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The Income Tax Bill 2025, recently tabled in the Lok Sabha by Union Finance Minister Nirmala Sitharaman, is set to bring significant changes to India’s tax landscape. Aimed at simplifying tax laws and reducing the complexities of the Income Tax Act 1961, this new bill promises easier compliance, tax reforms for individuals and businesses, and clarity on various provisions. If passed, the new law will take effect on April 1, 2026, replacing the decades-old tax regime. Let’s dive into the key changes and what remains the same under this proposed bill.
If passed, the Income Tax Bill 2025 will replace the existing Income Tax Act of 1961 and is set to come into effect on April 1, 2026. This bill, presented by Union Finance Minister Nirmala Sitharaman, focuses on simplifying tax laws, reducing outdated provisions, and enhancing ease of compliance.
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The bill will now be reviewed by the Parliamentary Standing Committee on Finance, which will begin consultations on the proposed changes.
Key Highlights of the New Income Tax Bill 2025
| Aspect | Changes |
|---|---|
| Simpler & Shorter Law | The new bill is 201 pages shorter than the current Act. The amended Income Tax Act 1961 is 823 pages, while the new Income Tax Bill 2025 is condensed to 622 pages, with fewer provisos. |
| Tax Year Concept | The term "assessment year" is replaced by "tax year" to reduce confusion. For new businesses, the tax year will start from their date of establishment. |
| Revised Income Tax Slabs | New slabs proposed for income taxation: |
| Income Range | Tax Rate |
|---|---|
| Up to Rs 4,00,000 | No Tax |
| Rs 4,00,001 to Rs 8,00,000 | 5% |
| Rs 8,00,001 to Rs 12,00,000 | 10% |
| Rs 12,00,001 to Rs 16,00,000 | 15% |
| Rs 16,00,001 to Rs 20,00,000 | 20% |
| Rs 20,00,001 to Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Note: Salaried individuals earning up to Rs 12 lakh annually do not need to pay tax, due to tax rebates under Section 87A as announced in the Union Budget 2025.
Deduction Benefits for Salaried Individuals
| Deduction | Details |
|---|---|
| Standard Deduction | Rs 50,000 or salary amount, whichever is lower. |
| Employment Tax & Gratuity | Fully deductible under the Gratuity Act, 1972. |
| Other Gratuity Deductions | Capped at Rs 75,000. |
| Pensions for Government, Defence & Civil Services | Fully deductible. |
| Retrenchment & Voluntary Retirement Benefits | Deduction limits of Rs 50,000 and Rs 5,00,000, respectively. |
Other Key Taxation Features
- Tax Heads: The five existing tax heads (salaries, house property, business/profession, capital gains, and other sources) remain unchanged.
- LTCG & STCG: No major changes to long-term and short-term capital gains taxation rules.
- Tax Audits: Chartered accountants (CAs) will continue conducting tax audits. However, company secretaries (CS) and cost accountants (CMAs) will not participate in this process.
What Remains the Same?
- ITR Filing Deadlines: There are no changes to deadlines for filing income tax returns.
- Old vs New Tax Regime: The old tax regime will remain an option, although the new tax regime will be the default.
Published date : 14 Feb 2025 11:16AM
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