Parliament has given its approval to the New Income Tax Bill, 2025, registering crucial amendments in the country’s tax framework. The legislation, which replaces the Income Tax Act of 1961, was cleared by the Upper House through a voice vote and returned to the Lok Sabha.
Its main purpose to smoothen tax processes, reduce compliance hurdles, and bring the law in line with present-day needs.
Alongside this bill, the Taxation Laws (Amendment) Bill, 2025, also received parliamentary approval. Both were introduced in the Upper House by Finance Minister Nirmala Sitharaman earlier in the day. The Lok Sabha had passed the Income Tax Bill on Monday. Speaking in the Rajya Sabha, Finance Minister Nirmala Sitharaman said: “This leaner and more focused law is designed to make it easy to read, understand and implement.”
Explaining the rationale behind the new law, Sitharaman said the language of the bill had been simplified to make it more accessible, without altering existing tax rates. She emphasised that parts of the old 1961 Act had become outdated and needed replacement to suit modern requirements.
She also acknowledged the work of the Parliamentary Select Committee, whose recommendations have been incorporated into the legislation. “Over 75,000 person-hours went into drafting the legislation,” she noted, thanking the committee for its detailed review.
The minister expressed disappointment at the opposition’s decision to walk out during the proceedings, even though they had earlier agreed to a 16-hour debate in each House. “I am shocked that the opposition doesn’t want to participate,” Sitharaman said.
Key Features of the New Income Tax Bill, 2025
- Simplified Structure: The legislation trims down the volume of text and the number of sections by about 50 per cent, making provisions clearer and easier to follow.
- Unified Tax Year: The existing distinction between “assessment year” and “previous year” has been scrapped. Instead, a single “tax year” concept will be used, simplifying the timeline for taxpayers.
- Flexible Refunds: Taxpayers will now be able to claim refunds even if they file returns after the due date, offering relief to late filers.
- Retention of Key Benefits: Provisions allowing the carry-forward of losses remain intact. The bill also continues to offer tax relief on anonymous donations to religious trusts.
- Reduced TDS Dispute Window: The time frame for correcting Tax Deducted at Source (TDS) errors has been cut from six years to two years, reducing the scope for prolonged disputes.
- Clarity on Pension and Gratuity: The bill provides explicit guidelines for deductions on commuted pension and gratuity payments received by family members.
The Income Tax Bill 2025 passed in the Lok Sabha on Monday has brought great relief to government pensioners and many other taxpayers. The new bill clearly provides that the entire amount of commuted pension will be exempted from tax, provided this pension is received from an approved pension fund.
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The New Income Tax Bill, 2025, is being positioned as a modern framework for both individuals and corporations. By reducing complexity, cutting red tape, and removing outdated provisions, the government hopes to make tax compliance less burdensome and more transparent.
With this reform, the six-decade-old tax law makes way for a simplified, technology-friendly, and more citizen-focused approach, setting the tone for a new era in India’s taxation system.
The Bill seeks to simplify, rationalise, and shorten the existing Income Tax Act, 1961. It also broadens the powers of income tax officials, allowing them to forcibly break into personal emails and social media accounts of assessees during search operations, reported The Hindu. The revised Bill was passed amid vociferous protests by the Opposition against the special intensive revision of electoral rolls in Bihar.
