New Income Tax Bill 2025: Key Details

• Home
• /
• Knowledge Base
• /
• News & other businesses
• /
• Blog
• /
• New Income Tax Bill 2025: Key Details

New Income Tax Bill 2025: Key Details

On 1 February 2025, Finance Minister Nirmala Sitharaman announced in her Union Budget speech that new Income Tax law would be tabled soon. Thereafter, on 7 February 2025, the Cabinet approved the Income Tax Bill 2025. After this, the Bill was tabled by the Finance Minister in the Lok Sabha on 13 February 2025. 

If the New Income Tax Bill 2025 goes into effect, it’ll replace the existing Income Tax Act 1961. Many taxpayers are curious about how the new bill will affect them if it is passed as a law.

In this blog post, we shall explain to our readers the key details of the New Income Tax Bill 2025!

Why is there a Need to Replace the Income Tax Act 1961?

The IT Act 1961 has become bulky and complex as a result of the frequent amendments it has gone through over the decades. It has grown to 47 chapters, 819 sections, 18 tables and 6 formulae and consists of 512,535 words making it complicated for taxpayers to comprehend and keep up with. 

On the other hand, the new Income Tax Bill 2025, is nearly half the size as compared to the old structure. It contains a total of 259,676 words, 23 chapters, 536 sections, 57 tables and 46 formulae. 

If the bill is passed into a law, it’ll simplify the tax system for taxpayers in India. It would remove the complicated language, which is difficult to understand by taxpayers. For better understanding and enhanced readability, it aims to use simpler language. The new income tax bill eliminates redundant and unneeded clauses, eliminates duplication, and logically identifies sections for better clarity and easier reference.

Changes under the Income Tax Bill 2025

We shall discuss the changes under the Income Tax Bill 2025 herein:

• Introduction of ‘Tax Year’ Concept: The bill introduces a new concept i.e., ‘tax year’. If the IT Bill 2025 is passed, ‘tax year’ will replace the existing assessment year and previous year terms. However, the term ‘financial year’ will still be used.

• Recognition of Virtual Digital Assets (VDAs): The new Income Tax Bill officially recognizes virtual digital assets like cryptocurrencies as an asset under property’s definition. It essentially means that VDAs will now be considered as capital assets and will be taxed accordingly.

• Increase in Turnover Limit for Presumptive Taxation: The new bill increases the turnover limit for businesses eligible for presumptive taxation from Rs. 2 crore to Rs. 5 crore. The threshold has been raised from Rs. 50 lakh to Rs. 75 lakh for professionals to make tax compliance easier for smaller businesses as well as self-employed people.

• Adjustments to Capital Gains Exemptions: The Income Tax Bill streamlines and eliminates the outdated exemptions. It removes Section 54E, which detailed exemptions for capital gains on transfers of assets before April 1992.

• More Organized Provisions: Under the Income Tax Bill 2025, crucial tax-related details like Tax Deducted at Source (TDS), Tax Collected at Source (TCS), exemptions and deductions are now clearly structured using tables. Provisions for the Non Profit Organizations are consolidated into a single chapter instead of multiple chapters. Previously scattered deductions for salaried individuals are now grouped under the salary chapter of the bill.

• Updated Provisions for Revenue Recognition and Withholding Tax: New provisions under the IT Bill 2025 simplify the revenue recognition for service contracts and inventory valuation. For easier reference for taxpayers, the withholding tax provisions have been reorganized into a table.

What Remains Unchanged in Income Tax Bill 2025

The Income Tax Bill 2025 keeps certain provisions of the ITA 1961 unchanged.:

• No alteration to tax rates/slab: The bill does not change the current income tax rates or slabs to ensure stability for individuals and businesses liable to pay taxes. The new tax regime’s slabs are mentioned in tabular form. However, for the old regime tax rates, there is no table. 

• Continuous validity of legal definitions and court rulings: Crucial terms and definitions that have been established during previous court rulings remain the same. This ensures consistency and accuracy in tax interpretation. 

• Certain deductions remain unchanged: Certain deductions in the bill remain unchanged. This includes existing deductions for rent, life and health insurance premiums, EPF contributions and home loans.

• No change in filing deadlines: The bill does not propose any changes in timelines for filing tax returns and paying taxes. 

Conclusion

It is anticipated that the new Income Tax Bill will maintain the fundamental tax structure while offering a more transparent tax framework. The government wants to make it easier for people and businesses to comply with tax laws by simplifying the language and restructuring provisions. 

FAQs about Income Tax Bill 2025

Q1. When will the new Income Tax Bill 2025 come into force?

A. If the Income Tax Bill is passed, it’ll come into force on 1st April 2026.

Q2. What are Virtual Digital Assets?

A. Virtual Digital Assets are digital representations of value. Examples of Virtual Digital Assets include cryptocurrencies, such as Bitcoin and Ethereum.

Q3. How many taxpayers will benefit from the revised tax rates and slabs?

A. Around 8.75 crore individuals have filed their income tax returns for the assessment year 2024-25 (according to the Income Tax Department.) All taxpayers who were previously paying tax under the new regime will benefit from these revisions.

Q4. Is the standard deduction on salary available under the new tax regime?

A. Yes, taxpayers under the new tax regime are eligible for a standard deduction of ₹75,000. This means a salaried individual earning up to ₹12,75,000 before the standard deduction will not be liable to pay any tax.

• 337 views