New Income Tax Bill 2025
What are the key reforms approved in Lok Sabha?
On Monday 11th-Aug-2025; The revised legislation of Income Tax (No. 2) Bill – 2025 along with the Taxation Laws (Amendment) Bill – 2025 introduced by Finance Minister Nirmala Sitharaman has been approved by the Lok Sabha .
It was basically designed to simplify, update and consolidate India’s income tax framework.
Once it is passed by the Rajya Sabha and approved by the President. it will officially replace the Income Tax Act, 1961.
The new Bill incorporates almost all recommendations made by the Select Committee of Parliament and includes further refinements based on the received feedback from stakeholders.
These updates focus on clearer legal language, simplified compliance processes and modernised tax administration.
New Income tax bill 2025 | Purpose
- Replace outdated provisions of the Income Tax Act, 1961.
- Ensure simpler, fairer and more transparent tax laws.
- Make tax laws in line with modern economic and business needs.
- Reduce unnecessary litigation through clear drafting and consistent rules.
Role of the ‘Select Committee’
The Select Committee led by BJP MP Baijayant Panda has reviewed the earlier draft of the Income Tax Bill – 2025.
Post detailed analysis the panel submitted a report of 4584 pages containing 566 recommendations, of which 285 focused specifically on simplifying the tax regime.
The committee’s work was aimed to make the law more understandable while maintaining its effectiveness.
The government accepted nearly all recommendations and addressed drafting, phrasing and cross referencing issues before tabling the revised Bill.
New Income Tax Bill 2025 | Accepted Key Recommendations and Changes
(i). Income Tax Refunds
- The earlier rule denied refunds if Income Tax Returns (ITR) were filed after the due date.
- The new Bill removes this restriction and allowing refunds even when ITR is filed late.
- This change is intended to improve fairness and reduce taxpayer grievances.
(ii). Section 80M Deduction for Intercorporate Dividends
- Under clause 148 of the revised Bill, the Section 80M deduction is available for companies opting for the special tax rate under Section 115BAA.
- This supports corporate taxpayers by preventing double taxation of dividends.
(iii). NIL TDS Certificate
- The Select Committee recommended that taxpayers be allowed to obtain a NIL TDS certificate.
- This certificate exempts eligible taxpayers from Tax Deducted at Source in certain situations helps improving cash flow and compliance convenience.
Also Read: ITR Filing Deadline Extended: CBDT New Date and ITR 2025-26 Updates
Why the Bill was renamed
The government decided to withdraw the original Income Tax Bill 2025 as presented earlier.
This was due to the large number of improvements suggested by the Select Committee and other stakeholders. The revised version now called the Income Tax (No. 2) Bill – 2025 Which includes-
- Drafting corrections to make provisions clearer.
- Better alignment of legal terms and phrases.
- Necessary consequential changes to match updated sections.
- Accurate cross-referencing for easier interpretation.
Next steps in the legislative process
Although Income Tax (No. 2) Bill- 2025 has been passed by the Lok Sabha but it still needs approval from the Rajya Sabha too. Once cleared, it will be sent for the President’s assent. After that it will officially replace the Income Tax Act, 1961.
When enacted, the law is expected to mark a major step toward a modern and efficient tax system in India with better clarity for taxpayers, stronger compliance measures and a more transparent legal framework.
New Income Tax Bill 2025 | Impact on India’s Tax Landscape
This reform is not just a legal update it is a structural shift in how taxation will work in India. The integration of committee recommendations ensures that both businesses and individuals operate under laws that are easy to understand and apply.
The streamlined approach also supports economic growth by reducing disputes and administrative delays.
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