Finance Minister Nirmala Sitharaman introduced the Income Tax Bill 2025 in the Lok Sabha on February 13, aiming to replace the existing Income Tax Act of 1961. The new legislation is set to take effect from April 1, 2026.
The simplification exercise was guided by three key principles: improving clarity and coherence through textual and structural refinements, maintaining continuity and certainty by avoiding major tax policy changes, and ensuring predictability for taxpayers by keeping tax rates unchanged.
Let’s take a look at the key changes introduced in the New Income Tax Bill 2025.
Major Highlights
Simplified language, removal of unnecessary provisions, and a more concise structure.
No new or additional taxes introduced.
Contains 536 sections and 23 chapters.
Set to be implemented from April 1, 2026.
Introduces the ‘Tax Year’ concept, replacing terms like ‘Previous Year’ and ‘Assessment Year.’
Specifies capital gains calculations for market-linked debentures.
Consolidates salary deductions (standard deduction, gratuity, leave encashment) under one section.
Includes a Taxpayer’s Charter outlining rights and responsibilities.
The New Income Tax Bill 2025
Finance Minister Nirmala Sitharaman first announced the introduction of a new Income Tax Bill in the Union Budget 2025, confirming that it would be presented the following week. On February 13, she tabled the bill in the Lok Sabha, referring it for review to a committee of members nominated by the Lok Sabha Speaker.
A key feature of the bill is the introduction of the ‘Tax Year’ — a 12-month period beginning in April, replacing the complex terms ‘Previous Year’ and ‘Assessment Year’. This change has gained significant attention, and if passed, will come into effect from April 1, 2026.
Although no major structural changes have been made to the 622-page bill, as promised, it has been rewritten to enhance readability and remove redundant and repetitive provisions for better clarity.
The proposed bill is shorter and consists of 23 chapters, 536 sections, and 16 schedules, compared to the existing Income Tax Act.
Virtual Digital Asset Taxation
The new bill formally defines Virtual Digital Assets (VDAs) and their tax treatment, providing a clear legal framework for cryptocurrencies, NFTs, and other digital assets. This ensures greater certainty in taxation and compliance for VDAs.
Deductions Under Section 80C Now Under Clause 123
Under the old tax regime, taxpayers could claim deductions under Section 80C for investments in Equity-Linked Saving Schemes (ELSS), Public Provident Fund (PPF), life insurance premiums, National Pension System (NPS), and tax-saving fixed deposits, with a cap of Rs 1.5 lakh.
In the new Income Tax Bill 2025, these deductions have been consolidated under Clause 123 for better clarity.
What Stays Unchanged?
The proposed bill retains the current tax rates and income slabs outlined in the previous budget. Deadlines for tax filing, payments, and other compliance obligations remain the same. While the core tax framework remains intact, the revised bill aims to enhance clarity and streamline provisions, making tax compliance more straightforward for individuals and businesses.
Wrapping Up
The government conducted extensive consultations with taxpayers, businesses, and industry experts before drafting the bill. Several suggestions were reviewed and incorporated, though further revisions may be made. The Income Tax website is still accepting feedback under the ‘new’ section, as reported by Financial Express.
Once passed, the Income Tax Act 2025 will enhance readability, simplify provisions, improve navigation, and reorganize sections logically to make tax compliance easier.
*This article is for informational purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
