The new Income Tax Bill 2025, introduced by the Government of India, has been making headlines lately. With the Rajya Sabha giving its nod, the bill is now all set to become law. The government claims that the new rules will simplify, expedite, and enhance the transparency of tax payments, benefiting particularly salaried employees, small traders, property owners, and the MSME sector.
One of the key changes is that the time limit for filing a TDS claim has been cut from six years to just two years. This means refunds will be processed faster. Also, if your income isn’t taxable, you can now apply for a ‘Zero TDS Certificate’, sparing you unnecessary deductions in the first place.
Confusion Between Financial Year and Assessment Year
The long-standing confusion between ‘Assessment Year’ and ‘Financial Year’ is gone. Under the new system, only the tax the year you pay your tax will matter. For example, if you paid tax for FY 2023–24, your return will be filed for Tax Year 2023–24.
Higher Tax-Free Limit & Big Savings for Middle-Income Groups
The tax exemption limit is now ₹60,000. Plus, under Section 87A, anyone earning up to ₹12 lakh won’t have to pay any income tax at all. Withdrawals from private pension schemes will also get the same tax breaks as government employees. The Unified Pension Scheme (UPS) benefits remain unchanged.
Relief for Property Owners
No more notional rent tax on vacant properties. For those earning rental income, the 30% standard deduction will now be calculated after subtracting municipal taxes. The interest deduction for property under construction stays as it is.
Clear Rules for MSMEs & Charitable Institutions
The bill now clearly defines MSMEs as per the MSME Act, 2006. Tax exemption for anonymous donations to non-profit and religious institutions will continue.
More Powers for the Tax Department With Limits
The Income Tax Department will get additional powers during raids and investigations, such as breaking locks or checking electronic documents—but only in cases where taxpayers fail to submit required documents.
Changes for Companies
Section 80M has been updated. When one company pays dividends to another, the benefit under Section 115BAA will apply. This means companies can enjoy a reduced corporate tax rate on such dividend distributions.
Lower Penalties & Easier Compliance
The bill also reduces the heavy penalties for violating income tax rules. If you file your return late, you can still get your refund without paying a penalty.
Simpler, Shorter, and More Citizen-Friendly
The old Income Tax Act (1961) had 819 sections and 5.12 lakh words. The new bill is much leaner, with 536 sections and just 2.6 lakh words. It also incorporates 285 recommendations from the Lok Sabha Select Committee.
Overall, the Income Tax Bill 2025 is designed to be citizen-friendly, digital-first, and transparent, aimed at building trust and encouraging participation in the economy. And for the common man, salaried professionals, and small businesses, these changes could mean more savings and less paperwork.