In a significant step toward overhauling India’s tax landscape, the Select Committee has presented its detailed report to Parliament on 21 July 2025, recommending sweeping reforms in the draft New Income Tax Bill, 2025. Spanning over 4,500 pages and comprising 285 recommendations, the report aims to replace the outdated Income-Tax Act of 1961 with a more streamlined, transparent, and digital-friendly law.
Among the many suggestions, three proposals stand out, directly benefiting small taxpayers, homeowners, and salaried professionals.
Here's a breakdown of the major changes you need to know.
“If your total income is below the taxable limit and you're filing only to claim a refund, you should not be penalised for missing the deadline.”
Currently, taxpayers who file their ITR after the due date—even if it's only to claim a refund—may face a penalty of up to ₹1,000. This affects lakhs of small taxpayers, especially salaried individuals who rely on refunds from TDS deductions.
The committee's new recommendation could remove this burden, making the system more empathetic and fair. This move aligns with India’s digital governance goal of simplifying citizen-facing processes.
If you're a property owner, particularly one with rental income, the following changes may bring clarity and relief:
“The 30% standard deduction, which is already allowed after municipal tax deductions, should be clearly mentioned in the new law.”
This proposal ensures that there's no ambiguity in how deductions on house property income are applied.
Additionally:
“The benefit of home loan interest deductions, currently only available for self-occupied properties, should also be extended to rented properties.”
This revision could significantly benefit middle-class investors who rent out homes while paying EMIs. With rising interest rates and real estate investment on the rise, this change would make rental investments more tax-efficient.
Many taxpayers often complain about delays in receiving refunds related to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). The committee has taken note and is recommending that:
“The refund process be quicker, easier, and more transparent.”
This is part of a broader CBDT initiative called:
“Enforcement with Empathy.”
The policy aims to reduce red tape, minimise litigation, and offer a more user-friendly experience for honest taxpayers. This move is particularly relevant as India’s e-filing ecosystem becomes more robust through platforms like the ITR 2.0 portal and pre-filled return formats.
The report is currently under review by the government. The final version of the Income Tax Bill 2025 is expected to be introduced and passed during the Budget session next year.
Once enacted, it will replace the Income Tax Act of 1961, bringing in a modern and simplified tax code.
The objective: Make tax compliance easier, faster, and friendlier—especially for small taxpayers and working professionals.
This marks a significant step in India’s journey toward transparent and taxpayer-centric reforms in the digital era.
The proposed changes under the New Income Tax Bill 2025 reflect a strong commitment to making taxation less burdensome and more accessible. From waiving penalties for refund-only filings, to extending home loan benefits, and speeding up refunds, these recommendations address some of the biggest pain points for everyday taxpayers.
As the government works on finalising and implementing the bill, Indian citizens can hope for a more empathetic, efficient, and digital-first tax ecosystem.