it is easy to read and understand.
• An attempt has been made to eliminate the dual system of “Previous Year” and “Assessment Year” by introducing the concept of “Tax Year”.
• Ambiguous or contradictory provisions have been removed to reduce litigation.

Suggestions of Select Committee

Some of the important suggestions made by the select committee are as follows

• Relief in tax refund – permission to claim refund even if the return is filed late.
• Dividend deduction – Reintroduction of section 80M deduction on inter-corporate dividends.
• NIL-TDS facility – Taxpayers who do not have tax liability will be able to obtain advance NIL-TDS certificate.
• Tax relief on vacant property – Removal of additional tax burden based on deemed rent.
• Clarity in house property income – 30 percent standard deduction will be applicable after deducting municipal taxes; home-loan interest deduction will be available on rented property as well.
• Procedural reforms – Advance ruling fees, TDS on PF withdrawal and clarification on penal powers.
• Alignment of MSME definition – Define MSME as per MSME Act.
• Correction of linguistic and technical errors – Correction of clause numbering and references.
• Expansion of pension benefits – Extend commuted pension deduction to non-employee individuals as well.

Major changes to the bill include the withdrawal of 80 million deduction on inter-corporate dividends; the facility of NIL-TDS certificate, relief from deemed rent tax on vacant house, clear definition of 30% deduction on house property; home-loan interest deduction on rented property, transparency in procedural rules, linking definition of MSME to MSME Act, improvement in legal language drafting and increasing scope of commuted pension scheme.