New Delhi, August 11 (Udaipur Kiran) – The Lok Sabha on Monday passed the revised New Income Tax Bill, 2025 and the Taxation Laws (Amendment) Bill, 2025, marking a significant step toward replacing the existing Income Tax Act, 1961. Finance Minister Nirmala Sitharaman presented the revised version of the bill, which was approved immediately. The bill will now move to the Rajya Sabha before receiving Presidential assent. Once enacted, the new law will take effect from April 1, 2026.
The revised bill incorporates almost all recommendations of the select committee chaired by BJP MP Baijayant Panda. Its main objective is to consolidate and amend laws under the Income Tax Act, 1961. The Taxation Laws (Amendment) Bill, 2025, passed alongside, paves the way for tax exemptions to contributors of the Unified Pension Scheme by amending the Income Tax Act, 1961, and the Finance Act, 2025.
Key Structural Changes
According to the statement of objectives and reasons, the revised bill accepts nearly all recommendations of the select committee, along with stakeholder suggestions for greater legal clarity. The new law will replace the 1961 Act, consolidating and simplifying tax laws, reducing the number of sections from over 800 to 536 sections across 23 chapters. The bill incorporates 285 committee recommendations, including 32 major changes, aimed at improving clarity, alignment of language, and cross-referencing.
Digital-First, Faceless Processes
To minimise human intervention, enhance transparency, and curb corruption, assessment and compliance processes will be faceless and digital-first.
Taxpayer Protection and Ease of Compliance
Tax authorities will be required to issue prior notices before taking action and consider taxpayer responses. The law allows TDS refunds even after the ITR deadline without penalties and provides advance zero-TDS certificates for non-taxable individuals.
Simplified and Clarified Deductions
For house property income, the law clarifies that the 30% standard deduction applies after municipal tax deductions. Pre-construction interest for rented properties is allowable, with a five-year limit on interest deductions. In addition, lump-sum payouts from certain pension schemes (such as LIC Pension Fund or NPS) will now be fully tax-deductible, resolving earlier ambiguities.
Other Notable Provisions
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Retains the ₹12 lakh annual tax exemption announced in the 2025-26 Union Budget.
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Bans anonymous donations to religious trusts not engaged in social service.
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Empowers CBDT to issue updated rules for the digital era.
Effective Date
Once enacted, the law will come into force from April 1, 2026. The Taxation Laws (Amendment) Bill, 2025, also passed, provides tax exemptions to Unified Pension Scheme subscribers, aligns benefits with the NPS, grants relief to Saudi Arabia’s Public Investment Fund and its subsidiaries investing in India, and streamlines block assessment rules in income tax search cases for faster resolution.
Bhupendra Singh Chundawat is a seasoned technology journalist with over 22 years of experience in the media industry. He specializes in covering the global technology landscape, with a deep focus on manufacturing trends and the geopolitical impact on tech companies. Currently serving as the Editor at Udaipur Kiran, his insights are shaped by decades of hands-on reporting and editorial leadership in the fast-evolving world of technology.
Lok Sabha Passes New Income Tax Bill, Major Changes to Come into Effect from April 2026
