Commuted Pension, Nil TDS Among Changes in Revised Income Tax Bill, 2025

The Lok Sabha has approved a revised Income Tax Bill, 2025, addressing drafting errors from the earlier version. The updated provisions will take effect from April 1, 2026, for the financial year 2026–27.

The corrections restore clarity to key areas such as nil TDS certificates, standard deductions for house property income, and tax deductions for commuted pension for non-employees. These changes aim to align the law with existing provisions and prevent unnecessary litigation.

Nil TDS Certificates: The earlier draft omitted the explicit reference to 'Nil' deduction under Clause 395, only covering 'lower' deduction. This created scope for ambiguity. The revised Bill reinstates the established language of Section 197 of the Income Tax Act, 1961, allowing both 'Nil' and 'lower' deduction certificates, benefiting taxpayers such as those with income below exemption limits, NRIs claiming DTAA benefits, and individuals eligible for the Section 87A rebate.

Commuted Pension for Non-Employees: Originally, Clause 19 exempted commuted pension only for employees. Following recommendations from the Select Committee, a new Section 93(1)(g) was added to allow a full deduction under 'Income from Other Sources' for non-employees receiving payouts from approved pension funds. This ensures parity with current law and extends relief to independent contributors and nominees.

Other changes include refunds for late or revised ITRs, standard deductions on property income, and interest deductions on pre-construction home loans. Experts believe these amendments will simplify compliance, enhance taxpayer relief, and align the Bill with long-standing tax practices.