New Income Tax Bill 2025 cleared: Major reliefs, compliance tweaks for corporate taxpayers
Set to take effect April 1, 2026, the New Income Tax Bill 2025 streamlines outdated provisions, updates terminology, and incorporates modern compliance requirements while retaining several core principles of the old Act.
- Aug 13, 2025,
- Updated Aug 13, 2025 7:45 PM IST
Parliament has approved a landmark overhaul of India’s tax framework by passing the Income-tax (No.2) Bill, 2025, that would replace the 1961 Income-tax Act. Set to take effect April 1, 2026, the new law streamlines outdated provisions, updates terminology, and incorporates modern compliance requirements while retaining several core principles of the old Act. Originally tabled in February 2025, the Bill was reviewed by a Select Committee of Parliament. On August 12, the government introduced a revised version incorporating most of the Committee’s recommendations.
According to CA Bhaveshkumar Patel, the changes aim to remove ambiguities, reduce compliance friction, and offer clarity — especially for corporate taxpayers.
Here are the key changes for corporate taxpayers
> Carry forward and loss set-off
The earlier draft used the term “beneficial owner” to determine shareholding continuity in closely held companies — a shift that created confusion over loss set-off eligibility. The revised Bill reverts to “beneficially held,” consistent with the 1961 Act, preserving established interpretation.
> Alternate Minimum Tax (AMT)
The February draft risked bringing all LLPs under AMT at 18.5% by omitting the link between AMT applicability and specific deductions. The new Bill reinstates this link, avoiding unnecessary AMT for LLPs without claimable deductions — a relief for family offices and Indian promoters.
> Transfer Pricing Definition
To prevent overly broad interpretation, the definition of “associated enterprise” has been refined by merging sub-sections differently. However, experts note the possibility of wider applicability of transfer pricing rules remains.
> TDS defaults and expense claims
Expense disallowance rules have been eased. Relief from disallowance, earlier extended only to payments to resident payees where TDS was paid late, now applies to payments to non-residents as well — preventing permanent disallowance of legitimate expenses.
> Indirect transfer provisions
The Bill widens the scope of income from indirect share transfers to include all income deemed to accrue in India, not just capital gains — aligning with existing law.
> Deduction for Inter-Corporate Dividends
Section 80M deduction, missing from the February draft for companies in the concessional 22% tax regime, has been restored. This prevents cascading tax in corporate holding structures.
> NIL tax deduction certificates
Tax officers can once again issue NIL TDS certificates, avoiding situations where taxpayers suffer deductions despite having no liability.
> Digital payment mandate extended
High-receipt professionals (over Rs 50 crore) must now accept payments via prescribed electronic modes such as UPI and RuPay, bringing them under the same cashless norms as large businesses.
> TDS correction timeline shortened
The correction window for TDS statements is cut from six years to two, curbing misuse, reducing disputes, and protecting deductees from old liabilities.
> Clarity in drafting
Several provisions, including loss set-off rules, have been restructured for better readability without changing their core intent.
> Integration of recent amendments
Updates from the Finance Act, 2025 — such as AIF asset classification, extended block assessment deadlines, and expanded trust taxation rules — are built into the Bill.
Changes affecting Non-Profit Organisations
Tax provisions for registered non-profit organisations are realigned with the 1961 Act. Key features include:
Shortfall in 85% income application can be deemed applied in the year of receipt.
Tax levied on net income, not gross receipts.
Reinvestment of capital gains into new assets counts as income application.
30% tax on anonymous donations extends to mixed-object NPOs.
15% mandatory investment rule applies only if investment is actually made.
Digital data in tax searches
Recognising digitalisation, the Bill explicitly allows tax authorities to access electronic records during searches, with privacy safeguards under tax and data protection laws.
With these reforms, the government seeks a modern, streamlined tax law while maintaining continuity where it matters — easing compliance for businesses, plugging gaps, and ensuring the law reflects today’s economic realities.
Parliament has approved a landmark overhaul of India’s tax framework by passing the Income-tax (No.2) Bill, 2025, that would replace the 1961 Income-tax Act. Set to take effect April 1, 2026, the new law streamlines outdated provisions, updates terminology, and incorporates modern compliance requirements while retaining several core principles of the old Act. Originally tabled in February 2025, the Bill was reviewed by a Select Committee of Parliament. On August 12, the government introduced a revised version incorporating most of the Committee’s recommendations.
According to CA Bhaveshkumar Patel, the changes aim to remove ambiguities, reduce compliance friction, and offer clarity — especially for corporate taxpayers.
Here are the key changes for corporate taxpayers
> Carry forward and loss set-off
The earlier draft used the term “beneficial owner” to determine shareholding continuity in closely held companies — a shift that created confusion over loss set-off eligibility. The revised Bill reverts to “beneficially held,” consistent with the 1961 Act, preserving established interpretation.
> Alternate Minimum Tax (AMT)
The February draft risked bringing all LLPs under AMT at 18.5% by omitting the link between AMT applicability and specific deductions. The new Bill reinstates this link, avoiding unnecessary AMT for LLPs without claimable deductions — a relief for family offices and Indian promoters.
> Transfer Pricing Definition
To prevent overly broad interpretation, the definition of “associated enterprise” has been refined by merging sub-sections differently. However, experts note the possibility of wider applicability of transfer pricing rules remains.
> TDS defaults and expense claims
Expense disallowance rules have been eased. Relief from disallowance, earlier extended only to payments to resident payees where TDS was paid late, now applies to payments to non-residents as well — preventing permanent disallowance of legitimate expenses.
> Indirect transfer provisions
The Bill widens the scope of income from indirect share transfers to include all income deemed to accrue in India, not just capital gains — aligning with existing law.
> Deduction for Inter-Corporate Dividends
Section 80M deduction, missing from the February draft for companies in the concessional 22% tax regime, has been restored. This prevents cascading tax in corporate holding structures.
> NIL tax deduction certificates
Tax officers can once again issue NIL TDS certificates, avoiding situations where taxpayers suffer deductions despite having no liability.
> Digital payment mandate extended
High-receipt professionals (over Rs 50 crore) must now accept payments via prescribed electronic modes such as UPI and RuPay, bringing them under the same cashless norms as large businesses.
> TDS correction timeline shortened
The correction window for TDS statements is cut from six years to two, curbing misuse, reducing disputes, and protecting deductees from old liabilities.
> Clarity in drafting
Several provisions, including loss set-off rules, have been restructured for better readability without changing their core intent.
> Integration of recent amendments
Updates from the Finance Act, 2025 — such as AIF asset classification, extended block assessment deadlines, and expanded trust taxation rules — are built into the Bill.
Changes affecting Non-Profit Organisations
Tax provisions for registered non-profit organisations are realigned with the 1961 Act. Key features include:
Shortfall in 85% income application can be deemed applied in the year of receipt.
Tax levied on net income, not gross receipts.
Reinvestment of capital gains into new assets counts as income application.
30% tax on anonymous donations extends to mixed-object NPOs.
15% mandatory investment rule applies only if investment is actually made.
Digital data in tax searches
Recognising digitalisation, the Bill explicitly allows tax authorities to access electronic records during searches, with privacy safeguards under tax and data protection laws.
With these reforms, the government seeks a modern, streamlined tax law while maintaining continuity where it matters — easing compliance for businesses, plugging gaps, and ensuring the law reflects today’s economic realities.