LS passes new Income Tax Bill amid Opposition's protest

The Lok Sabha on Monday passed the Income Tax (No.2) Bill, 2025, which seeks to replace the Income Tax Act, 1961, and makes the law simple and easy for taxpayers, without discussion amid opposition parties’ protest over the electoral roll revision in Bihar.

Finance Minister Nirmala Sitharaman tabled the Bill, incorporating most of the recommendations from the select committee. The Bill was initially introduced in February and referred to the select committee for wider scrutiny. The committee, headed by BJP leader Baijayant Panda, submitted its report on the Bill to Lok Sabha on July 21. The government on Friday withdrew the old version of the Bill to table the new one incorporating the select committee’s recommendations.

The Bill simplifies the decades-old tax structure and makes it easier for taxpayers to calculate taxes and file returns. It simplifies the language and reduces compliance burden for small taxpayers. The Bill eliminates the concepts of "previous year" and "assessment year" by using the single term "tax year". The Bill also streamlines sections related to salary and house property, making it easier for taxpayers to comprehend the entire filing process and reducing reliance on professional assistance.

The Bill allows refund claims in cases where the return is not filed in due time with the removal of Clause 263(1)(ix). It also gives relief in case of late filing of TDS with no penalties. The other key changes include full deductions for commuted pensions and clarification on pre-construction interest for let-out properties.

The Bill does not bring new changes in the tax regimes or tax rates. Finance Minister Nirmala Sitharaman in the Budget 2025-26 had already announced that under the new tax regime, individuals earning up to Rs 12 lakh annually won't have to pay income tax. For the salaried employees, the nil tax limit was extended up to Rs 12.75 lakh after taking into account the standard deduction of Rs 75,000.

However, the Bill allows the tax authorities to access taxpayers' social media, emails, and digital accounts during search operations. The authorities will have power to gain access by overriding any required access code. Several experts and opposition parties have criticized this overwhelming power to tax authorities.

The Lok Sabha also passed the Taxation Laws (Amendment) Bill, 2025, to amend the Income-Tax Act, 1961, and the Finance Act, 2025. This Bill seeks to equalise tax benefits for subscribers of the Unified Pension Scheme and the National Pension Scheme.