Lok Sabha clears Bill to simplify, update 60-year-old income tax law
Tax Concept with New Indian Currency – 3D Rendered Image
| Photo Credit:
Muralinath
The Lok Sabha on Monday approved, without any discussion, a Bill designed to update and simplify India’s taxation system, replacing legislation that had been in effect for over 60 years. The Bill includes a revised structure, provisions for digital taxation, systems for resolving disputes, and initiatives to expand tax collection through technological and data-driven methods.
The government aims to implement the new law with effect from April 1, 2026, which will help individuals to claim TDS (Tax Deducted at Source) refunds even if they fail to file their income tax return by the due date.
Based on the recommendations of the Select Committee and including some other changes, the reworked Income Tax Bill was introduced by Finance Minister Nirmala Sitharaman at 2 pm before the proceedings were adjourned. The house met again at 4 pm, and the Bill was passed within minutes.
The Select Committee had suggested that the government modify the provisions related to TDS claims for those who fail to file an ITR before the stipulated due date. According to the revised Bill, individuals will be allowed to claim a TDS refund even if their return of income is filed beyond the statutory timeline provided for filing the original income tax return.
According to CBDT sources, the provisions related to the carry-forward and set-off of losses have been redrafted for better presentation but with the same intent. The concept of “receipt” has been changed to the concept of “income,” as was the case in the Income-tax Act, 1961. The utilisation of capital gains on the acquisition of a new capital asset will be treated as an application of income by a registered non-profit organisation, as was the case in the Income-tax Act, 1961.
Major recommendations
Other key recommendations relevant for individual taxpayers pertain to Clause 22, which is related to deductions from house property income. Here, the computation of deductions has been clarified, including the standard 33 per cent deduction and pre-construction interest for let-out properties, which enhances fairness and transparency for property owners. In Clause 124, which pertains to the deduction for an employer’s contribution to a pension scheme, the addition of the phrase “by such individual” ensures clarity. Amendments in Clause 156, regarding the rebate of income tax for certain individuals, address drafting errors to ensure accurate computation of rebates for individuals with income below a specified threshold.
Sources also said that where the application of regular income falls short of 85 pre cent of regular income because such income was not received or was received late during the tax year, if an option is exercised by the assessee, such income will be deemed as an application of income in the tax year in which it is derived.
The mandatory investment and deposit of deemed accumulated income of 15 per cent of regular income in specified modes has been done away with. For TDS correction statements, the time period for filing statements has been reduced to two years from six years, as per the Income Tax Act, 1961. This is expected to substantially reduce the grievances of deductees, another source added.
Published on August 11, 2025
