Old Income Tax Act 1961 vs New Income Tax Bill 2025

The need to simplify the existing tax laws, which are complicated more often than not, was first felt by the lawmakers in the year 2009. On February 7, 2025, the new Income Tax Bill, 2025 was approved by the Cabinet and has now been tabled in the parliament. Once the bill is passed in the Parliament, it will become an act or code whatsoever. 

If passed in parliament, the new Income Tax Bill will become effective on 1st April 2026.

Let's look at the key differences between the existing Income Tax Act and the proposed Income Tax Bill 2025.

Structural Changes

• The new Income Tax Bill has reduced content as compared to the current Income Tax Act. The section count has been reduced from more than 700 odd sections to 536. 
• For example, Section 80C is different from Section 80D. In the new bill, all clauses (or sections) are numbered sequentially, without the use of alphabets in the section numbers. As a result, the total count of sections appears to have increased in the new bill. In substance, it has not.
• The following table represents the changes made in overall layout in the new bill:

Concept of Tax Year in Income Tax

• Removal of concept of previous year and assessment year was one of the significant changes anticipated by both professionals and the public at large in the new bill.
• In the current Income Tax Act, concepts of the previous year and Assessment year are followed. 
• The previous year is the year in which the income is earned, whereas the assessment year is the year in which the income is charged to tax. The assessment year begins where the previous year ends, i.e., the next year to the previous year. Return of income needs to be filed in the assessment year for the income earned in the previous year.
• These references created complexities and challenges in determining the period for which tax provisions apply.
• Therefore, the new bill introduces the concept of ‘Tax Year’. A separate section elaborates on this concept in the new bill (Section 3).
• Broadly speaking, the Tax year is the financial year from 1st April to 31st March.
• So, wherever required, the dual reference has been simplified by mentioning it as ‘Succeeding Tax Year’ instead of ‘Assessment Year’.

Inclusion of Digital Assets, Income and Transactions

• Recently, digital transactions have increased significantly, leading to the rise of digital assets and income earned online. As a result, digital income and assets have been included wherever necessary to ensure digital income and assets are appropriately considered for taxation purposes.
• For instance, the definition of undisclosed income includes Virtual Digital Asset, which is not so in the existing act.

Due dates

• There have been no changes in the due dates in the new bill.
• There has been only a change in nomenclature—in the existing act, the due dates fall within the assessment year. Now, they are in the subsequent tax year.
• For instance, under the current act, the due date for individuals not subject to tax audit for FY 2024-25 is 31st July of the relevant assessment year, which falls on 31st July 2025. Whereas, the new bill sets the due date as 31st July of the succeeding tax year, which is also 31st July 2025.
• The due dates specified in the new bill are given below for reference:

Section 202 (The New Income Tax Bill) v/s 115BAC(Existing Income Tax Act)

• Section 115BAC of the existing Income Tax Act talks about the new tax regime for the following assessees
  • Individuals
  • HUF.
• In the new Income Tax Bill, it is dealt under section 202. Section 202 talks about the new tax regime for the following assessees
  • Individuals
  • HUF
  • Association of Persons
  • Body of Individuals
  • Artificial Juridical Person.
• Opting out of the new tax regime option - is made available in the new Income Tax Bill also. The new regime is still the default tax regime.
• Broadly speaking, deductions not available under section 115BAC of the existing Income Tax Act are also not available under section 202 under the new Income Tax Bill. However, deductions available under section 115BAC are still made available under the new Income Tax Bill. 

TDS provisions

• All the TDS sections in the current act (Section 192 to 194T) are now consolidated under one section, section 393.
• The rates and threshold limits have not been changed. The rates and limits as proposed in Budget 2025 also hold good in the new bill.

Final word

While the new bill does not completely overhaul the existing provisions,  it simplifies the language and improves the presentation of the provisions. The core principles still remain intact, while it tries to make the provisions more tax-payer friendly. Through simplification, the new bill is expected to promote more transparency and efficiency on the part of tax payers and also government.

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