Lok Sabha Passes New Income Tax Bill: How Is It Different This Time? 5 Points Explained

The Lok Sabha on Monday passed two important legislations about taxation, ie Income Tax Bill and Taxation Laws (Amendment Bill). The Income-Tax (No.2) Bill, 2025 seeks to consolidate and amend the law relating to Income Tax Act 1961.

Earlier in day, Finance Minister Nirmala Sitharaman, had introduced the new Income Tax Bill in the parliament, which aims to replace the existing Income Tax Act, 1961. Sitharaman had withdrew the bill last week to include recommendations by Select Committee.

The revised I-T bill, tabled in the parliament today, has tightened definitions, and is a modified version of the I-T bill which was presented earlier this year. The revisions have been made based on the BJP MP Bijayant Panda-led Select Committee's report. The 31-member select committee had made suggestions to simplify the language of the new bill and eliminate multiple definitions and ambiguities. Here are the key differences between the revised new I-T Bill and the one that was presented earlier in February.

New I-T Bill Introduced Today: What Are The Key Changes Introduced Today?

-Based on the committee's report, the new I-T bill has clear and tight definitions, eliminates ambiguities related to acts, and aligns with the existing frameworks.

-The Select Committee had identified several drafting corrections based on stakeholders' suggestions to eliminate confusion and complicated interpretation of the new bill. The parliamentary panel has suggested nearly 566 suggestions or recommendations in its report, according to news agency ANI. The new bill, according to the Centre's official statement, has included "almost all" suggestions and changes recommended by the panel.

-The parliamentary panel committee had suggested changing the provision that prohibits refunds if income tax returns are filed beyond the due date. The upgraded I-T bill is expected to have the changed provision related to the ITR due date.

-The report had also made recommendations related to aligning the definition of micro and small enterprises with the MSME Act. The committee had also asked for clarification over the terms like 'income' vs 'receipts', anonymous donations, and removal of the deemed application concept.

-The committee is also likely to include suggestions for changing the provisions, which restrict refunds if income tax returns are filed beyond the due date.

Other than these changes, the report had also recommended amendments in the bill related to advance ruling fees, TDS on provident funds, low-tax certificates, and penalty powers.

The new Income-Tax Act was introduced in February 2025. The new I-T Act was introduced in parliament after the government proposed a comprehensive review of the Income Tax Act of 1961.

The new Income Tax Bill draft has been prepared on three basic principles including textual and structural simplification, no major tax policy changes, and no modifications of tax rates.

Additionally, the government had opted for three pronged approach to eliminate intricate languages, remove redundant and repetitive provisions, and logical reorganisation of sections.