Revised Income Tax Bill, 2025 Tabled With Key Fixes For Salaried, Homeowners & Investors
Finance Minister Nirmala Sitharaman on Monday tabled a revised Income Tax Bill, 2025 in Parliament, replacing last week’s withdrawn draft. The update adopts most recommendations of the Parliamentary Select Committee chaired by Baijayant Panda, aiming to replace the Income-Tax Act, 1961 with simpler language and clearer structure.
FM’s clarification: “There are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing.” The earlier draft was withdrawn to avoid confusion and ensure the law conveys the correct meaning.
What’s been fixed after committee review
- Refunds after missed deadlines: Clause blocking refunds for late returns deleted; genuine cases (illness, technical issues) can be considered.
- House property valuation clarity: “In normal course” removed; tax based on the higher of actual or deemed rent.
- Clearer deduction rules: 30% standard deduction applies after municipal taxes; pre-construction interest allowed for both self-occupied and let-out properties.
- Equal pension deduction: Commuted pension deduction extended to non-employees.
- Commercial property relief: Temporarily unused business premises not taxed on notional rent.
Pension deduction expanded
Clause 19 explicitly allows full deduction of commuted pension received from specified funds (e.g., LIC Pension Fund in Schedule VII). This now applies to non-employees as well, aligning treatment with employees.
Property valuation & deductions clarified
- Clause 20: Income from buildings/attached land taxed under “Income from house property” unless used for business/profession.
- Clause 21: Annual value is higher of actual vs. notional rent; owner-paid local taxes deductible; unrealised rent excluded.
- Clause 22: 30% standard deduction after municipal taxes. Pre-construction interest deductible in five equal instalments from year of completion—for both self-occupied and let-out properties.
New tax slabs (Clause 202 I)
| Total Income (Rs.) | Tax Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Section 87A rebate — how it works
- General: For residents with total income up to Rs. 5,00,000 — rebate equals 100% of tax payable or Rs. 12,500, whichever is lower.
- New regime: Rebate up to Rs. 60,000 for incomes up to Rs. 12,00,000. Tapering relief applies above Rs. 12,00,000, capped at tax payable.
What it means for taxpayers
- Salaried: Cleaner slab structure and clearer standard deduction sequencing.
- Homeowners: Less dispute on valuation; broader access to pre-construction interest claims.
- Investors/retirees: Wider eligibility for commuted pension deduction.
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