Income Tax filing set to become simpler: What are the 3 new changes?

Filing income tax returns (ITR) may soon get much simpler for Indian taxpayers. A Parliamentary Select Committee has submitted an extensive report to improve the proposed New Income Tax Bill, 2025, which is expected to replace the long-standing Income Tax Act of 1961. This report, over 4,500 pages long, contains 285 key recommendations aimed at streamlining tax procedures and making them more taxpayer-friendly.

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One of the most significant recommendations is a proposal to eliminate penalties for those filing ITRs solely to claim refunds. Under the current system, individuals whose income falls below the taxable threshold still face penalties of up to Rs 1,000 if they miss the deadline, even when they file returns just to receive a refund. The committee has advised that such taxpayers be exempted from penalties, providing relief to lakhs of salaried individuals and small earners.

Another major suggestion pertains to income from house property. The committee recommends clearly codifying the existing 30% standard deduction (after municipal tax) in the new law to avoid confusion. Moreover, it proposes extending the benefit of home loan interest deductions, currently allowed only for self-occupied houses, to rented properties as well. These changes are expected to benefit middle-class homeowners and those with rental income.

Additionally, the committee has recommended revamping the refund process related to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). Taxpayers often face long waits for refunds, leading to frustration. The Central Board of Direct Taxes (CBDT) is reportedly working on a new framework under the “Enforcement with Empathy” approach, aiming to ensure faster and more transparent refunds.

The government is currently examining the report, and the revised bill is expected to be tabled in the Budget session next year. If approved, it will overhaul India’s income tax system with a digital-first, simplified approach focused on reducing taxpayer stress and compliance burdens.