Four Key Amendments In Income Tax Act - How Does This Impact Taxpayers?

Income Tax Bill 2025: On the key amendments made to IT (Income Tax) Act, 1961, the Finance Minister Nirmala Sitharaman has clarified that all pertinent changes have already inclusive of the Icome Tax Bill, 2025, which will stand applicable from FY 2026-27.

Addressing the Lok Sabha on August 12, 2025, Finance Minister Sitharaman said, “In addition to the New Income Tax Bill, we are bringing certain amendments in the Income Tax Act of 1961. The 4 changes for the Income Tax Act 1961 have also been incorporated in the New Income Tax Bill.”

4 Key Amendments In Income Tax ACT, 1961

As per the Finance Minister’s speech in Lok Sabha, check out the key details -

Provision of tax exemption on  dividend, interest, and long-term capital gains to sovereign wealth funds and pension funds investing in infrastructure between April 1, 2020 - March 31, 2030. The public investment fund and its fully-owned subsidiaries  will be mentione directly under the section for exemption.  

Abatement of all assessments for block periods in search cases until there is a block assessment order. It will be a major reform for Ease of Doing Business.

Providing clarity for the new Income Tax regime, where standard deduction of Rs. 75,000 will be clarified for salaried individuals.

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Fourth is related to the Unified Pension Scheme (UPS) to clear the confusion on deduction, and bring parity with NPS

What Was Wrong With Standard Deduction Pre-Amendment?

The Finance Act, 2023, has introduced Section 115 BAC (1A), which gave revised income tax slab rates for taxpayers under the new regime. The classified rates are as follows.  

Clause (i): Applicable for financial year 2023-24
Clause (ii): Applicable for financial tear 2024-25
Clause (iii): Applicable from financial year 2025-26(inserted via the Finance Act, 2025).

The aforementioned income tax slabs were defined under the taxation framework for a given fiscal year, which a taxpayer's income is calculated.

Reportedly, there was also a drafting error and clause iii was not mentioned in Section 115BAC(1A).