The Select Committee of the Lok Sabha on the Income Tax Bill, 2025, earlier this week submitted an over 4,500-page report in the House. The report has several key suggestions for improving the Bill, which seeks to replace the existing Income-Tax Act, 1961. Among various suggestions, there are some recommendations on simplifying the income tax return (ITR) filing and refund process going ahead.
On July 21, the Select Committee presented in Parliament its report, in which many important recommendations have been made. In this article, let’s understand in detail how some of the recommendations of the panel are expected to bring a big shift in the way we approach our income tax return filing every year. Here are three big suggestions made by the Lok Sabha panel to the government:
1. No penalty on those filing ITR only for refund
The most relieving recommendation in the report of the Select Committee is that if a person files ITR only to get tax refund, but his total income does not come under the purview of tax, then he should not be fined for late filing.
The existing rule is that if you filed ITR after the deadline, even if it was only for refund, then you need to pay a penalty of up to Rs 1,000.
But now the committee wants that such small taxpayers should be given relief from this penalty. This will directly benefit lakhs of people who file returns every year only to get a refund, but suffer a penalty due to not being able to do it on time.
This change is related to Clause 479 of the Income Tax Bill and its purpose is to make tax compliance simple and taxpayer-friendly.
2. Two major changes regarding tax on house income
The Select Committee has also given two important suggestions in the calculation of tax on income from ‘house property’ in Income Tax:
Standard deduction should be clarified:
The committee has said that while calculating house income, the taxpayer should get a standard deduction of 30% on the annual income left after deducting municipal tax, as is in the current rules – but this should be clearly written in the new law.
Exemption on home loan interest should be applicable not only on self-occupied houses, but also on rented houses:
In the currently proposed bill, an exemption on home loan interest is seen only for self-occupied houses. But the committee wants that this benefit should also be applicable on ‘let-out’ i.e. houses given on rent.
These changes can provide relief to the middle class and those who buy houses for investment purposes.
3. Emphasis on simplifying the process of TDS / TCS refund
One of the biggest problems while filing ITR is getting a refund of TDS or TCS deduction. The Select Committee has suggested that the refund process be made simpler, faster, and more transparent.
Along with this, the Chairman of CBDT (Central Board of Direct Taxes) recently clarified that under the “Enforcement with Empathy” policy, the rules and forms of the new tax bill are now being prepared so that taxpayers do not face more trouble.
This will provide relief to those taxpayers whose TDS has already been deducted from their income, and they have to wait for months for the refund every year.
What is expected from the new Income Tax Bill?
The Select Committee has suggested a total of 285 changes in its report. The most important of these are – simplifying the processes for taxpayers, simplifying the technical language, and making tasks like filing ITR more transparent.
It is clear from these three major changes that the government is now moving towards making the tax system “compliance-friendly”.
Income Tax Bill 2025 can prove to be a big reform, especially for small taxpayers, working class and those who depend on rental income or refund.
What next?
Now this report is under consideration with the government. The revised Income Tax Bill is likely to be passed next year, probably in the Budget session of Parliament. This bill will replace the old Income Tax Act of 1961 and will make India’s tax system more modern, digital and taxpayer-friendly.