New Income Tax Bill, 2025 and comparison of Old vs New

The Indian government has introduced the Revised New Income Tax Bill, 2025 on 11th August 2025, a significant legislative move aimed at modernizing the country’s tax framework. This bill seeks to replace the decades-old Income Tax Act of 1961 with a simpler, more organized, and taxpayer-friendly structure. The revised version incorporates 285 recommendations from a Lok Sabha Select Committee, signaling a concerted effort to reduce complexities and foster a more transparent tax environment. Here’s a breakdown of the key legal changes, benefits, and suggestions that are set to redefine the tax landscape.

Key Changes Introduced by the Bill

The new bill is designed to streamline tax procedures and minimize ambiguity, which has historically been a source of litigation.

• Single ‘Tax Year’ System: The bill eliminates the confusing dual system of a “Previous Year” and an “Assessment Year,” replacing it with a single, simplified “Tax Year.” This change is expected to make filing returns and financial planning much more straightforward for taxpayers.
• Reduced Litigation: By removing ambiguous legal provisions, the bill aims to significantly reduce the number of disputes and legal challenges between taxpayers and the tax authorities.
• Empowering Digital Administration: The bill grants the Central Board of Direct Taxes (CBDT) increased power to formulate rules, thereby promoting a more efficient and digitally-driven tax administration.
• NIL-TDS Certificates: A new provision allows taxpayers to obtain a NIL-TDS certificate, which can be particularly beneficial for those whose income falls below the taxable threshold.

Benefits and Suggested Reforms for Taxpayers

The revised bill includes several changes that are specifically aimed at providing relief and greater clarity to taxpayers.

• Late Filing Refunds: In a major relief for taxpayers, the bill allows for refund claims even if the tax return is filed late. This rectifies a previous limitation and provides a critical safety net.
• Clear Deduction on House Property: The bill provides a clear definition and framework for the 30% deduction on house property, offering much-needed clarity for homeowners and investors.
• Reintroduction of Section 80M: The deduction on inter-corporate dividends under section 80M is being reintroduced. This is a significant change for corporate taxpayers, as it will help prevent double taxation.
• Tax Relief on Vacant Properties: Taxpayers will be able to claim tax relief on vacant properties, which is a beneficial change for property owners who are unable to rent out their assets.
• MSME Definition Alignment: The bill aligns the definition of Micro, Small, and Medium Enterprises (MSMEs) with the MSME Act, 2006, ensuring consistency and clarity for these businesses.
• Expanded Pension Benefits: Commuted pension benefits, previously limited to employees, are now expanded to include non-employees, broadening the scope of this financial relief.

This new bill is seen as a positive step towards creating a more logical, fair, and less litigious tax environment for all stakeholders. The proposed changes are expected to not only simplify compliance but also offer significant relief and clarity for financial planning.