New Income Tax Bill 2025: What Changed and What Remains Unchanged?

The New Income Tax Bill was introduced in the Lok Sabha on 13th February 2025. The purpose of this bill is to simplify the complex Income Tax Act of 1961. The Income Tax Act has undergone many changes since 1961, as certain changes are made to it every year through the Union Budget. The Income Tax Act has evolved significantly over the past six decades, with everything from adjustments to tax rates to the introduction of new provisions, alongside the introduction of fresh exemptions and the removal of outdated ones.

Over the years, it has been revised so extensively that it now bears little resemblance to its original form when it was first enacted.

For quite some time, tax experts and taxpayers alike have expressed a need for a completely new law—one that is built from the ground up, integrating all existing provisions and expanding beyond them. The Bill if passed will be effective from 1st April 2026.

Purpose of the New Income Tax Bill

In the Budget Speech of 2024, Finance Minister Nirmala Sitharaman revealed the government's intention to scrutinise the Income Tax Act, 1961 in totality. Through this scrutiny, the Act was to be made more concise so that the taxpayers could easily read and understand it.

The primary objective mentioned by the Minister is to reduce disputes and litigation involving the tax system. The government would thereby enhance tax certainty with the promise of offering clarity and ease of compliance for taxpayers. 

After the announcement, the Income Tax Department launched a public consultation process where taxpayers could propose changes they would like to see in the new law. This move showed the interest of the government in public input and a more inclusive approach to tax reform.

The Finance Minister in the 2025 Budget had assured that the new Income Tax Bill would be brought soon. She further said it would embody the same philosophy of Nyaya that was at the heart of Bharatiya Nyaya Sanhita. The law had repealed the Indian Penal Code of 1860 from July 2024. It is a commitment of the government to reform, fairness, and justice.

Changes in New Income Tax Bill

The new Income Tax Bill 2025 spanning over 600 pages, 536 sections, 23 chapters and 16 schedules has provisions which are extensive yet easier to understand and aims at improving the compliance procedure. Being easier to read and understand for taxpayers and tax authorities alike, it is set to give more certainty to taxation and reduce litigation between taxpayers and the revenue authority. 

The following are the changes in the new income tax bill:

• Ease of Compliance: The new income tax bill will make compliance easier for the taxpayers and the income tax authorities. It has a more structured and streamlined tax administration process and includes the use of modern compliance mechanisms.
• Concept of Tax Year: The tax year means the period of twelve months of the financial year commencing on 1st April. This is seen to replace the concept of Financial Year and Assessment Year reducing confusion.
• Virtual Digital Asset: The Income Tax Bill 2025 gives a more broader definition of Virtual Digital Assets. The definition now includes crypto-assets, non-fungible tokens or any other digital asset as the Government may specify.
• Tax Recovery and Appeal: The Bill provides provisions which bring reforms to the tax recovery and appeal processes.  
• Reduced Content and Easier to Understand: The Income Tax Bill 2025 even though with more sections and same number of chapters, is shorter in terms of content and words when compared to the Income Tax Act 1961. The aim is to simplify the content and make it much easier to understand.

What Remains Unchanged in The Bill?

Most of the provisions and rules remain unchanged in the Income Tax Bill 2025. All the proposed changes in the Budget 2025 have been inculcated accordingly in the Bill. The scope of income, criteria to determine residential status, slab rates and other limits and rates remain the same or have been changed to those made in the Budget accordingly.

However, all provisions related to tax deductions at source and as such have been grouped and mentioned under the same section. 

Benefits of New Income Bill 

• Reduced Complexity: The new income tax bill is expected to simplify the tax structure by minimising the number of deductions and exemptions available to taxpayers.
• Increased Compliance: It will streamline tax laws and reduce legal ambiguities.
• Liberal Tax Rates: The Bill provides for a relieved tax structure which ensures more money saved in the hands of the taxpayer.
• Minimised Legal Disputes: The simplification of tax laws is expected to reduce litigation burdens for individuals and businesses significantly.

Final Word

In conclusion, the Income Tax Bill 2025 is reformative with an effort to bring a change in the direct taxation landscape of the country. However, note that the provisions of the Bill will only come into effect after it is passed by both the houses of the parliament and is assented by the President. It is likely to be implemented from 1st April 2026.