In a major legislative development, the Lok Sabha on Monday passed the Revised New Income Tax Bill, 2025, incorporating almost all of the 285 recommendations made by a Parliamentary Select Committee. The move is being hailed as one of the most significant tax reforms in decades, with the potential to simplify compliance, reduce disputes, and provide targeted relief to taxpayers across India.
The bill, along with the Taxation Laws (Amendment) Bill, 2025, was reintroduced in the lower house by Finance Minister Nirmala Sitharaman and cleared swiftly, paving the way for it to be tabled in the Rajya Sabha.
Why the Bill Was Revised
The original version of the New Income Tax Bill was introduced in February 2025, but faced concerns from various stakeholders. The government referred it to a Select Committee headed by BJP MP Baijayant Panda for a detailed review. After weeks of deliberation, the panel proposed 285 amendments aimed at improving clarity, reducing unnecessary compliance burdens, and updating provisions to suit modern economic realities.
Accepting almost all recommendations, the government withdrew the earlier draft and presented a revised version — which passed through the Lok Sabha without resistance.
Major Changes in the New Bill
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More Flexible Rules for Beneficial Owners
Taxpayers receiving share-related benefits during the year can now carry forward related losses, giving investors more breathing space in volatile markets. -
Return of Inter-Corporate Dividend Deduction
Companies can once again deduct dividends received from other domestic firms, reducing the tax burden and potentially boosting corporate reinvestment. -
Bigger Relief for Property Owners
A flat 30% standard deduction will now apply after municipal taxes on property income, alongside extended pre-construction interest deductions for rented properties — making real estate investment more attractive. -
Simpler Compliance for Small Taxpayers
Measures include issuing ‘Nil’ tax deduction certificates to avoid unnecessary TDS, allowing refunds for late ITR filings, and waiving penalties for genuine mistakes. -
Clearer NPA Definition for Banks
The bill now explicitly defines non-performing assets (NPAs), aiming to prevent disputes between financial institutions and tax authorities. -
Fairer Rules for Non-Profits & Religious Trusts
Anonymous donations will no longer threaten tax exemptions, giving NGOs and trusts greater operational certainty. -
Complete Removal of 1961 Act References
All outdated mentions of the six-decade-old Income Tax Act, 1961 have been removed, making way for a cleaner, modern tax code.Why These Revisions Matter?
The New Income Tax Bill, 2025 is not just a legal rewording — it’s a structural overhaul of India’s taxation framework. By streamlining procedures, updating definitions, and offering targeted reliefs, the bill aims to:
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Reduce litigation between taxpayers and authorities.
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Encourage investment through clearer corporate tax benefits.
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Support small taxpayers with simplified compliance.
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Modernise tax law in line with global best practices.
If approved by the Rajya Sabha, the bill will officially replace the remnants of the 1961 tax law, ending over six decades of reliance on an outdated framework. Economists believe the changes could enhance taxpayer confidence, improve compliance rates, and boost ease of doing business in India.
Finance Minister’s Statement
While presenting the revised bill, Nirmala Sitharaman said, “This legislation reflects the government’s commitment to a fair, transparent, and predictable tax system. By adopting the committee’s recommendations, we have ensured that the law is both business-friendly and citizen-centric.”
What’s Next?
The bill now awaits Rajya Sabha approval. Once cleared, it will usher in a new era of taxation in India — one that promises to be simpler, fairer, and more aligned with the realities of a growing economy.
Key Takeaway
From property tax relief to simpler compliance, and from corporate deductions to clearer banking rules, the New Income Tax Bill, 2025 represents a significant leap forward. Taxpayers, investors, and institutions alike are watching closely as the legislation heads to its final stage in Parliament.
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