New Income Tax Bill 2025: Finance Minister Nirmala Sitharaman introduced a new Income Tax Bill in the Lok Sabha on Thursday (February 13), after getting approval from the cabinet. This bill aims to replace the Income Tax Act, 1961, making tax rules simpler and more modern.
Sitharaman requested Speaker Om Birla to send the bill to a select committee for review. Some opposition members objected, but the House approved its introduction through a voice vote.
What’s New in the Bill?
The bill does not introduce new taxes. Instead, it simplifies tax laws, making them easier to understand.
It reduces legal complexities and aims to make tax compliance easier for everyone.
The government has promised that the new law will be 50% shorter than the current Income Tax Act.
The bill may also introduce lower penalties for certain offences, making the tax system more taxpayer-friendly.
It will remove unnecessary amendments and outdated provisions, making tax laws clearer for ordinary people.
Impact on Taxpayers
The new tax system, if passed, will apply from the financial year 2025-26, meaning taxpayers will follow it from the assessment year 2026-27. The main highlights include:
The tax year concept: The new bill introduces unified TAX YEAR concept, removing confusion between the financial year and assessment year , making it easier for taxpayers to understand when to pay taxes and file returns
No change in financial year: The tax year will still run from April 1 to March 31.
Revised tax sections: Existing tax sections will be reorganized for better clarity.
No change in residency rules: The definitions of "resident" and "non-resident" remain the same.
More comprehensive tax law: The bill will have 23 chapters, 536 sections, and 16 schedules, covering all aspects of taxation.
Easier TDS compliance: Tax Deducted at Source (TDS) rules will be simplified and combined under one section.
No change in tax slabs: Income tax rates and deadlines for filing returns will stay the same.
Retains income categories: The bill does not change the classification of different types of income.
Outdated rules removed: More than 300 unnecessary provisions will be taken out.
Implementation from April 1, 2026: Till then, the current Income Tax Act will continue to be in effect.
The government hopes that these changes will make tax filing easier and reduce disputes. If passed, the new law will provide a clearer and more efficient tax system for all taxpayers.