After withdrawing the Income Tax Bill on Friday, August 8, Finance Minister Nirmala Sitharaman today (August 11) introduced a new Bill named The Income-Tax (No.2) Bill, 2025. The Bill has been passed by the Lok Sabha.
A 31-member Select Committee led by BJP MP Baijayant Panda had proposed several amendments to the law. Despite protests from the opposition, the House had accepted the bill’s withdrawal.
On July 21, the first day of the current Monsoon session of Parliament, the report of the parliamentary panel on the new Income-Tax Bill was presented in Lok Sabha. In its report, the panel has suggested important changes to tighten definitions, remove ambiguities, and align the new law with existing frameworks.
The Committee, in its 4,584-page report, had identified several drafting corrections based on stakeholder suggestions, which they believe are essential for clarity and unambiguous interpretation of the new bill. The parliamentary panel had made a total of 566 suggestions/recommendations in its report.
To give significant relief to taxpayers, the committee had suggested changing the provision that disallows refunds if income tax returns are filed beyond the due date.
The new Income-Tax Bill passed without debate
The new Income-Tax Bill was passed without debate amid opposition protests over their demand for debate on Special Intensive Revision (SIR) of electoral rolls in Bihar. Both Lok Sabha and Rajya Sabha have witnessed continuous disruptions since the beginning of the monsoon session of Parliament over the opposition demand.
Introduction of the new Bill
The Government had introduced the Income Tax Bill, 2025, in the Lok Sabha on February 13, 2025, and it was referred to the Select Committee for examination.
The Select Committee laid its report in the Lok Sabha on July 21, 2025. The new and amended bill also incorporates suggestions from stakeholders about changes that would convey the proposed legal meaning more accurately.
There were corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing and the government decided to withdraw the Income-tax Bill, 2025 and bring the Income Tax (No. 2) Bill, 2025.
New Bill replaces Income-tax Act, 1961
The new bill replaces the Income-tax Act, 1961, which has been subjected to numerous amendments since its passage more than sixty-four years ago.
As a result of these amendments, the basic structure of the Income-tax Act had been overburdened and language has become complex, “increasing compliance for taxpayers and hampering efficiency of tax administration”.
The Objects and Reasons of the bill states that taxpayers, practitioners and tax administrators had also raised concerns about the complicated provisions and structure of the Income-tax Act 1961.
New Income Tax Bill: Key changes to know
For individual taxpayers
Refunds
The elimination of a clause that may have prevented taxpayers from receiving a refund if their return was submitted after the statutory deadline is among the most significant adjustments. Central processing reduced the ITR processing time from 90 days to just 10 days, due to which refunds started coming faster.
Income from house property
The bill clarifies the much-needed deductions for income from property. It makes it clear that after deducting municipal taxes, the annual value should be used to calculate the standard 30 per cent deduction.
Pension exemptions
Income-tax exemptions for some disbursements under the new Unified Pension Scheme are introduced by the new bill. It corrects a previous discrepancy in tax treatment by granting non-employees who receive commuted pensions from an approved fund the same tax exemptions.
Rules for big professionals
Till now, the rule of making electronic payment mandatory for turnover of more than Rs 50 crore was only for ‘Business’. Now the word ‘Profession’ has also been added to it. This means that big doctors, lawyers, CAs, and other professionals will also have to follow this rule.
For businesses and companies
Dividend
The committee has agreed to restore the inter-corporate dividend deduction, which was conspicuously missing from the original draft. For businesses, this is a huge relief.
Beneficial owner definition
In an effort to streamline loss accounting, the measure incorporates a revised definition of “beneficial owner,” allowing people to carry forward losses when they receive direct or indirect share advantages throughout the tax year.
LLPs and AMT
The amended bill aligns the application of the Alternate Minimum Tax (AMT) for Limited Liability Partnerships (LLPs) with the current 1961 Act provisions, correcting a wording error from the prior version. This eliminates the broader definition that would have prevented LLPs from obtaining some tax advantages.
Non-profit organisations (NPOs/Trusts)
Use of capital gains: If a registered trust sells its property and uses the capital gains to buy a new property, it will now be considered as ‘use of income’. This is similar to the old system.
MSME alignment
To provide uniformity across several regulations, the bill clearly aligns the definitions for micro and small businesses with the MSME Act, 2006.
TDS and TCS
To avoid confusion and operational difficulties, the new bill specifically reintroduces the option for both “Nil” and “lower” tax deduction certificates. The amended draft restores the established text of Section 197 of the old Act, which had previously excluded the specific reference to the “Nil” deduction.
Source: Z Business
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