Key Points:
- No late penalty if you’re filing an ITR just to claim a refund and your income is below the taxable limit.
- House property income relief: Clear 30% standard deduction after municipal taxes, and home loan interest deduction proposed for rented (let-out) properties too.
- Faster, fairer TDS/TCS refunds: Proposed overhaul aims to make refunds quicker and more transparent.
- 285 recommendations submitted to Parliament in a massive report aiming for digital, taxpayer-friendly reforms.
- Draft bill under review; final law expected in upcoming Budget session to replace 1961 Income Tax Act.
New Delhi: Filing your income tax return (ITR) in India may soon get easier and fairer, thanks to sweeping recommendations submitted by Parliament’s Select Committee. On July 21, 2025, the Committee delivered a 4,500 page report with 285 key suggestions to modernize and simplify tax laws under the draft New Income Tax Bill, 2025 a landmark move to replace the outdated 1961 Act.
1. No Penalty for Late Refund-Only Filers
One of the most welcome changes targets salaried employees and small taxpayers: If your total income is below the taxable threshold and you are filing ITR solely to claim a refund, you’ll no longer face a penalty for missing the deadline. Currently, such filers risk a ₹1,000 fine even when no tax is due, stinging millions of honest refund claimants. This change could bring relief to lakhs who file late only to recover tax deducted at source, especially those with low or exempt income.
2. Big Relief for Property Owners Deductions Clarified & Expanded
If you earn income from house property, two major changes are proposed:
- Standard Deduction Clarity: The much used 30% standard deduction (after municipal taxes) will be explicitly mentioned in the new law to remove confusion and align with current practice.
- Interest Deduction for Rented Properties: The benefit of home loan interest deduction, which was previously available only for self-occupied homes, will now extend to let-out/rented properties too. This provision is a boon for middle class homeowners and rental investors, clarifying guidelines and possibly reducing tax outgo if you’ve financed a second home.
3. Faster, Transparent TDS and TCS Refunds
Long waits for TDS and TCS refunds may soon be a problem of the past. The Committee calls for a streamlined and more transparent refund process, echoing the Central Board of Direct Taxes’ (CBDT) new “Enforcement with Empathy” approach designed to reduce hassles for honest taxpayers.
Thanks to digital reforms, the average ITR refund time has already plunged from 93 days ten years ago to just 17 days in 2024. The new bill aims to cement and accelerate these gains, focusing on automation, real-time checks, and clear accountability for speedy crediting of eligible refunds.
Next Steps: What’s Changing and When?
- The government is currently reviewing the Select Committee’s suggestions and public inputs.
- The final Income Tax Bill is expected to be tabled and likely passed in the Budget session next year.
- Once enacted, it will replace the 1961 Income Tax Act, ushering in a modern, digital-first, and taxpayer-friendly era.
Why These Changes Matter
The focus is clear: make tax filing simpler, more transparent, and fairer especially for small taxpayers, working professionals, and rental income earners. These reforms are among the most significant for personal income tax since independence and could set a new global benchmark for efficiency and ease.
If you routinely file late just for a refund, own rental property, or are frustrated with slow TDS/TCS refunds, these changes could bring immediate relief and a smoother tax experience, starting as soon as next year.
