Income Tax Bill 2025: All major changes coming for taxpayers
What's the story
The Indian government is gearing up to introduce the new Income Tax Bill 2025, which will replace the existing Income Tax Act of 1961.
The proposed legislation is likely to be tabled in Parliament on Thursday, February 13.
The main aim of this bill is to simplify existing tax laws and reduce litigation, making them more accessible and comprehensible for the common man.
Tax calendar
New tax year concept and unchanged financial year
To avoid confusion among taxpayers about assessment and previous years, the new bill introduces the concept of a 'tax year.'
This unified term seeks to clarify when ITRs are filed and taxes paid. Terms like 'assessment year' will be done away with.
However, it is important to note that the financial year period, from April 1 to March 31, will not change under this new legislation.
Legislative adjustments
Section modifications and residency laws
The new bill will also amend sections under the existing Income Tax Act.
For instance, income tax return filing is currently covered under Section 139, but that may change as part of the efforts to simplify direct tax laws.
However, despite these changes, the residency laws are likely to remain unchanged in the new act.
They will continue to classify taxpayers into three categories: ordinarily resident individuals, non-ordinarily resident individuals, and non-resident individuals.
Tax reform
A more comprehensive and structured approach
The new Income Tax Act 2025 is more exhaustive than its predecessor, with 536 sections and 16 schedules spread over more than 600 pages.
The increase in sections indicates a more systematic approach to tax administration, with modern compliance mechanisms, digital governance, and streamlined provisions for businesses and individuals.
The bill also simplifies the computation of depreciation for businesses by providing a formula.
Tax clarity
Simplification and unchanged tax slabs
The new bill seeks to make interpretation easier for taxpayers by eliminating explanations and provisos from the existing version.
Deductions from salaries like standard deduction, gratuity, leave encashment, etc., have been tabulated in one place instead of being spread across various sections and rules.
All TDS-related sections have been grouped under a single clause with tables for understanding.
However, no changes have been made to the income tax return filing deadlines or income tax slabs as announced in Budget 2025.