Latest Income Tax Billb Draft 2025

Union Finance Minister Nirmala Sitharaman has recently withdrawn the old draft of the Income Tax Bill, 2025, from the Lok Sabha and introduced a revised version in Parliament. This move comes after extensive feedback and scrutiny, including approximately 285 recommendations from a Select Committee. The goal is to modernize and simplify India’s direct tax framework, replacing the current Income Tax Act, 1961.

Understanding the Income Tax Bill is crucial for SSC aspirants as it forms an essential part of current affairs related to India's taxation and governance.

Why Was the Earlier Income Tax Bill Withdrawn?

The original Income Tax Bill, introduced during the Parliament’s Budget session in February 2025, was immediately referred to a Select Committee for a detailed review. The major reasons for withdrawing the earlier draft were:

• Drafting inconsistencies and technical errors required correction.

• The a need for terminology clarifications and improved legal language to correctly reflect legislative intent.

• Extensive stakeholder and committee feedback demanded a consolidated, clearer bill, avoiding confusion caused by multiple versions.

These points highlight the importance of clear and accurate drafting in tax reform efforts like the Income Tax Bill.

Key Features and Structure of the New Income Tax Bill

The revised Income Tax Bill aims to make the law easier to understand and implement. Some of the most important features include:

• Simplified Language: Legal terminology has been rewritten to remove ambiguity and contradictions, reducing disputes, a common issue under the previous Income Tax Act.

• Organized Provisions: The new bill contains 536 sections and 16 schedules, significantly more organized compared to the older act’s 298 sections.

• Introduction of “Tax Year”: The bill eliminates the dual system of “Previous Year” and “Assessment Year,” introducing a single “Tax Year” concept for better clarity and administration.

• Digital-first Approach: The Central Board of Direct Taxes (CBDT) gains enhanced powers to promote digital administration and automation, including faceless processes to reduce corruption and litigation.

• No Immediate Tax Slab Changes: The bill focuses on simplifying compliance without changing existing tax rates or income categories.

This approach signals a major tax reform aimed at ease of doing business and transparency.

Major Recommendations from the Select Committee

The Select Committee submitted a detailed 4,500-page report suggesting significant changes now reflected in the revised Income Tax Bill:

Taxpayer Benefits & Relief:

• Refunds on Late Returns: Taxpayers can claim refunds even if returns are filed after the deadline, assisting those who miss deadlines for genuine reasons.

• Dividend Deduction (Section 80M): Reintroduction of inter-corporate dividend deductions eases the tax burden on companies receiving dividends from other domestic firms.

• NIL-TDS Facility: Taxpayers with no tax liability can obtain advance NIL-TDS certificates, reducing compliance hassle.

• Tax Relief for Vacant Property: The additional tax burden based on deemed rent for vacant properties has been removed.

• Clear 30% Deduction for House Property: Now applicable only after subtracting municipal taxes; home-loan interest deduction is also extended to let-out properties.

Compliance & Procedural Changes:

• Simplified Advance Ruling Fees: Making advance tax rulings more accessible by modifying the fee structure.

• Clarifications on Penal Powers and TDS: Clearer rules on when penalties apply, especially for provident fund withdrawals and other procedures.

• Definition Alignment: MSME definitions are now linked directly to the MSME Act, reducing confusion.

• Legal Drafting Improvements: Correcting linguistic and technical errors, including clause numbering and property terminology.

• Expanded Pension Deduction: Commuted pension deduction is extended beyond employees to non-employee individuals.

These changes are a significant update in the Income Tax Bill draft in India, aimed at easing taxpayer compliance and reducing litigation.

Top 10 Changes in the Income Tax Bill at a Glance

1. Refund claims are possible even for late returns.

2. Reintroduction of Section 80M deduction for inter-corporate dividends.

3. Facility for NIL-TDS certificates for those with no liability.

4. Removal of ‘deemed rent’ tax on vacant properties.

5. Clear calculation of 30% deduction after municipal taxes for house property.

6. Extension of home-loan interest deduction to let-out properties.

7. Improved transparency and clarity in procedural rules.

8. Alignment of MSME definitions with the MSME Act.

9. Correction of legal language and clause references.

10. Wider scope for commuted pension deduction to non-employee individuals.

What Does the Income Tax Bill Mean for Taxpayers and Investors?

• Simplification and Transparency: The bill aims to make tax compliance easier with clearer rules and fewer technical hurdles, helping taxpayers plan their finances better.

• Reduced Litigation: Many ambiguous provisions that caused frequent legal disputes have been removed, reducing opportunities for misinterpretation.

• Support for Digital India: Emphasis on digital processes and automation will make tax filing and refunds quicker, more convenient, and corruption-free.

• Investor Confidence: Clearer definitions and rules promote investment by reducing uncertainties in tax regulations affecting businesses and individuals.

Final Thoughts

The Income Tax Bill 2025 represents a significant overhaul of India’s direct tax framework, aimed at simplifying and modernizing the existing laws.

By addressing drafting errors and incorporating extensive feedback from the Select Committee, the bill promises greater clarity and reduced disputes for taxpayers. The introduction of the “Tax Year” concept and a digital-first approach reflects the government’s commitment to a transparent and efficient tax system.

For SSC aspirants, understanding the key changes and benefits of the Income Tax Bill is crucial for current affairs preparation. The bill not only eases compliance but also enhances investor confidence by aligning definitions and procedures with modern standards.