Income Tax Bill 2025: What Every Family Needs to Know About Clubbing of Income [Read Bill]

The government has taken a huge step towards simplifying and consolidating the provisions of the Income Tax Act, 1961, by introducing the Income Tax Bill, 2025 (ITB) in Parliament. The bill aims to enhance clarity, ease compliance, and modernize tax administration while maintaining integrity in tax collection.

In this article, let’s take a detailed look at the key changes in clubbing income, deeming provisions, setting off and carrying forward of losses, and Chapter 6A deductions.

Clubbing of Income: Understanding the Provisions

What is Clubbing of Income?

Under normal circumstances, a person is taxed only on the income earned by them. However, in certain special cases, the income of another person is included (i.e., clubbed) in the taxable income of the taxpayer, making them liable to pay tax on both their own income and the clubbed income.

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For example:

• If a minor child earns an income, it is clubbed with the income of their parent and taxed accordingly.
• If an individual invests in property, fixed deposits, shares, mutual funds, or post office savings in the name of their spouse, the income from such investments is clubbed with the taxpayer's income.

Key Clubbing Provisions in the ITB 2025

The provisions relating to clubbing of income are governed by Sections 60 to 64 of the Income Tax Act. These provisions prevent tax evasion by stopping taxpayers from shifting their income to family members to reduce tax liabilities.

Under Section 64 of the Income Tax Bill, 2025, a key provision states that:

• If an individual has a substantial interest in a business or entity, any income received by their spouse in the form of salary, commission, fees, or remuneration from that entity will be clubbed with the taxpayer’s income.

Modification in Spousal Clubbing Rules

Previously, clubbing provisions did not apply if the spouse possessed "technical or professional qualifications" and earned income based on their knowledge and experience. This condition was cumulative—meaning both technical/professional qualifications and experience were required.

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What has changed in the ITB 2025?

• The first condition (possession of technical/professional qualifications) has been removed.
• The term “qualification” has been explicitly included in the second condition alongside knowledge and experience.
• This means that income can now be attributed to technical/professional knowledge, experience, and qualifications, without requiring formal educational degrees.

According to Taxmann’s Advisory & Research, the new provision does not explicitly state that the spouse must hold qualifications. Instead, it recognizes cases where a spouse applies technical or professional knowledge and experience, irrespective of formal credentials.

Deeming Provisions: Ensuring Fair Taxation

Deeming provisions under Sections 68 to 69D of the Income Tax Act play an important role in taxing unexplained income, investments, and expenditures. These provisions prevent tax evasion by ensuring that undisclosed funds are appropriately taxed.

Key Updates in Deeming Provisions in ITB 2025

• Section 69B has been split into two parts:
  • Investment-related provisions are merged with Section 69.
  • Asset-related provisions are merged with Section 69A.
• Section 69D has been updated to include the term “negotiable instrument” along with “hundi” to align with modern financial practices.
• The tax rate for deemed income is now explicitly specified within the same chapter to reduce litigation.

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Does the Government Still Tax Unaccounted Cash?

Yes. the heading of Section 68 has been changed from "cash credits" to "unexplained credits", but unaccounted cash found during tax raids, search, and seizure operations continues to be taxed under deeming provisions.

Chapter 6A Deductions: Simplification and Consolidation

Chapter 6A of the Income Tax Act deals with deductions that reduce taxable income. These deductions are vital for encouraging savings, investments, and economic growth. The new bill has made the following key changes:

1. Integration of Provisos and Explanations

Complex provisos and explanations have been merged into the main sections to enhance clarity.

2. Major Restructuring of Section 80C

• Section 80C deductions (for investments like life insurance, provident funds, etc.) have been reorganized into Schedule 15.
• The deduction limit is clearly stated in the section, while Schedule 15 provides a structured list of eligible savings instruments.
• This makes tax planning simpler for millions of middle-class taxpayers.

3. Consolidation of Profit-Linked Deductions

Deductions that were previously spread across different sections (e.g., Section 10A) have now been grouped together under Part C of Chapter 6A. This reduces confusion and litigation over their interpretation.

4. Merging of Section 80TTA and 80TTB

• Section 80TTA (general deduction on interest from savings accounts) and Section 80TTB (specific deduction for senior citizens) have been merged into a single structured provision.
• This makes it easier to understand eligibility criteria and deduction limits without referring to multiple sections.

To Read the full text of the Order CLICK HERE

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