Updates, Income Tax Rules 2025, New Income Tax Bill 2025

 

New Income Tax Bill 2025: Latest Updates, Key Changes & What You Need to Know

The Government of India has officially reintroduced the revised version of the Income Tax Bill, 2025 in the Lok Sabha on 11 August 2025, replacing the earlier draft that was presented in February this year. This marks a significant step towards overhauling the country’s tax laws and replacing the decades-old Income-Tax Act, 1961.

The revised bill incorporates most of the recommendations made by the Select Committee, headed by Baijayant Panda, and aims to provide clarity, fairness, and modern tax reforms for individuals and businesses.

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Why Was the Original Bill Withdrawn?

The original bill, introduced on 13 February 2025, faced criticism over drafting errors, unclear definitions, and certain provisions that could cause taxpayer hardship.
To address these issues, the government decided to withdraw it on 8 August 2025 and bring a more refined, taxpayer-friendly version.

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Major Highlights of the Revised Income Tax Bill 2025

1. Clearer Definition of “Relative”

The new bill expands the definition of relative to include all lineal ascendants and descendants—both from the maternal and paternal side.
This change removes ambiguity in cases like inheritance, gifts, and exemptions

Finance Minister Nirmala Sitharaman speaks in the Lok Sabha

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2. Home Loan Interest Deduction for Let-Out Properties

Earlier, the deduction for pre-construction home loan interest was allowed only for self-occupied properties.
The revised bill restores this benefit for let-out (rented) properties as well. A standard deduction of 30% will be applied on the annual property value before municipal taxes.

3. Full Tax Deduction on Commuted Pension

If you receive a lump-sum pension payout from specified pension funds (such as LIC Pension Fund), it will now be fully tax-deductible.
This is a major relief for retirees who prefer receiving their pension in a single installment.

4. Relief from Penalties for Genuine Errors

Taxpayers making unintentional mistakes in their filings will get penalty relief—as long as there’s no fraud or deliberate concealment of income.

Impact on Taxpayers

• Individuals can expect more clarity on exemptions and deductions.

• Homeowners with rented properties gain more tax benefits.

• Retirees enjoy tax-free commuted pension payments.

• Honest taxpayers get protection from harsh penalties for minor mistakes.

Why This Matters

The revised Income Tax Bill 2025 is more taxpayer-friendly and designed to reduce litigation, simplify compliance, and encourage transparency.
By modernizing definitions and expanding deductions, the government aims to create a fairer tax regime

Key Dates to Remember

Event	Date
Original Bill Introduced	13 Feb 2025
Bill Withdrawn	8 Aug 2025
Revised Bill Introduced	11 Aug 2025

Final Thoughts

The New Income Tax Bill 2025 is a fresh start for India’s taxation framework. With clearer rules, wider deductions, and a focus on taxpayer convenience, it promises to be a positive change for millions.
However, taxpayers should carefully review the final provisions once the bill becomes law to make the most of the new benefits.