On Monday, Finance Minister Nirmala Sitharaman tabled the revised Income Tax Bill 2025 in Parliament, replacing the earlier draft that had sparked widespread debate among taxpayers, real estate stakeholders, and financial experts. The updated legislation introduces significant reforms aimed at simplifying compliance, boosting investment, and addressing long-pending concerns—particularly for property owners, salaried taxpayers, and investors.
As the new fiscal year approaches, it’s crucial to understand how the Income Tax Bill 2025 will impact your finances. Here’s a detailed breakdown of the key changes and what they mean for you.
What is the Income Tax Bill 2025?
The Income Tax Bill 2025 is a comprehensive legislative proposal designed to amend existing tax laws under the Income Tax Act, 1961. It replaces the earlier version introduced in the previous session, incorporating stakeholder feedback and economic realities. The bill aims to:
- Enhance tax compliance through digital integration
- Encourage long-term investments
- Provide relief to middle-class taxpayers
- Reform property-related taxation to promote transparency
With a strong focus on equity and economic growth, the revised bill marks a pivotal shift in India’s tax policy.
Major Changes in the Income Tax Bill 2025
1. Revised Tax Slabs and Rates for Individuals
One of the most anticipated changes in the Income Tax Bill 2025 is the revision of income tax slabs under the new tax regime, which is now the default option for taxpayers.
Key Takeaway:
Taxpayers earning between ₹10–15 lakh will see a reduction in their effective tax rate. The highest marginal rate is now capped at 25% (down from 30%) for income above ₹15 lakh, excluding surcharge and cess.
Note: The surcharge structure remains unchanged, but the effective tax burden on high-income earners is expected to drop slightly due to slab rationalization.
2. New Deductions for Property Owners
The Income Tax Bill 2025 introduces favorable changes for residential property owners, especially those with multiple homes or rental income.
✅ Standard Deduction for House Property (Section 24)
- A standard deduction of 30% on net annual value of let-out properties is retained.
- New Addition: Property owners can now claim an additional 5% deduction (total 35%) if the property is registered under the wife’s name or jointly owned by spouses—aimed at promoting gender-inclusive asset ownership.
✅ Self-Occupied Property (SOP) Norms Relaxed
- Homeowners with one self-occupied property continue to enjoy NIL taxable value.
- New Rule: Individuals owning two homes can now declare both as self-occupied if one is under construction or located in a different city due to employment. This eliminates the earlier requirement to treat the second home as “deemed let out.”
✅ Capital Gains Exemption Extended
- The exemption under Section 54 (for reinvestment in residential property) is extended:
- From 1 year before to 3 years after sale of the original property.
- Now applicable for up to two replacement homes, provided the total capital gains do not exceed ₹2 crore.
3. Investment-Friendly Reforms
The Income Tax Bill 2025 introduces incentives to encourage long-term investing in equities, mutual funds, and startups.
📈 Equity and Mutual Fund Taxation
- Long-Term Capital Gains (LTCG) on equities and equity-oriented funds:
- Exemption limit increased from ₹1 lakh to ₹1.5 lakh per year.
- Gains above this threshold taxed at 10% without indexation.
- Short-Term Capital Gains (STCG) remain at 15%, but now include indexation benefits for debt funds held over 3 years.
💼 Startup and MSME Investment Boost
- Section 80-IAC extended till FY 2027–28 for eligible startups.
- Angel investors can now claim a 20% deduction on investments in DPIIT-recognized startups (up to ₹50 lakh per year).
🏦 New ‘Green Bonds’ Deduction
- A new Section 80CCG allows a 100% deduction (up to ₹2 lakh) on investments in government-issued green bonds—encouraging eco-friendly infrastructure funding.
4. Digital Compliance and Tax Evasion Crackdown
The Income Tax Bill 2025 strengthens digital tracking mechanisms to curb tax evasion, especially in real estate and high-net-worth transactions.
🔍 TDS on Property Transactions
- TDS rate increased to 2% (from 1%) on all property sales exceeding ₹50 lakh.
- Applicable to both residential and commercial properties.
- Mandatory Aadhaar linkage for both buyer and seller to file TDS returns.
📊 Real-Time Property Data Integration
- The Income Tax Department will integrate with SARFAESI, Stamp Duty, and Sub-Registrar databases to automatically detect mismatches in property ownership and rental income reporting.
⚠️ Penalty for Under-Reporting Property Income
- Penalty increased to 50% of tax evaded (up from 25%) for under-reporting rental income or declaring incorrect property values.
5. Benefits for Senior Citizens and Retirees
- Standard deduction increased to ₹75,000 (from ₹50,000) for senior citizens (60–79 years) and ₹1 lakh for super seniors (80+).
- Interest income from deposits up to ₹75,000 is now fully exempt (under Section 80TTB).
- Pension income up to ₹10 lakh exempted under a new Section 10(47).
What This Means for You
How to Prepare for the Income Tax Bill 2025
- Review Your Portfolio: Rebalance investments to leverage new LTCG and green bond benefits.
- Update Property Declarations: Reassess self-occupied status for multiple homes ahead of ITR filing.
- Use Digital Tools: Leverage the Income Tax e-filing portal’s new “Property Dashboard” to auto-fill income details.
- Consult a CA: Ensure compliance with revised TDS and capital gains rules.
Final Thoughts: A Step Toward Inclusive Growth
The Income Tax Bill 2025 reflects a balanced approach—offering relief to the middle class, incentivizing investment, and tightening compliance in high-value transactions. By addressing long-standing concerns of property owners, taxpayers, and investors, the government aims to foster transparency, boost confidence, and stimulate economic activity.
While the bill still needs parliamentary approval, early indications suggest it will be passed before the start of the new financial year. Stay informed, plan ahead, and make the most of the upcoming tax reforms.
Frequently Asked Questions (FAQs)
Q: When will the Income Tax Bill 2025 come into effect?
A: Expected to be effective from April 1, 2025, for the Assessment Year 2026–27.
Q: Is the old tax regime still available?
A: No. The new tax regime is now the default, though taxpayers can opt for the old regime with more deductions, subject to conditions.
Q: Can I claim both HRA and home loan benefits under the new rules?
A: Yes. HRA exemption under Section 10(13A) and home loan interest deduction under Section 24 are still available under the old regime.
Q: Does the capital gains exemption apply to commercial property?
A: No. The enhanced exemption under Section 54 is only for residential property.
Q: Where can I read the full Income Tax Bill 2025?
A: The official draft is available on the Parliament of India website and the Income Tax Department portal.