New Income Tax Bill 2025: Will changes in the revised bill impact taxpayers?

Only a week after the last draft of the Income Tax Bill, 2025 was withdrawn, the Lok Sabha enacted an updated version. The majority of the Select Committee’s recommendations are included in the amended Bill, which Finance Minister Nirmala Sitharaman submitted on August 11. The six-decade-old Income Tax Act of 1961 will be replaced by it.

The largest change to India’s direct tax regulations in over 60 years began this year in February with the introduction of the first draft of the new Bill. To make changes and corrections, the administration withdrew it last week.

Preeti Sharma, Partner at Global Employer Services, Tax & Regulatory Services, BDO India, said the biggest benefit of the new law is its simpler language. “A common man may easily understand it with lesser effort compared to the old law,” she said.

Sharma added that most of the Select Committee’s recommendations have been included. The new tax regime announced in Budget 2025 remains part of the Bill, and taxpayers will still need to assess which regime works best for them when filing returns. She also clarified that there are no changes to the tax rates announced in Budget 2025.

A significant change in the updated Bill is the explicit tax deduction for some taxpayers’ commuted pensions or lump sum pension payments.

This pertains to people who get pensions from particular funds, including the LIC Pension Fund, that are mentioned in Schedule VII of the Bill. The Select Committee recommended including this exemption because it was not made explicit in the previous draft. Ensuring equitable tax treatment for non-workers who receive pensions from authorized funds, comparable to the benefits currently provided to employees, was the goal.

Third, clauses pertaining to the definition of associated enterprises and transfer pricing have been loosened. “A number of much-needed adjustments. He expressed his satisfaction that the Select Committee had taken action as a result of his representations.

The way management and control are decided is one instance of how the definition of Associated Enterprise has changed.