A major change is set to take place in India’s tax regime. Today, the government will present the revised Income Tax Bill, 2025, replacing the earlier draft withdrawn last week after experts pointed out multiple drafting errors and ambiguities.
The same version can revise the way income is taxed, deductions are claimed, and compliance is managed for salaried employees, property owners, and business investors.
Finance Minister Nirmala Sitharaman said that the new draft incorporates the feedback of key stakeholders to “convey the correct legislative meaning,” fixing alignment problems, cross-referencing errors, and inconsistent phrases that had triggered legal concerns.
Key Fixes and Changes in the New IT Bill Draft
Here are the key modifications and fixes in the draft new income tax bill 2025:-
Valuation of House Property
In the earlier draft, Clause 21(2) used the vague phrase “in normal course” to compute annual value, creating room for disputes.
Fix – The phrase will be taken out, and the law will require that we compare the actual rent being paid with a set value called deemed rent. We will then tax whichever amount is higher, as stated in the current law.
Tax Deductions From Income of House Property
The rules that are not clear in Clause 22 risk inconsistent interpretations.
Fix – 30% standard deduction shall be applicable after municipal taxes are deducted.
For both self-occupied and let-out properties, pre-construction interest deductions will be permitted, ensuring fairness between homeowners and landlords.
Claim Tax Refund After Missing ITR Deadlines
If the income tax return was filed late, then the tax refunds are blocked by the earlier draft’s Clause 263(1)(a)(ix) even when there are genuine reasons like illness or technical issues.
The update – The same clause has been removed, permitting the eligible taxpayers to claim the refunds even when they forget the due date for valid reasons.
Pension Tax Deduction Parity
Earlier, clause 19 permits the deductions for commuted pension merely for employees, other than non-employees with similar payouts from pension funds.
Fix – The rules for claiming deductions will now also apply to people who are not employees.
Commercial Property Tax
The previous draft risked taxing vacant commercial properties as “house property,” applying notional rent rules.
Fix suggested- Substitute “occupied” with “as he may occupy” so that both occupied and temporarily unused business properties stay categorised as business assets, avoiding tax on imaginary income.
The Income-Tax Bill 2025 withdrawal is as per the suggestions of the Parliamentary Select Committee, which specifies the recognition of the Legislature that enactments affecting the fiscal rights and responsibilities of citizens should be free from drafting inconsistencies and interpretational ambiguities.
Towards the concerns determined for the calculation of income from house property, standard deduction from salary, and treatment of pension benefits, it is good to think about the text to ensure that the provisions are appropriate, unambiguous, and capable of uniform application. This course mitigates litigation and strengthens the credibility and stability of the direct tax framework.
Source: Business Standard
