New Income Tax Bill 2025 Highlights & Key Changes

The Income Tax Bill 2025 was introduced in Parliament on February 13, 2025, marking a significant reform in India's taxation framework. A specialized committee is currently reviewing the bill and is expected to present its report by the Monsoon Session. This legislation introduces structural modifications, simplified language, and new provisions to modernize India's tax system. Understanding the new Income Tax Bill 2025 highlights is essential for taxpayers, financial professionals, and students preparing for taxation-related examinations. This article provides a comprehensive overview of the Income Tax Bill and its key implications. Readers can also download the Income Tax Bill for a complete understanding of the proposed framework.

Implementation Timeline

A common concern among taxpayers is the effective date of the Income Tax Bill. The legislation will come into effect on April 1, 2026, making the first financial year under the new system FY 2026-27. Individuals and businesses should prepare for a seamless transition to ensure compliance with the updated tax regulations.

Guidelines for CA, CS, and CMA Candidates

The transition period for taxation-related examinations is as follows:

• Examinations conducted on or after April 1, 2027, will follow the new Income Tax Bill 2025 highlights.

• Examinations conducted before March 31, 2026, will continue to adhere to the Income Tax Act, 1961.

Objectives of the Income Tax Bill 2025

The Income Tax Bill aims to modernize India’s tax system while ensuring greater transparency and efficiency. The key objectives include:

• Aligning tax policies with international best practices.

• Enhancing clarity by using simplified language and an organized structure.

• Streamlining tax calculations for individuals and businesses to improve accuracy and compliance.

Several structural and procedural revisions have been incorporated to achieve these goals. Below are the new Income Tax Bill 2025 highlights that taxpayers should be aware of.

Key Revisions in the Income Tax Bill

1. Structural Refinement

• The previous Income Tax Act contained 298 sections, but due to various sub-sections, it comprised over 800 provisions.

• The new Income Tax Bill consolidates and refines these provisions into 536 sections, removing redundancies.

2. Enhanced Chapter Organization

• The former tax legislation was divided into 47 chapters, making navigation complex.

• The Income Tax Bill now comprises 23 well-structured chapters, improving accessibility and interpretation.

3. Concise Legislative Framework

• The word count has been significantly reduced to improve readability:

  • Previous Act: 5.12 lakh words

  • New Income Tax Bill: 2.6 lakh words

4. Page Reduction for Efficiency

• The Income Tax Bill now consists of 622 pages, which is 200 pages fewer than the previous version, facilitating better comprehension.

5. Simplified Language & Computation Mechanisms

• The new legislation introduces user-friendly language, structured tables, and formula-based tax calculations to eliminate ambiguities.

6. Measures to Minimize Tax Litigation

• The law integrates past judicial pronouncements to mitigate legal disputes, ensuring greater predictability in tax rulings.

7. Introduction of the ‘Tax Year’ Concept

• The conventional terms ‘Previous Year’ and ‘Assessment Year’ have been eliminated.

• The ‘Tax Year’, running from April 1 to March 31, has been introduced for consistency and simplification.

8. Retention of Dual Tax Regimes

• Contrary to prior expectations, both the old and new tax regimes will continue to coexist, allowing taxpayers to select the most suitable option.

9. Taxation of Virtual Digital Assets (VDA)

• The new Income Tax Bill 2025 highlights the formal inclusion of Virtual Digital Assets (VDA), such as cryptocurrencies and NFTs, under taxable assets.

• Previously, taxable assets included only cash, bullion, and jewelry; now, undisclosed income in digital assets is also regulated.

10. Stability in Tax Slabs

• The tax slabs remain unchanged, as specified in the Union Budget 2025.

• For example, individuals earning INR 12 lakh will continue to enjoy zero tax liability due to applicable rebates.

11. Continuation of Five Income Heads

• The core classification of taxable income remains consistent under five categories:

  1. Salary

  2. House Property

  3. Business/Profession

  4. Capital Gains

  5. Other Sources

12. Revised Section Numbers for Clarity

• The Income Tax Bill introduces a new numbering system for improved organization:

  • Salary Income: Old sections 15-17 → New 15-19

  • House Property: Old sections 20-27 → New 20-25

  • Business/Profession: Old sections 28-44 → New 26-66

  • Capital Gains: Old sections 45-55 → New 67-91

  • Other Sources: Old sections 56-59 → New 92-95

These modifications enhance accessibility while preserving the fundamental taxation principles.