New Delhi, August 12, 2025 — Parliament has passed the Income Tax (No. 2) Bill, 2025, replacing the nearly 64-year-old Income-tax Act, 1961. The updated version, tabled by Finance Minister Nirmala Sitharaman, incorporates over 285 recommendations from the Select Committee, aiming to simplify the tax code, reduce compliance burden, and modernize assessment processes.
The bill slashes the number of sections from 819 to 536, retains the ₹12 lakh basic exemption, introduces faceless digital assessments, and grants full tax deduction on commuted pensions from specified funds. It also removes provisions that could have increased taxes on vacant residential properties and tones down controversial privacy clauses from the earlier draft.
| Feature | February 2025 Draft | August 2025 Revised Bill |
|---|---|---|
| Number of Sections | ~819 sections | Reduced to 536 sections |
| Basic Tax Exemption Limit | Unclear / debated | ₹12 lakh confirmed |
| Assessment Method | Mostly human-led | Faceless, fully digital assessments |
| Pension Taxation | No clarity on commuted pension | Full tax deduction allowed on commuted pension from specified funds |
| Vacant Property Tax | Could have increased liability | Status quo maintained, no extra tax burden |
| Privacy Provisions | Allowed broad access to taxpayer’s devices & digital accounts | Likely trimmed down per committee recommendations |
| Select Committee Recommendations | Not incorporated | ~285 recommendations implemented |
