New Income Tax Bill 2025: 10 Key Changes from ITR Refunds to MSME Definition – Revised Draft to be Presented on August 11
Government to Present Amended Income Tax Bill After Key Recommendations
On Friday, August 8, Finance Minister Nirmala Sitharaman announced in Parliament that the Income Tax Bill, 2025 would be withdrawn and reintroduced in a revised form. This decision follows extensive recommendations from a 31-member Parliamentary Select Committee chaired by BJP MP Baijayant Panda. The revised draft will be tabled in Parliament on August 11.
The original bill aimed to simplify and modernize India’s tax system, but several provisions faced criticism from tax experts, industry bodies, and taxpayers. The Select Committee reviewed these concerns in detail and submitted its report to the Lok Sabha on July 21, containing 566 recommendations, of which 285 focus on making the tax system clearer and simpler.
10 Major Changes Proposed in the Revised Draft
1. ITR Refunds Even After Late Filing
The earlier draft stated that taxpayers filing Income Tax Returns (ITR) after the due date would not be eligible for refunds. The committee recommends removing this restriction, allowing refunds even in cases of delayed filing.
2. Changes to Section 80M Deduction
Under the proposed changes, companies benefiting from the special tax rate under Section 115BAA would also be eligible for Section 80M deductions on inter-corporate dividends.
3. Option for NIL TDS Certificate
Taxpayers would be allowed to apply for a NIL Tax Deducted at Source (TDS) certificate if they have no actual tax liability, helping them avoid unnecessary tax deductions.
4. Alignment of MSME Definition
The definition of micro and small enterprises would be aligned with the MSME Act, ensuring consistency across various laws and regulations.
5. Clarity on Advance Ruling Fees
The bill would use clear and unambiguous language regarding advance ruling fees, penalties, and tax assessment processes to improve transparency.
6. Provident Fund TDS Provisions
TDS rules related to Provident Fund (PF) withdrawals would be revised for greater clarity and transparency.
7. Fairer Penalty Provisions
The powers and processes for imposing penalties would be made clearer and fairer to prevent arbitrary fines.
8. Improved Drafting & Definitions
The bill’s language would be simplified, avoiding overly technical terms, making it easier for both taxpayers and professionals to understand.
9. Removal of Ambiguous Provisions
Sections containing vague or double-meaning terms would be rewritten to reduce the scope for disputes and litigation.
10. No Change in Tax Rates
Contrary to some media reports, the committee has not recommended any change to existing tax rates, including Long-Term Capital Gains (LTCG) tax.
Political and Economic Significance
The Income Tax Bill 2025 has been in the spotlight for months as it promises a major overhaul of India’s direct tax framework. The government’s decision to withdraw the original bill and present a revised version signals an intent to make the law more taxpayer-friendly, transparent, and aligned with current economic realities.
While the Opposition has raised concerns and continues to challenge certain provisions, the government maintains that this step is necessary to incorporate feedback from all stakeholders. If passed, the revised bill could mark one of the most significant tax reforms in recent years.
