For individual taxpayers, the key updates cover refunds on belated or revised ITRs, nil TDS certificates, standard deduction on property income, and pre-construction home loan interest deductions.
The February draft referring only to “lower” deduction, omitting the ‘nil’ option for TDS certificates, would have impacted a taxpayer whose income is not taxable, said Sachin Garg, partner, Nangia & Co LLP said.
“Examples could include a taxpayer whose income is below the ₹2.5 lakh threshold or not taxable up to ₹12 lakh (in the new regime) due to rebate under section 87A, or a taxpayer having losses or even a non-resident claiming non-taxability on account of a benefit under a Double Tax Avoidance Agreement,” he said.
Also read: Lok Sabha approves new tax bill with UPS relief, corporate dividend deduction
Refunds allowed on late or revised returns
Earlier this year, a drafting slip-up in the February tax bill (Clause 263(1)(a)(ix)) restricted refunds only to returns filed before the deadline — a sharp departure from the long-standing rule under the Income Tax Act, 1961, which also allowed refunds for belated and revised returns.
This meant that if you filed late or corrected your return later, you risked losing any refund due.
“This could have led to hardship in genuine cases where a taxpayer was unable to file their return by the deadline,” explained Sachin Garg, partner, Nangia & Co LLP. “The restriction was not an intended policy shift, but a drafting oversight.”
The revised bill fixes this, restoring the right to claim refunds for late and revised filings. Garg said the correction ensures taxpayer rights are preserved and refund claims are not unfairly denied purely on procedural grounds.
Clarity on Nil TDS certificates
If you owe no tax, you can apply for a Nil TDS certificate to prevent excess deductions at source. The February draft mentioned only “lower” TDS, leaving out the Nil option and risking legal disputes.
Under Section 197 of the 1961 Act, taxpayers with no tax liability can apply for lower or Nil TDS certificates to avoid excess deduction and refund claims later.
“While it could be argued that Nil is a subset of lower, the absence of explicit wording created scope for interpretation disputes,” said Garg. Without clarity, he warned, operational issues and unnecessary litigation could have followed.
The revised Bill restores the original wording, covering both Nil and lower deductions. This is especially useful for senior citizens with non-taxable interest income.
“Nil TDS certificate is relevant for any taxpayer whose income is not taxable. Examples could include a taxpayer whose income is below the ₹2.5 lakh threshold or not taxable due to rebate under section 87A, or a taxpayer having losses or even a non-resident claiming non-taxability on account of a benefit under a Double Tax Avoidance Agreement,” Garg noted.
Also read: The new Income Tax Bill: Will linguistic makeover lead to taxation simplicity?
Standard deduction on property income
In the case of income from house property, the revised Bill also clarifies the right method to apply standard deduction. While calculating income from house property, the 1961 Act applies the 30% standard deduction on net annual value — i.e., after municipal taxes actually paid.
Initial readings of the February draft had raised doubts as to whether the deduction would apply on gross value or after municipal taxes.
“The updated text now makes it explicit that the standard deduction is calculated after reducing municipal taxes paid,” said Dinesh Kanabar, CEO, Dhruva Advisors.
He noted that this preserves continuity with existing practice and prevents an inadvertent increase in taxable income, avoiding unnecessary disputes.
Pre-construction interest deduction stays intact
Buying a property to rent out?
The Bill confirms the availability of pre-construction interest deductions for rental properties. Under the 1961 Act, if the property is completed within five years, interest from the pre-construction period can be claimed in five equal instalments from the year it is first let or occupied.
“The original draft created uncertainty about whether this benefit would continue for rental properties,” Kanabar said. “The clarification makes it clear that the deduction remains intact.”
Also read: Income tax filing: How to deal with inaccuracies in annual information statement
He stressed the importance of this relief for property investors: “Taxpayers who incur substantial interest costs before completion should not be disadvantaged just because their property is rented rather than self-occupied.”
If you’ve been worried about losing refunds, dealing with extra TDS hassles, or missing out on property deductions, these changes should put you at ease.
