Revised New Income Tax Bill 2025 Passed In Lok Sabha: What Are The Changes Suggested By Parliamentary Panel?

On Monday, the Lok Sabha cleared two major pieces of legislation — the amended New Income Tax Bill, 2025 and the Taxation Laws (Amendment) Bill, 2025 — just moments after Finance Minister Nirmala Sitharaman reintroduced them in the lower house of the parliament. With the nod from the Lok Sabha, the bills will now be tabled in the Rajya Sabha for consideration.

The revised draft marks a significant shift in India’s tax framework, incorporating a long list of changes recommended by a parliamentary panel.

Why was the first version rolled back?

The Income Tax Bill was first tabled in February 2025. Soon after, it was referred to a Select Committee led by BJP MP Baijayant Panda. The committee proposed 285 changes to improve clarity, simplify compliance, and modernise provisions. The government agreed to adopt almost all of them, prompting the withdrawal of the earlier draft. Monday’s version reflects these adjustments — and sailed through the Lok Sabha without delay.

Also Read: Government to Table New Income Tax Bill on August 11, After Withdrawing Initial Draft | Republic World

Major changes in the new bill

1. More flexible rules for beneficial owners
Taxpayers who receive share-related benefits during the year can now carry forward related losses, offering better relief in volatile market conditions.

2. Return of the Inter-Corporate dividend deduction
Companies can once again deduct dividends received from other domestic companies, reducing the tax burden on corporate earnings.

3. Bigger Relief for Property Owners
A standard 30% deduction after municipal tax on property income. Extended pre-construction interest deduction for properties that are rented out.

4. Easier Compliance for small taxpayers

• Issuance of ‘Nil’ tax deduction certificates to avoid unnecessary TDS.
• Refunds permitted for late income tax return filings by smaller taxpayers.
• Waiver of penalties for unintentional errors.

5. Clearer NPA definition for banks
The law now explicitly defines non-performing assets (NPAs), cutting down on disputes between banks and tax authorities.

6. Stricter but fairer rules for non-profits and religious trusts
Anonymous donations will no longer jeopardize tax exemptions, giving such organizations more operational clarity.

7. End of References to the 1961 Income Tax Act
All remaining mentions of the old six-decade-old Income Tax Act have been removed, aiming for a cleaner, modern code.

Why these revisions matter
This update is not just a legal rewrite — it’s a structural overhaul. By modernizing definitions, streamlining compliance, and offering targeted reliefs, the bill aims to make India’s tax system more predictable and taxpayer-friendly, while aligning it with today’s economic realities.

If passed by the Rajya Sabha, it will replace the remnants of a law that has shaped India’s taxation for over 60 years.