The Taxation Laws (Amendment) Bill 2025, tabled in Lok Sabha on 11th August 2025, proposes various changes to the Income Tax Act 1961 and Finance Act 2025. The changes proposed in the Bill are as follows: –
1. Amendment in the Income Tax Act, 1961
Changes to Section 10 : Incomes not included in total income
There are various amendments in the Income tax act proposed in this bill. There are various clauses which are inserted in Section 10 i.e. 12AA and 12AB which are effective from April 1, 2025.
Clause 12AA – Any payment received from the National Pension System Trust by a subscriber to the Unified Pension Scheme is exempted from Income tax to the extent that it does not exceed 60% of the individual corpus. This exemption is applicable when the payment is received at the time of superannuation, voluntary retirement or retirement under clause (j) of rule 56 of the Fundamental Rules, provided it is not treated as a penalty under the Central Civil Services (Classification, Control and Appeal) Rules, 1965.
Clause 12AB – Any lump sum amount received by an assessee who is a subscriber to the Unified Pension Scheme, as specified in Notification Number FX-1/3/2024-PR, dated 24th January 2025 of the Department of Financial Services is also exempted.
Insertion of clause (d) in Explanation 1 of Clause 23FE – This amendment results in the inclusion of Saudi Arabian Public Investment Fund in the Specified Person definition. Additionally, a wholly owned subsidiary of this fund is also considered a “specified person” provided if is a resident of Saudi Arabia and makes investments, , directly or indirectly, using funds owned by the Saudi Government.
Amendment of Section 16 – Deduction from Salaries
This amendment deals with as to how a deduction of “fifty thousand rupees or the amount of salary, whichever is less” (or “seventy five thousand rupees” in certain cases) is applied when income tax is computed under specific clauses of section 115BAC.
Amendment of Section 80CCD – Deduction in respect of contribution to pension scheme of Central Government
A new subsection 3A has been inserted which stipulates that if any amount from a Unified Pension Scheme subscriber’s account (for which a pervious deduction was allowed) is received by the assessee or their nominee upon superannuation, voluntary retirement, or retirement under rule 56(j) (not treated as penalty), the whole amount received will be considered income in that previous year and will be charged to tax.
It has also been added that an assessee is deemed not to have received any amount if it is transferred from their “individual corpus” to a “pool corpus” due to superannuation, voluntary retirement or retirement under rule 56(j) (not treated as penalty).
- Amendment in the Finance Act 2025
Changes to section 49 of the Finance Act 2025 (which amends Section 158BA of the Income tax act 1961)
These amendments, effective from September 1 2024, aim to modify the scheme of block assessment for search cases to ensure its correct application. A new clause (ba) is inserted in section 49, which substitutes ub section (2) of section 158BA.
The substituted sub section (2) clarifies the abatement of pending assessments during search operations:
(a) Any assessment, reassessment or recomputation under the Income tax act for any assessment year within the block period, if pending on the date a search is initiated (under section 132) or a requisition is made (under section 132A), shall abate and be deemed to have abated on that date.
(b) Any proceeding for assessment, re-assessment or recomputation for any assessment year within the block period (excluding the year where the last search authorization is executed or requisition is made), for which a notice was issued between the search / requisition date and the date of order under section 158BC(1) shall abate and be deemed to have abated on the date of issue of such notice.
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