Tax changes on hold: Government to reintroduce New Income Tax Bill today

The new bill uses slightly different wording. It only excludes "occupied" commercial properties from house property taxation.

A major shake-up in India’s tax regime is on the horizon. The government will table a revised Income Tax Bill, 2025 in Parliament today, replacing the earlier draft withdrawn last week after experts flagged multiple drafting errors and ambiguities.

 

For salaried employees, property owners, and business investors, this version could significantly alter how income is taxed, deductions are claimed, and compliance is managed.

 

Finance Minister Nirmala Sitharaman told the House on Friday that the new draft incorporates key stakeholder feedback to “convey the correct legislative meaning,” fixing alignment issues, cross-referencing errors, and inconsistent phrases that had triggered legal concerns. 

 

 

Key Fixes and Changes in the New Draft

1. Refund Claims After Missed ITR Deadlines

The earlier draft’s Clause 263(1)(a)(ix) blocked tax refunds if an income tax return was filed late, even for genuine reasons such as illness or technical glitches.

 

What’s new: This clause has been deleted, allowing eligible taxpayers to claim refunds even if they miss the deadline for valid reasons.

 

2. House Property Valuation Clarity

Clause 21(2) in the earlier draft used the vague phrase “in normal course” to calculate annual value, creating room for disputes.

 

Fix: The phrase will be removed, and the law will explicitly require comparing actual rent with deemed rent and taxing the higher amount — mirroring the current law. 

3. Deductions From House Property Income

Unclear rules in Clause 22 risked inconsistent interpretations.

 

Fix:

 

The 30% standard deduction will now clearly apply after municipal taxes are deducted.

 

Pre-construction interest deductions will be allowed for both self-occupied and let-out properties, ensuring fairness between homeowners and landlords. 

 

4. Pension Deduction Equality

Clause 19 previously allowed deductions for commuted pension only for employees, excluding non-employees with similar payouts from pension funds.

 

Fix: Deduction eligibility will now extend to non-employees, ending the unequal treatment. 

5. Commercial Property Taxation 

 

The earlier draft risked taxing vacant commercial properties as “house property,” applying notional rent rules.

 

Fix Recommended: Replace “occupied” with “as he may occupy” so that both occupied and temporarily unused business properties remain classified as business assets — avoiding tax on imaginary income.  "The withdrawal of the Income-Tax Bill, 2025, pursuant to the recommendations of the Parliamentary Select Committee, signifies the Legislature’s recognition that enactments affecting the fiscal rights and obligations of citizens must be free from drafting inconsistencies and interpretational ambiguities. In view of the concerns identified—particularly in relation to computation of income from house property, standard deduction from salary, and treatment of pension benefits—it is prudent to revisit the text to ensure that the provisions are precise, unambiguous, and capable of uniform application. Such a course not only mitigates potential litigation but also fortifies the credibility and stability of the direct tax framework," said Aditya Bhattacharya, Partner, King Stubb & Kasiva, Advocates and Attorneys.