Finance Minister Nirmala Sitharaman introduced the Taxation Laws (Amendment) Bill, 2025 in the Lok Sabha, proposing significant amendments to the Income-tax Act, 1961 and the Finance Act, 2025. The bill seeks to provide targeted tax exemptions, streamline pension withdrawals under the newly launched Unified Pension Scheme, and refine the framework for block assessment in search and seizure cases.
Major Proposals Under the Bill
1. Tax Exemptions for Unified Pension Scheme Subscribers
With the Unified Pension Scheme officially rolled out in January 2025, the government has proposed new exemptions under Section 10 of the Income-tax Act.
- New Clauses (12AA) and (12AB) will allow tax-free withdrawals of up to 60% of the individual corpus from the National Pension System Trust for Unified Pension Scheme subscribers at the time of superannuation, voluntary retirement, or retirement under Fundamental Rule 56(j), provided such retirement is not penal in nature.
- Lump-sum amounts received as per the Department of Financial Services notification dated January 24, 2025, will also be exempt.
To ensure clarity in taxation, Section 80CCD is being amended to specify that such payouts will be taxable if withdrawn in cash, but not taxable when transferred to the "pool corpus" upon retirement.
2. Tax Benefits for Saudi Arabia's Public Investment Fund
A new provision under Section 10(23FE) proposes to extend sovereign wealth fund benefits to:
- The Public Investment Fund (PIF) of Saudi Arabia, and
- Its wholly owned Saudi subsidiary, allowing them the same tax exemptions already available to certain other sovereign and pension funds, provided investments meet prescribed conditions.
3. Enhanced Standard Deduction
The bill updates Section 16 to ensure the Rs 75,000 standard deduction under the new tax regime applies not just to clause (ii) cases but also to clause (iii), expanding coverage for salaried taxpayers.
4. Revisions in Block Assessment Procedure
Amendments to Section 49 of the Finance Act, 2025 seek to refine the scheme for assessing "undisclosed income" in search and requisition cases.
- All pending assessments or reassessments for years in the block period will abate from the date of initiation of a search under Section 132 or requisition under Section 132A.
- Proceedings initiated after the search but before the block assessment order will also abate, ensuring no duplication of assessments.
Objective Behind the Amendments
According to the Statement of Objects and Reasons, the bill aims to:
- Facilitate direct tax relief as part of India's economic cooperation with Saudi Arabia.
- Provide income-tax exemptions to retirees under the Unified Pension Scheme.
- Improve the application of block assessment provisions for search cases.
The bill carries no significant additional financial burden beyond existing administrative expenses.
Official copy of the Amendment Bill has also been attached
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