Lok Sabha Passes Income Tax Bill, 2025 — Key Changes You Need to Know Before April 2026 Rollout

On Monday, the Lok Sabha approved 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 Parliament. The passage marks a crucial step in India’s ongoing effort to modernise its tax framework. With the Lok Sabha’s nod, the bills will now move to the Rajya Sabha for consideration.

The revised draft incorporates a long list of recommendations made by a parliamentary panel, signalling a significant shift towards simplification, clarity, and taxpayer-friendly provisions.

Why the First Draft Was Withdrawn
The Income Tax Bill, 2025 was initially tabled in February 2025 but was soon referred to a Select Committee led by BJP MP Baijayant Panda. The panel conducted detailed reviews, engaged with industry bodies, and proposed 285 amendments to improve clarity, ease compliance, and modernise outdated provisions.

The government agreed to adopt nearly all of these suggestions, prompting the withdrawal of the February draft. Monday’s updated version reflects these changes — and passed through the Lok Sabha without delay.

Key Changes in the Revised Bill
CA Gaurav Makhijani, Associate Partner and Head of Tax (North India & Gujarat) at Rödl & Partner India, explained:
“The New Income Tax Bill, 2025 was tabled before the Indian Parliament in February 2025, which was later referred to a Select Committee for review and recommendations. Feedback was also sought from industry bodies and professional associations. The Select Committee considered most of the major concerns raised and has sought to clarify provisions that were causing uncertainty.”

Among the important clarifications:
Refund Claims: Earlier, the draft suggested that refunds could not be claimed if returns were filed after the original due date. This provision has now been scrapped.
Nil TDS Certificates: Initial language implied that applications for Nil TDS certificates would not be permitted; the revised bill removes that ambiguity.
Inter-Corporate Dividend Deduction: The deduction is retained, contrary to earlier concerns.
Definition of “Resident”: Provisions impacting individuals moving abroad for employment have been clarified.
Alternate Minimum Tax (AMT) on LLPs: The bill confirms AMT will not apply to LLPs — a major relief for family-owned businesses.
Transfer Pricing Rules: The definition of Associated Enterprises has been refined to avoid conceptual changes from the current Income Tax Act, 1961.

Makhijani noted that these updates “clarify most critical items which were creating confusion” and stressed the importance of finalising related rules and forms well before the planned rollout on 1 April 2026 to give industries time to update ERP systems.

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

Select Committee’s Role in Protecting Taxpayer Interests
Tax expert Vivek Jalan, Partner at Tax Connect Advisory Services LLP, said many taxpayer suggestions were directly accepted by the committee and the CBDT.

He highlighted a key example: “Clause 263(1)(a)(ix) of the Feb’25 Income Tax Bill required that a person seeking refunds must mandatorily file Income Tax Returns within the due date. Considering that this would create hardship for taxpayers who miss deadlines for genuine reasons, the Ministry of Finance has deleted this clause. This ensures there is no unnecessary litigation.”

With the removal of Clause (ix), the subsequent provisions have been renumbered. Jalan added: “It is considered that after this, till the implementation of the Income Tax Bill, 2025 on 1 April 2026, no further amendments may be made. Taxpayers, trade, and industry can thus prepare for implementation of the New Income Tax Act, 2026.”

Simplifying Tax Laws for the Common Man
For Deepak Kumar Jain, Founder and CEO of TaxManager.in, the Finance Minister’s intent is clear — make the law easier to understand and fairer for taxpayers.
“The aim to introduce the New Income Tax Bill, 2025 is to simplify tax laws which would be easier for a common man to understand and comply with. Fair measures have been taken to reduce penalties on honest taxpayers committing mistakes. Many measures will provide relief to the middle-income group, meaning higher take-home pay.”

Next Steps Before April 2026 Implementation
The government has already announced that related rules and forms are being prepared alongside the legislation. Once passed in the Rajya Sabha, the bills will move towards finalisation for implementation from 1 April 2026.

‘With that said, the new Income Tax law is intended to be implemented from 1 April 2026. The Government has already announced that related rules and forms are being prepared. However, it is critical that the Bill be finalized promptly and also the necessary compliances, rules, and forms are issued in time. This will allow industry sufficient lead time to incorporate the changes into their ERP systems,’ Makhijani added.

Industry stakeholders and tax professionals are urging the government to release the final compliance guidelines and system requirements promptly. This lead time will be crucial for businesses to make the necessary technological and procedural adjustments.

What This Means for Taxpayers
If the bill becomes law in its current form, taxpayers can expect:
Simplified refund processes without strict due-date barriers.
Clearer definitions to prevent legal disputes.
Reduced compliance burdens for individuals and businesses.
No AMT for LLPs, benefiting many family-owned and partnership structures.
More predictability in tax rules, enabling better financial planning ahead of the 2026 rollout.

The New Income Tax Bill, 2025 is being hailed as one of the most significant overhauls of India’s tax code in recent years. With clarity, fairness, and simplification at its core, the legislation, if passed by the Rajya Sabha, is set to reshape compliance for both individuals and businesses starting April 2026.