What are the Benefits of the New Income Tax Bill 2025 for Taxpayers?
The new Income Tax Bill 2025 is designed to simplify the tax process for the general public. This new system aims to eliminate confusion between financial and assessment years, reduce the TDS claim deadline from six years to two, and allow individuals with zero tax liability to get a'Zero TDS Certificate'. The government states these changes will increase transparency and reduce disputes. After being passed by the Rajya Sabha, the bill is set to become law.
The new bill is focused on making the tax process simpler for everyone. The new tax year system will eliminate confusion, the time limit for TDS claims has been reduced from six years to two, and those with zero tax liability will be able to receive a 'Zero TDS Certificate.' The government says these changes will increase transparency and reduce disputes. The bill will now become law after being passed by the Rajya Sabha.
Relief for Late ITR Filers
The government has made a significant change in the revised version of the new Income Tax Bill-2025, providing relief to those who file late income tax returns (ITR). According to the previous rules, if a taxpayer missed the ITR filing deadline, they would not be able to get a refund. However, a previous provision has been re-added to the new bill, allowing refunds even after a delayed ITR filing. This step will prove to be extremely helpful, especially for salaried employees and small business owners who often face delays in gathering the necessary documents.
New 'Tax Year' System to Ease Taxpayer Confusion
To resolve taxpayer issues, the bill implements a simplified 'tax year' system. Earlier, people were often confused between the 'assessment year' and the 'financial year' while filing their ITRs, which could lead to errors. Now, only the year in which the tax was paid will be considered the 'tax year.' For example, if someone paid tax for the financial year 2023-24, that same year will be considered the tax year for filing the return, making the process much more straightforward.
Good News for Salaried Individuals
The amended bill offers various exemptions for salaried individuals. The exemption limit under Section 87A has been increased to ₹60,000, meaning people with an income of up to ₹12 lakh will not have to pay any tax. Additionally, lump-sum withdrawals from private pension plans will now be tax-exempt, similar to government employees. The tax benefits associated with the central government's Unified Pension Scheme (UPS) will also remain intact, encouraging more people to save for retirement.
Relief for Property Owners
Several improvements have also been made for house and property owners in the new bill. If a building is temporarily vacant, 'nautical rent tax' will not be applicable, which provides a big relief to property owners. The 30% standard deduction on rental income will now be applied only after deducting municipal taxes, which will result in greater tax savings. The deduction for pre-construction interest for a rented property will also continue, which is a positive sign for the real estate sector.
Benefits for Companies and Charitable Trusts
For the business community, the biggest relief is related to tax on dividends. According to the new provisions, the same dividend will no longer be taxed repeatedly, which will boost investor confidence. Tax exemption on anonymous donations received by non-profit organizations and religious trusts will also continue, encouraging social and charitable work. To provide clarity to micro and small enterprises (MSMEs), their definition has been aligned with the MSME Act-2006, helping them avoid legal complications.
New Powers for the Income Tax Department
The bill gives income tax officials more power in cases of search and seizure. They will now be able to enter buildings, break locks, and examine electronic documents. However, these powers will only be used when a person fails to produce the necessary documents despite being issued a summons, which helps prevent their misuse. This measure is expected to be effective in curbing tax evasion.
New Bill to Replace 54-Year-Old Law
The current Income Tax Act was created in 1961 and has undergone hundreds of amendments since then. The new bill will replace it and is almost half the size. The old law had 5.12 lakh words and 819 sections, while the new bill has only 2.6 lakh words and 536 sections. To ensure its credibility and effectiveness, 285 recommendations from the Lok Sabha's select committee were fully incorporated into its creation.
Frequently Asked Questions (FAQs)
Q: What is the main objective of the new Income Tax Bill 2025?
A: The main objective of the new Income Tax Bill 2025 is to simplify the tax process, increase transparency, and provide relief to taxpayers. It will replace the old, complex Income Tax Act of 1961, which had hundreds of amendments.
Q: Can a refund still be claimed if ITR is filed late?
A: Yes, a significant change has been made in the new bill. Now, even if a person misses the deadline for filing their ITR, they can still claim a refund by filing a late return.
Q: What benefits will salaried individuals get from the new bill?
A: Salaried individuals will benefit from an increased exemption limit under Section 87A to ₹60,000, which means no tax will be applicable on income up to ₹12 lakh. Additionally, tax exemptions will also be available on private pension plans.
Q: Is the confusion between 'tax year' and 'financial year' now over?
A: Yes, a simplified 'tax year' system has been implemented in the new bill. Now, only the year in which the tax was paid will be considered the 'tax year,' eliminating the confusion between the 'assessment year' and the 'financial year.'
Q: What are the special provisions for property owners in the new bill?
A: Property owners have received several reliefs. 'Nautical rent tax' will no longer apply to temporarily vacant buildings. The 30% standard deduction on rental income will be applied only after deducting municipal taxes, which will increase tax savings.
Q: Will companies have to pay tax on dividends multiple times?
A: No, according to the new provisions, the same dividend will no longer be taxed repeatedly. This step will help improve the business and investment environment and boost investor confidence.
Q: Have there been any changes to the powers of income tax officials in the new bill?
A: Yes, income tax officials have been given some new powers in cases of search and seizure. However, these powers will only be used if an individual fails to produce the necessary documents despite being issued a summons.
Q: How is the new bill different from the old 1961 Act?
A: The new bill will replace the 54-year-old Income Tax Act of 1961. It is approximately half the size, with 2.6 lakh words and 536 sections compared to the old law's 5.12 lakh words and 819 sections, making it much simpler and more modern.
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