Finance Minister Nirmala Sitharaman has presented the new Income Tax Bill 2025 in Parliament today, February 13, 2025. This presentation marks a significant step in reforming India’s direct tax system.
Key Features of the Bill
The proposed new income tax bill is designed to replace the Income Tax Act of 1961, with the goal of making direct taxes simpler.
Simplification and Structural Overhaul:
The idea is to get rid of old, confusing parts of the law and make the language easier to understand. Currently, the tax law has 298 sections and 14 schedules, but the new bill aims to shorten this considerably. The new bill is a substantial document at 622 pages, but it’s expected to cut down the number of sections by about 25-30%. This should make it easier for taxpayers to understand the rules and follow them.
Introduction of ‘Tax Year’ Concept:
One key change is the introduction of the term “Tax Year,” replacing “Assessment Year” and “Previous Year.” This aligns India’s tax system with the financial year and international practices. Importantly, the bill doesn’t change the current tax rates or slabs, and existing income categories like salaries and capital gains remain the same.
No Change in Tax Rates and Slabs:
The bill does not propose changes to existing tax rates or slabs. The current categories of tax heads including salaries, house property, and capital gains remain unchanged.
Emphasis on Digital Transactions:
The bill strongly promotes digital transactions. It includes provisions for easier electronic record-keeping and tax filing, reflecting the global shift towards digital finance. Virtual Digital Assets (VDAs), such as cryptocurrencies, are now recognized and taxed like other assets.
Business Thresholds for Presumptive Taxation:
For businesses, the threshold for the presumptive tax scheme is proposed to be increased. Businesses with a turnover of up to ₹3 crore can now opt for this scheme, up from the previous limit of ₹2 crore. The threshold for professionals has also been raised from ₹50 lakh to ₹75 lakh.
Tax Audits and Compliance:
Regarding tax audits, Chartered Accountants (CAs) will continue to be the primary professionals responsible. The bill does not include Company Secretaries (CSs) or Cost Accountants (CMAs) in this role. The emphasis on digital processes and reduced direct interaction aims to improve compliance and lessen the risk of harassment for taxpayers.
Process and Implementation
After it’s introduced, committees will review it. It will go to the Standing Committee on Finance for their suggestions, and then the cabinet will review it again before it goes back to Parliament for a final vote. The plan is for the new law to take effect on April 1, 2026, which is the beginning of the new financial year.
Major Reform
This new bill is part of a bigger effort to update tax laws, lessen the amount of legal disputes over taxes, and make the tax rules clearer. The government is pushing for these changes, but some people think the new bill is still too complicated. Even so, it’s generally seen as a big step towards a better tax system in India.
The introduction and later implementation of the 2025 Income Tax Bill is a major change to how taxes work in India. The goal is to make tax laws more transparent and simpler, while also adapting to the current economic situation.
Official PDF Copies:
Income Tax Bill, 2025 for proposed “Income Tax Act, 2025”
Corrigendum to Income Tax Bill, 2025
General FAQs on the Broad scope of New Income-tax Bill, 2025
FAQs on New Income-tax Bill, 2025
Navigator (Provisions of Income Tax Act 1961 to Income Tax Bill 2025)