Goodbye 1961 Act, Hello 2025 Act: Lok Sabha Clears Number First Income Tax Ticket – Key Change
Finance Minister Nirmala Sitharaman introduced a new bill today (August 11) called Income Tax (No. 2) Bill 2025 after withdrawing its income tax bill on Friday, August 8. The bill has been passed by Lok Sabha.
A 31-member select committee led by BJP MP Baijayant Panda has proposed several amendments to the law. Despite opposition protests, the House accepted the evacuation of the bill.
On July 21, the first day of the current Parliamentary Monsoon Meeting, the report of the Parliamentary Group in the new Income Tax Act was submitted in Lok Sabha. The group proposed important changes in its report to strengthen definitions, disambiguate and align new laws with existing frameworks.
In its 4,584-page report, the Commission identified several drafting corrections based on the recommendations of stakeholders, which they believe are crucial for a clear and clear interpretation of the new bill. The Parliamentary Group made a total of 566 recommendations/recommendations in its report.
To greatly alleviate taxpayers, the Commission recommends a change in the provision that if an income tax return is filed within the due date, a refund will be cancelled.
New Income Tax Act Passed Without Debate
There was no debate over their debate on the Special Intensive Revision (SIR) of Bihar’s election in Rolls-Royce. Both Lok Sabha and Rajya Sabha have witnessed the ongoing destruction of opposition demands since the start of the parliamentary monsoon meeting.
Introduction to the new bill
The government introduced the Income Tax Act in Lok Sabha on 13 February 2025 and forwarded it to the Options Committee for review.
The Selected Committee published its report on Lok Sabha on July 21, 2025. The new and revised bill also incorporates stakeholder recommendations regarding changes that will more accurately convey the meaning of the proposed legal.
The nature of drafting, consistency of phrases, corresponding changes and cross-references were corrected, and the government decided to withdraw the Income Tax Act of 2025 and propose the Income Tax Act (No. 2) Act, 2025.
The new bill replaces the Income Tax Act of 1961
The new bill replaces the Income Tax Act of 1961, which has undergone many amendments since its passage more than 64 years ago.
The result of these amendments is that the basic structure of the Income Tax Act is too burdensome and the language becomes complicated, “increasing taxpayer compliance and hindering the efficiency of tax management.”
The object and reason of the bill states that taxpayers, practitioners and tax administrators also raised concerns about the complex provisions and structure of the Income Tax Act of 1961.
Also read: Income Tax Act 2025: Finance Minister withdraws Lok Sabha’s Income Tax Act; new version will be filed on August 11
New Income Tax Act: Key Changes to Know
For individual taxpayers
Refund
If a return is filed after the statutory deadline, canceling the terms that may prevent taxpayers from refunding is one of the most important adjustments. Central processing reduces ITR processing time from 90 days to just 10 days, so refunds start faster.
Income from property
The bill sets out much-needed deductions for property income. Obviously, after deducting municipal taxes, the annual value should be used to calculate the standard deduction tax.
Pension waiver
The new bill introduces income tax exemptions for certain expenses under the new unified pension plan. It corrects previous tax treatment differences by granting non-employees who receive pensions from approved funds.
Rules for big professionals
So far, the rules for electronic payments for turnovers of over Rs 500 crore are only used for the “business”. Now, the term “profession” has been added to it. This means that large doctors, lawyers, CAS and other professionals will also have to follow this rule.
For enterprises and companies
dividend
The committee has agreed to restore the dividend deductions between companies, which are clearly missing in the original draft. This is a huge relief for businesses.
Definition of Benefit Owner
To simplify loss accounting, the measure incorporates a revised definition of “benefit owner” so that people can bear losses when they gain direct or indirect share advantage throughout the tax year.
LLP and AMT
The amended bill would replace the minimum tax (AMT) for a limited liability partnership (LLP) is consistent with the current 1961 ACT provision, thus correcting the misphrases in previous versions. This eliminates a broader definition that will prevent LLP from gaining some tax advantages.
Nonprofit Organizations (NPO/Trusts)
Use of Capital Earnings: If a registered trust sells its property and uses capital earnings to purchase a new property, it will now be considered a “use of income”. This is similar to the old system.
MSME Alignment
To provide unity in several regulations, the bill clearly aligns the definition of micro and small businesses with the MSME Act of 2006.
TDS and TCS
To avoid confusion and operational difficulties, the new bill specifically reintroduces the option of “zero” and “lower” tax deduction certificates. The revised draft also restores the established text of Section 197 of the Old Act, which previously excluded specific references to “zero” deductions.
