The Central government withdrew the Income-Tax Bill 2025 on August 8 from Parliament. Finance Minister Nirmala Sitharaman informed the lower house (Lok Sabha) that the bill will be reintroduced in a fresh form on August 11, 2025, after considering the suggestions made by a Lok Sabha Select Committee led by Baijayant Panda.
Finance Minister told Parliament that several suggestions needed to be added to ensure the bill’s intent was clearly conveyed. There were concerns about phrasing, drafting gaps, and missing references. To avoid confusion from multiple versions, the government has decided to withdraw the old draft and bring a revised bill in the Lok Sabha.
Clause 21(2) in the earlier draft was unclear on assessing the annual value of vacant properties. The committee recommended deleting “in normal course” and restoring the earlier law’s method of comparing actual rent with notional rent.
The Committee reviewed Clause 22 and recommended clarifications to ensure fairness for property owners. Clause 22(1)(a) now states that the 30% standard deduction will be calculated on the annual value after deducting municipal taxes. Clause 22(2) allows pre-construction interest deductions for let-out properties, aligning with existing rules for self-occupied properties.
Upon review, Clause 19 was found to result in unequal tax treatment for commuted pensions received by non-employees. It was recommended that deductions for such pensions be allowed under "Income from other sources," similar to the treatment for employees.
The Committee also found that Clause 20's could lead to incorrect taxation of some business properties. It recommended replacing “occupied” with “as he may occupy” to exclude temporarily unused properties from house property tax and accepted the rest of the clause.
Experts say under the current Income-tax Act, 1961, commercial properties used or intended for business are taxed as business income, not under house property income. Hence, income from these properties is treated as business income, not rental income.
Under current law, individuals can claim tax exemption on up to two self-occupied residential properties, while any additional vacant homes are taxed as deemed rented. However, commercial properties are exempt from this rule.
To avoid unfair taxation, the Committee recommended keeping the existing law’s wording in the new Income-tax Bill 2025. This means both occupied and vacant commercial properties should be excluded from house property income tax, ensuring temporarily idle business properties are not unfairly taxed.
