The New Income Tax Bill has just been passed in the Lok Sabha. It has been a historic shift in India’s tax system after more than 60 years. From April 1, 2026, the old Income Tax Act of 1961 will be replaced by the Taxation Laws (Amendment) Bill, 2025. This time, it aims at making tax laws simpler, clearer, and easier to follow.

The new bill is built on the government’s S.I.M.P.L.E principles, is streamlined, integrated, minimises litigation, practical, and efficient, allowing for learning and adaptation. It has redefined key terms like MSMEs and capital assets. 

However, it also cuts down legal jargon, making the law nearly 50% shorter compared to the old act.  The new bill will have 536 sections and 16 schedules, which have been arranged in a clear and logical order.

However, in the old law vs new bill comparison, one thing remains the same: taxpayers will still have to file returns to claim refunds, even if their income is below the taxable limit. This move has left many small taxpayers disappointed.

Everything You Need to Know About the New Income Tax Bill

Here’s a quick look at the most important changes that could affect you.

1. Refunds Even If You File Late: If you’ve paid more tax than required during the year, you can still get a tax refund even if you file your return late or revise it later. Earlier, this was a grey area, and late filers often lost out.
2. No Penalty for Late TDS Statements: Missed the TDS filing deadline? Under the Revised Income Tax Bill, you won’t face a financial penalty. This is a big relief for small businesses and individuals who struggle with compliance timelines.
3. Skip TDS if You Owe No Tax: If you have zero tax liability, you can get a Nil-TDS certificate in advance so that tax isn’t deducted in the first place. This saves the hassle of waiting months for refunds. Applies to both residents and non-residents.
4. Clear Tax Deduction on Lump Sum Pensions: Retirees receiving commuted pensions (one-time payouts) from funds like the LIC Pension Fund will now have an explicit tax deduction written into the law, no longer relying on implied rules.
5. Relief for Company Dividends: Companies can again claim deductions on dividends received from other companies (Section 80M). This fixes the double-taxation issue that cropped up when this was dropped in the earlier draft.
6. Property Income Rules Made Clear

• 30% Standard Deduction on annual value.
• Interest on home loans for buying, building, or repairs stays deductible.
• If a rental property is vacant for part of the year, tax will be based on the higher of actual rent or expected rent, removing earlier confusion.
  

7. Clearer Definitions for Key Terms: The Bill now clearly defines terms like capital asset, micro and small enterprises, and beneficial owner.

• Micro enterprise: Invests under ₹1 crore, turnover below ₹5 crore.
• Small enterprise: Invests under ₹10 crore, turnover below ₹50 crore.
  

8. Same Tax Treatment Across Similar Cases: Whether it’s pension contributions or money spent on scientific research, the tax rules will be consistent across the board.
9. FY/AY Confusion: No more juggling “financial year” and “assessment year”. The new Bill introduces a single ‘tax year’ to make things straightforward.
10. Anonymous Donations with a Caveat: Religious-cum-charitable trusts can still receive anonymous donations without paying tax. But if they also run schools, hospitals, or other non-religious services, donations for those will be taxed.

What This Means for Taxpayers

The New Income Tax Bill has been designed to make tax rules easier to read and follow. It simplifies complex language and gives clearer rules for things like deductions, exemptions, and how certain incomes are defined.

One big relief is for people who miss the return filing deadline; under the revised income tax bill, you can still claim a refund on extra tax paid. However, there’s one thing that hasn’t changed! You still have to file a return to get that refund, even if your income is below the taxable limit.

This has upset many small taxpayers and senior citizens who only file returns to claim refunds on excess TDS. 

For property owners, the new bill shows simpler rules for calculating rent income and deductions. For businesses, especially MSMEs, the bill updates definitions, restores certain corporate tax benefits, and makes cross-referencing between rules easier.

Old Law vs New Bill

Change/Provision	Old Law	New Income Tax Bill
Overall Structure	Income Tax Act, 1961, 5 lakh+ words, 4,000+ amendments over 60 years	50% shorter, simpler language and clear definitions
Refund on Late Returns	Ambiguity on eligibility for refunds after late filing	Clear rule: refunds are allowed even for belated/revised returns, but return filing is still mandatory
TDS Late Filing Penalty	Penalty for delay	No financial penalty for late TDS filing
Nil-TDS Certificate	Not available for all	Available for both residents & non-residents with no tax liability
Commuted Pension Deduction	Implicit mention only	Explicit deduction added for certain pension funds
Inter-Corporate Dividends	Allowed under Section 80M	Reinstated even for companies under the 22% tax regime
Property Tax Rules	Vacant property annual value based on reasonable rent	Annual value = Higher of reasonable rent or actual rent receivable
Definitions	Older, varied definitions	Clearer definitions for capital asset, MSME, and beneficial owner
Tax Year Concept	Use of FY and AY separately	Single ‘Tax Year’ for clarity
MSME Classification	Not fully aligned with MSME Act	Fully aligned with MSME Act (2020) criteria

Next Steps

• The Bill will now be tabled in the Rajya Sabha.
• After passage, it will require the President’s assent to become law.
• The new provisions will apply from April 1, 2026.

Conclusion

The New Income Tax Bill marks a significant step toward simplifying India’s tax framework after more than six decades of the old law. While it introduces clearer language, better definitions, and reduced litigation, some long-awaited reliefs, like removing the need to file returns just to claim refunds, are still missing. For taxpayers, especially MSMEs and individuals, the changes in the Revised Income Tax Bill could mean easier compliance and fewer disputes. 

Source: MoneyControl