The Parliament handed the revised Income Tax Bill 2025, fixing drafting oversights within the earlier February model that had sparked confusion over refunds, tax deducted at supply (TDS) guidelines, and property earnings deductions. Consultants say the adjustments restore readability, align the regulation with long-standing provisions, and can assist forestall useless litigation.
For particular person taxpayers, the important thing updates cowl refunds on belated or revised ITRs, Nil TDS certificates, normal deduction on property earnings, and pre-construction dwelling mortgage curiosity deductions.
Additionally learn: Lok Sabha approves new tax bill with UPS relief, corporate dividend deduction
Refunds allowed on late or revised returns
One of the crucial impactful adjustments reinstates refund eligibility for belated or corrected filings.
The February draft’s Clause 263(1)(a)(ix) had restricted refunds solely to returns filed on or earlier than the due date — a major departure from the Revenue Tax Act, 1961, which allowed refunds for belated and revised returns as nicely.
“This might have led to hardship in real circumstances the place a taxpayer was unable to file their return by the deadline,” defined Sachin Garg, companion, Nangia & Co LLP. “The restriction was not an meant coverage shift, however a drafting oversight.”
The revised Invoice removes the clause completely, reinstating the proper to assert refunds even in late or corrected filings. Garg mentioned the correction ensures taxpayer rights are preserved and refund claims will not be unfairly denied purely on procedural grounds.
Readability on Nil TDS certificates
Underneath Part 197 of the 1961 Act, taxpayers with no tax legal responsibility can apply for decrease or Nil TDS certificates to keep away from extra tax deduction and refund claims later. However the February draft referred solely to “decrease” deduction, omitting the Nil choice.
“Whereas it could possibly be argued that Nil is a subset of decrease, the absence of specific wording created scope for interpretation disputes,” mentioned Garg. With out readability, he warned, operational points and pointless litigation may have adopted.
The revised Invoice restores the unique wording, overlaying each Nil and decrease deductions. That is particularly helpful for senior residents with non-taxable curiosity earnings.
“Nil TDS certificates is related for any taxpayer whose earnings just isn’t taxable. Examples may embrace a taxpayer whose earnings is under the ₹2.5 lakh threshold or not taxable because of rebate below part 87A, or a taxpayer having losses or perhaps a non-resident claiming non-taxability on account of a profit below a Double Tax Avoidance Settlement,” Garg famous.
Additionally learn: The new Income Tax Bill: Will linguistic makeover lead to taxation simplicity?
Customary deduction on property earnings
Within the case of earnings from home property, the revised Invoice additionally clarifies the proper methodology to use normal deduction. Whereas calculating earnings from home property, the 1961 Act applies the 30% normal deduction on web annual worth — i.e., after municipal taxes truly paid.
Preliminary readings of the February draft had raised doubts as as to whether the deduction would apply on gross worth or after municipal taxes. “The up to date textual content now makes it specific that the usual deduction is calculated after lowering municipal taxes paid,” mentioned Dinesh Kanabar, CEO, Dhruva Advisors.
He famous that this preserves continuity with current apply and prevents an inadvertent enhance in taxable earnings, avoiding pointless disputes.
Pre-construction curiosity deduction stays intact
The Invoice confirms the supply of pre-construction curiosity deductions for rental properties. Underneath the 1961 Act, if the property is accomplished inside 5 years, curiosity from the pre-construction interval might be claimed in 5 equal instalments from the 12 months it’s first let or occupied.
“The unique draft created uncertainty about whether or not this profit would proceed for rental properties,” Kanabar mentioned. “The clarification makes it clear that the deduction stays intact.”
Additionally learn: Income tax filing: How to deal with inaccuracies in annual information statement
He careworn the significance of this reduction for property buyers: “Taxpayers who incur substantial curiosity prices earlier than completion shouldn’t be deprived simply because their property is rented reasonably than self-occupied.”
