Income Tax Bill 2025: Key changes for property owners, taxpayers, investors

Income Tax New Bill 2025: The revised Income Tax Bill, 2025 replaces last week's withdrawn draft, bringing clearer property rules, new slabs, higher rebates and fixes for refund claims

Finance Minister Nirmala Sitharaman on Monday tabled a revised Income Tax Bill, 2025 in Parliament, replacing an earlier draft that was withdrawn last week. The new version incorporates most of the recommendations of the Parliamentary Select Committee chaired by BJP leader Baijayant Panda.

 

The Bill, first presented in the Lok Sabha on February 13 this year, seeks to replace the Income-Tax Act, 1961 with simpler language and a clearer structure. Sitharaman said the earlier draft was withdrawn to “avoid confusion” and to ensure that the legislation “conveys the correct meaning”.

 

“There are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing,” she said. 

According to Dinkar Sharma, company secretary at Jotwani Associates, the revision is needed to modernise a tax framework that has “over the decades, become fragmented, outdated, and overly complex due to piecemeal amendments, judicial pronouncements, and the changing nature of business and investment in the digital age.”

 

 

Sharma said the existing Income-Tax Act, 1961, while robust, contains “convoluted provisions, overlapping definitions, and compliance processes that can be difficult for the average taxpayer,” leading to unintended non-compliance, prolonged litigation, and a heavy administrative burden. “By removing redundant sections, simplifying language, and clearly defining key terms, the Bill seeks to reduce interpretational ambiguities that have historically led to disputes,” he said.

 

What could the updates mean for salaried employees, property owners, and business investors? Find out.

 

Fixes have been introduced after the select committee review:

 

The parliamentary panel offered 285 suggestions, among which 32 were identified as major or principal recommendations. Most have been adopted in the revised draft:

 

Refund claims after missed deadlines: Deletion of a clause that blocked refunds if returns were filed late, allowing genuine cases such as illness or technical issues to be considered.

House property valuation clarity: Removal of the term “in normal course” to avoid disputes, with taxation based on higher of actual or deemed rent.

Clearer deduction rules: 30 per cent standard deduction will apply after municipal taxes; pre-construction interest deduction allowed for both self-occupied and let-out properties.

Equal pension deduction: Commuted pension deduction extended to non-employees.

Commercial property taxation fix: Wording adjusted so temporarily unused business premises are not taxed on notional rent.

 

Commuted pension now fully deductible for more taxpayers

 

Clause 19 now explicitly allows the entire amount of commuted pension to be claimed as a tax deduction if received from specified funds such as the LIC Pension Fund, as listed in Schedule VII. This applies to non-employees as well, bringing them in line with employees for tax purposes.

 

Property valuation and deductions clarified

 

Clause 20 confirms that income from buildings and associated land will be taxed under “Income from house property” unless used for business or profession.

 

Clause 21 outlines that the annual value will be the higher of the notional rent or the actual rent received, with local taxes paid by the owner deducted from it. Unrealised rent will not be counted.

 

Clause 22 clarifies that the standard 30 per cent deduction will be calculated after deducting municipal taxes and that pre-construction interest can be claimed for let-out properties as well as self-occupied ones. Interest for periods before completion can be deducted in five equal instalments from the year the property is completed.

 

New tax slabs under Clause 202 (I)

 

The Bill retains the new regime announced in Budget 2025 for individuals, Hindu Undivided Families and others:

 

Up to ₹4,00,000 – nil

₹4,00,001 to ₹8,00,000 – 5 per cent

₹8,00,001 to ₹12,00,000 – 10 per cent

₹12,00,001 to ₹16,00,000 – 15 per cent

₹16,00,001 to ₹20,00,000 – 20 per cent

₹20,00,001 to ₹24,00,000 – 25 per cent

above ₹24,00,000 – 30 per cent

 

How the rebate under Section 87A works

 

For residents with total income up to ₹5 lakh, the rebate is 100 per cent of income tax payable or ₹12,500, whichever is less.

 

Under the new regime, the rebate can be up to ₹60,000 for incomes up to ₹12 lakh. A tapering benefit applies for incomes above ₹12 lakh, capped at the tax payable.