Finance Minister Nirmala Sitharaman presented the Income Tax Bill 2025 in the Lok Sabha on February 13. The bill aims to make the tax system simpler by using easy language, removing difficult terms, and reorganizing rules without adding any new taxes.
The new bill is 622 pages long and has 536 sections, 23 chapters, and 16 schedules. This is much shorter than the 1961 Income Tax Act, which had 298 sections in 14 schedules but was more the 1000 pages long. The main goal of the new bill is to make tax rules simpler for people, businesses, and organizations by removing unnecessary details.
After the Lok Sabha approves the bill, it will go to the Parliament’s Finance Committee for review. Then, it will be discussed again in both Houses of Parliament. The new Income Tax Bill 2025 will replace the old Income Tax Act of 1961. Once passed, it will be called the Income Tax Act, 2025, and is expected to take effect in April 2026.
Here are the tax rates based on income:
Tax Exemptions : People who earn up to Rs 12 lakh per year will not have to pay tax.
Standard Deduction : Standard deduction of Rs 75,000, which means income up to Rs 12.75 lakh will be tax-free.
Introduction of “Tax Year” : The Income Tax Bill 2025 introduces the concept of a “tax year” replaces complex terms like ‘assessment year’ and ‘previous year’, defined as a twelve-month period starting from April 1.
Clarifying Legal Text : The word “notwithstanding” is changed to “irrespective,” and tables and formulas are used instead of difficult explanations.
Backlog Deadline : A deadline has been set to resolve appeals at the first appeal level to reduce backlog.
Provisions on Capital Gains : The bill updates the rules on capital gains tax by combining different rules from the 1961 Act, making it simpler for securities and other investments.
Deadline extended for tax payers : Instead of two, taxpayers now have four years to fix mistakes or add missing information on their tax returns, giving them more time to make corrections.
Simplified deductions & exemptions : Earlier, tax deductions were spread across different sections like 10 and 80C to 80U. The new bill combines them into one place, making them easier to understand and use.
Unveiling of the Taxpayer’s Charter : The bill has a taxpayer’s guide that explains their rights and duties, making sure the tax system is clear and fair.
Enhanced Regulatory Clarity for Non-Profit Organizations : Clauses 332 to 355 set clear rules for tax-exempt organizations, making sure they follow strict guidelines when doing business.
Including crypto in Virtual Digital Assets (VDA) : Clauses 67 to 91 set clear rules for taxing digital assets like cryptocurrency. This is an important step by the Indian government, as it brings crypto under the country’s financial system. By officially recognizing Virtual Digital Assets (VDAs), it helps create clearer regulations, making it easier for blockchain-based financial tools to be accepted and used widely.
Empowerment of CBDT : The Central Board of Direct Taxes (CBDT) will have the authority to set tax administration rules and implement digital tax monitoring systems.
The Income Tax Bill 2025 will introduce significant revisions in numbers, clauses, and sections from the Income Tax Act, 1961.
Intimation notice of Income Tax Act
12A & 80G Compliance of Income Tax Act
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