Lok Sabha passes new Income Tax Bill, here are key takeaways

Representational Pic/File

The Lok Sabha on Monday passed the Income Tax Bill, 2025, aimed at overhauling India's 63-year-old income tax framework, in just three minutes and without debate, reported the PTI.

The swift passage occurred amid protests by opposition members over alleged irregularities in Bihar's electoral roll revision.

In Photos: Rahul Gandhi and INDIA Bloc MPs detained during protest march to EC headquarters

3 months agoPHOTO GALLERY

Finance Minister Nirmala Sitharaman reintroduced the bill -- first tabled in February and withdrawn on August 8 -- with substantial changes based on recommendations from a Parliamentary Select Committee.

Despite the opposition's disruptions, the Bill was passed via voice vote and now heads to the Rajya Sabha and President for final approval.

The Income Tax (NO.2) Bill, from April 1, 2026, will replace the Income Tax Act, 1961. The bill cuts down wordage and chapters by almost half and writes the clauses in simpler and easy to understand language. It does away with the confusing concepts of assessment year and previous year, replacing them with easier to understand 'tax year'.

According to the PTI, Nangia Andersen LLP, Partner, Sandeep Jhunjhunwala said deductions in respect of certain inter-corporate dividends for companies opting for concessional rate of taxes have been re-introduced in line with the provisions of the existing Income Tax Act, 1961.

"By enabling refunds for belated returns and harmonising definitions of Micro and Small enterprise with allied statutes, the Bill reflects a balanced, pragmatic, and taxpayer-oriented approach," Jhunjhunwala said.

Here are the key points of the Income Tax Bill, 2025

- According to the revised bill, individuals will be allowed to claim TDS refund even if their return of income is filed beyond the statutory timeline provided for filing of the original income-tax return, as per the PTI.

- The Income Tax (No.2) Bill provides for 'nil' TCS on Liberalised Remittance Scheme (LRS) remittances for education purposes financed by any financial institutions.

- The provisions relating to the carry forward and set-off of losses have been appropriately amended and the reference to the beneficial owner has been omitted to align with Section 79 of the Act.

- With simplified terminology, the bill Replaces outdated terms such as "assessment year" and "previous year" with a unified "tax year" for clarity.

- It allows taxpayers to claim TDS refunds even if returns are filed after the deadline -- provided statutory conditions are met.

- Enables issuing of ‘Nil' TDS certificates for qualifying taxpayers.

- Offers zero TCS (Tax Collected at Source) under the Liberalised Remittance Scheme (LRS) for education-related remittances funded by financial institutions.

- Reinstates inter-corporate dividend deductions for companies availing concessional tax rates.

- Aligns definitions of Micro and Small Enterprises with the MSME Act.

- Clarifies taxation norms for charitable trusts and non-profit organisations, ensuring anonymous donations don't affect their exemption eligibility.

(with PTI inputs)