What Exactly Is The New Income-Tax Bill 2025? Know The 7 Big Changes And Benefits From the February Draft News24 –
The Lok Sabha on August 12 passed the revised Income Tax (No.2) Bill, incorporating significant revisions from the earlier draft introduced on February 12. Introduced by the Finance Minister Nirmala Sitharaman, the bill will now move to the Rajya Sabha for its consideration, which afterwards will become the law after the President’s assent.
The new changes made provide clarity, minimise uncertainty, and better align numerous provisions with the Income-tax Act, 1961, especially for The new Income Tax bill provides flexibility for allowing refund claims in cases where the return is not filed in due time and reduces the period for filing TDS correction statements to two years from six years as provided in the Income Tax Act Act, 1961. The provisions of the bill will come into effect from the next fiscal year.
The Bill has around 2.59 lakh words compared with the 5.12 lakh words in the Income Tax Act, 1961. The number of chapters has been reduced to 23 from 47, and the number of Sections Has Been Reduced to 536 from 819.
Unified Pension Scheme Benefits And Retirement Benefits
The updated bill includes tax relief for Unified Pension Scheme (UPS) subscribers. According to the bill, those enrolled in the UPS under the National Pension System (NPS) can receive up to 60% of their total pension corpus tax-free upon retirement, whether due to regular retirement, voluntary retirement, or specific types of early retirement. The bill offers a tax benefit for “retirement benefit accounts.” Income from these accounts, held in a designated country, will be tax-free.
Minimum Alternate Tax (MAT) And AMT Provisions
The earlier draft merged MAT and AMT provisions into a single complex section, raising potential confusion and litigation. However, the new Income-Tax Bill fixes earlier errors or unclear points in the tax law and now permits refunds even if a person files their return late. This will simplify The Alternate Minimum Tax (AMT) rule will now apply only to non-corporate taxpayers (like individuals, partnerships, or LLPs) who have claimed certain deductions, instead of applying to all non-corporates.
Reduces The Burden For Taxpayers
Earlier, the Bill did not allow taxpayers to claim certain expenses if the TDS was deducted in that year but paid after the income tax return filing deadline. The select committee had suggested that this relief should apply only to payments made to residents. However, the new Bill extends this relief to payments made to non-residents as well. This change eliminates the risk of permanently losing such expense claims and reduces the compliance burden for taxpayers.
Income On Indirect Transfer Of Shares Or Interest
The February Bill restricted indirect transfer rules to capital gains only. The new Bill broadens this to include all income considered to accrue or arise in India under clause 9(2), aligning with the 1961 Act.
Compulsory Digital Payment Options For High-Revenue Professionals
For high-revenue professionals and businesses with receipts exceeding ₹50 crore, the bill mandates the acceptance of prescribed electronic payment methods, such as BHIM UPI and RuPay debit cards, extending digital payment norms to professionals and supporting the government’s push for a cashless economy.
TDS Correction Statements Filing Period Reduced
Currently, the law permits deductors to file correction statements for up to six years following the original filing. The new Bill reduces this period to two years. This change aims to prevent misuse by deductors, reduce disputes, and safeguard deductees from unforeseen tax demands.
Retained Contentious Definition Of ‘Virtual Digital Space’
The new Bill, like the earlier draft, brings in the idea of a “tax year,” meaning 12 months starting from April 1. It keeps the controversial definition of “virtual digital space” — The bill grants income tax authorities expanded powers to request information during surveys, searches, and seizures, covering email servers, social media accounts, online investment, trading, and banking accounts, remote or cloud servers, and digital application platforms. Clause 247 permits tax officers to bypass passwords and access digital platforms, such as emails and social media, during searches.
It also says that during searches, income tax officers can access these digital spaces — including emails and social media — even if they have to bypass passwords to do so.