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Informist, Tuesday, Aug. 12, 2025

 

--Parliament passes Income Tax Bill (No. 2), 2025 

--Sitharaman introduces Income Tax Bill (No. 2), 2025 in Rajya Sabha 

 

NEW DELHI – Parliament on Tuesday passed the Income-tax (No. 2) Bill, 2025, as the Rajya Sabha returned the money bill to the Lok Sabha. Finance Minister Nirmala Sitharaman had presented the Bill in the Upper House of Parliament after incorporating most of the recommendations made by a select parliamentary committee. The Lok Sabha had passed the Bill on Monday. 

 

The new Bill, first announced in the full Budget for 2024-25 (Apr-Mar), aims to simplify the Income Tax Act, 1961, to make it easier for taxpayers to calculate their tax dues and file returns. The parliamentary committee set up to examine the Bill had tabled its report on Jul. 21. The committee, headed by Bharatiya Janata Party member of Parliament Baijayant Panda, had recommended a number of tweaks to the Bill that was introduced in the Lok Sabha by Sitharaman in February.

 

Sitharaman had said last month that she hoped Parliament would take up the Bill in the Monsoon Session and hold a detailed discussion. There was no discussion on the Bill in the Lok Sabha Monday, but the leaders held a brief discussion in the Rajya Sabha Tuesday and Sitharaman also reponded. 

 

The main objective of the bill is to simplify the Income-tax Act, 1961, and make it easy to understand, read, and implement, Sitharaman said in the Upper House. The government would also issue information memoranda in the future to provide more clarity on the new income tax act, Sitharaman added. No new taxes have been introduced through the bill, the minister clarified.  

 

In its report, the parliamentary committee had suggested that the Bill be amended to allow carry-forward and set-off of losses by certain companies in which the shareholding pattern, though altered temporarily, is restored in subsequent years and the 51% continuity requirement is met thereafter. "This would preserve the legislative intent of preventing misuse while ensuring fair treatment for companies whose shareholders remain ultimately liable to tax," the committee had said. Its report included a host of other recommendations. The Bill has 536 sections and 23 chapters spread across 622 pages, 201 pages fewer than the older Act. 

 

"The revised Bill addresses gaps to simplify interpretation, reduce disputes, and promote fairness," Gouri Puri, partner, Shardul Amarchand Mangaldas & Co., said. "Key changes include allowing full deductions for commuted pensions, clarifying pre-construction interest for let-out properties, and enabling more flexible refund eligibility even after late filings. These measures aim to improve the taxpayer experience and broaden compliance." 

 

Rajesh Gandhi, partner, Deloitte India, said, "The proposals relating to tax benefits for investment by foreign pension funds and sovereign funds in the infrastructure sector are similar to the existing tax law though the provisions have been drafted in a more structured and concise manner." 

 

As per the corrigendum to Clause 425 of the Income-tax (No. 2) Bill, 2025 issued on Monday, the interest provision for shortfall in advance tax payment has now been aligned with that under the old Income-tax Act, 1961. 

 

Besides the Income-tax Bill, the Rajya Sabha passed the Taxation Laws (Amendment) Bill, 2025, which aims to amend the Income-Tax Act, 1961, and the Finance Act, 2025. Through this Bill, the government has tried to bring parity between tax benefits to subscribers of the Unified Pension Scheme and the National Pension System. The Bill also adds the Public Investment Fund of Saudi Arabia under Sec. 10(23FE) of the Income-tax Act, 1961, which provides tax exemption to specified foreign funds that invest in infrastructure entities in India.

 

Informist had reported on Aug. 4 that the finance ministry might look at giving more tax incentives to subscribers to make the Unified Pension System more attractive.

 

The government had introduced the defined-contribution National Pension System on Jan. 1, 2004, replacing the defined-benefit pension scheme. All states, except Tamil Nadu and West Bengal, had joined the new plan. Prior to that, under the old pension scheme, government employees who completed at least 10 years of service received a monthly guaranteed pension based on their last drawn basic salary and years of service. They did not have to contribute to the pension fund.

 

Combining the National Pension System and old pension scheme, the government had announced the Unified Pension Scheme last year after numerous rounds of discussions with stakeholders, including employee associations.  End

 

Reported by Priyasmita Dutta

Edited by Avishek Dutta

 

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