New Income Tax Bill Provides Flexibility For Refunds If Return Filed Late
The new Income Tax bill, which was passed by Lok Sabha on Monday, provides flexibility for allowing refund claims in cases where the return is not filed in due time and reduces the time period for filing TDS correction statements to two years from six years as provided in the Income Tax Act Act, 1961, government sources said.
The Income Tax (No.2) Bill, 2025, was passed without debate amid protests by opposition parties, hours after it was introduced in the House by Finance Minister Nirmala Sitharaman. It incorporates almost all suggestions of Select Committee that examined the bill.
The Income Tax (No.2) Bill, 2025, which was introduced on Monday afternoon after the government on Friday last withdrew the Income Tax Bill, 2025 in the Lok Sabha, incorporates almost all recommendations of the Select Committee, which examined the legislation.
The provisions of new Income Tax Bill will come into effect from the next fiscal.
The Government had said in the budget in July 2024 that a time-bound comprehensive review of the Income-tax Act, 1961 would be undertaken to make the Act concise, lucid, and easy to read and understand.
The new Income Tax Bill was passed without debate amid opposition protests over their demand for debate on Special Intensive Revision (SIR) of electoral rolls in Bihar. Both Lok Sabha and Rajya Sabha have witnessed continuous disruptions since the beginning of the monsoon session of Parliament over the opposition’s demand.
Government sources said that according to the provisions of the new Income Tax Bill, the deduction under 80M of IT Act, 1961 (Clause 148 of the IT Bill, 2025) is also available to companies who have opted for the new regime.
The deductions for commuted pension and gratuity for family members are provided under Clause 93 of the IT Bill, 2025.
The provisions of MAT (Minimum Alternate tax) and AMT (Alternate minimum tax) are separated as two sub-sections under section 206
Government sources said the provisions of AMT are applicable only to those non-corporates who have claimed deductions. LLPs who have only capital gains income are not liable for AMT if there is no claim for deduction.
The word “profession” has been added after “business” in clause 187 to enable professionals with total receipts exceeding Rs 50 crore in a year the facility of prescribed electronic modes of payment.
Flexibility has been provided for allowing refund claims in cases where the return is not filed in due time with the removal of Clause 263(1)(ix), the souces said, adding that the provisions related to carry forward and set off of losses have been re-drafted for better presentation but with the same intent.
The concept of receipt has been changed with the concept of income as was there in the Income-tax Act, 1961. The utilization of capital gains on acquisition of new capital asset shall be treated as application of income by a registered non-profit organization as was there in the Inome Tax Act, 1961.
Where application of regular income falls short of 85% of regular income on account of such income not being received or received late during the tax year, on an option exercised by the assessee, such income shall be deemed as application of income in the tax year in which such income is derived.
The government sources said provisions relating to taxation of anonymous donation has been aligned with the existing provisions of the Income-tax Act, 1961 and exemption has been made available to mixed object registered non-profits organisation also.
Mixed object registered non-profits organization has clearly been specified, mandatory investment and deposit of deemed accumulated income of 15% of regular income in specified modes has been done away with.
“For TDS correction statements, time period for filing statements has been reduced to two years from 6 years in the Income Tax Act, 1961 ad This is expected to reduce the grievances of deductees substantially,” a source said.
The amendments of Finance Act, 2025 which were required to be incorporated and have now been made part of the new Bill.
The amendments made by Taxation Laws (Amendment) Bill, 2025 have also been made part of the new Bill.
Government sources said that a number of reforms have been taken by the Government since 2014. There have been major system and process reforms. The law has also reformed over the last ten years which include Corporate tax reforms, Personal Income-tax Reforms, Reforms in taxation of Capital Gains, merging of two regimes of trust provisions etc.
They said tax administration has been made more efficient, transparent, and taxpayer-friendly. Reforms in this regard include: annual Information System which also uses verified third-party data to pre-fill returns; central processing of returns,
The tax policy reforms include Corporate Tax reforms, Individual Tax reforms , Presumptive tax provisions for non-residents have been expanded to include cruise shipping, raw diamonds and also for those providing services and technology for electronic manufacturing.
The Government had introduced the Income Tax Bill, 2025 in the Lok Sabha on February 13, 2025, and it was referred to the Select Committee for examination.
The Select Committee laid its report in the Lok Sabha on July 21, 2025. The new and amended bill also incorporates suggestions from stakeholders about changes that would convey the proposed legal meaning more accurately.
There were corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing and the government decided to withdraw the Income-tax Bill, 2025 and bring the Income Tax (No. 2) Bill, 2025.
The new bill replaces the Income-tax Act, 1961, which has been subjected to numerous amendments since its passage more than sixty-four years ago. (ANI)
