New Income Tax Bill 2025: Key Changes Taxpayers Can Expect

Finance Minister Nirmala Sitharaman is set to introduce the new Income Tax Bill 2025 in the Lok Sabha today, February 13, 2025. As per the revised business list on the Lok Sabha website, the bill is expected to be introduced anytime between 11 AM and 3:30 PM. The bill, part of the Parliament’s Legislative Business, is listed as the 27th item on the agenda for today.

The new Income Tax Bill aims to simplify the existing Income Tax Act, 1961, making tax laws more accessible for the common taxpayer and reducing litigation. Since its inception, the Income Tax Act, 1961, has undergone multiple amendments through 66 Union Budgets, including two interim budgets. The proposed bill seeks to bring clarity, streamline tax provisions, and introduce reforms that impact taxpayers significantly.

Key Highlights Expected From the New Income Tax Bill, 2025

1. Introduction of the Concept of Tax Year

The bill is expected to introduce the concept of a “tax year” to resolve taxpayer confusion surrounding the assessment year and financial year. Currently, taxpayers often misinterpret these terms when filing returns and depositing taxes. The new approach may unify these concepts, ensuring clarity in income tax return (ITR) filings.

2. No Change in Financial Year

As per the news reports, despite the introduction of the tax year, the financial year will remain unchanged, continuing from April 1 to March 31. The government has decided not to adopt the calendar year system for tax purposes, ensuring consistency with global and domestic financial reporting.

3. Renumbering and Modification of Tax Sections

To enhance readability and simplify tax laws, the bill is expected to bring changes to section numbering and categorisation. For example, under the current Income Tax Act, income tax return filing is governed by Section 139, and the new tax regime falls under Section 115BAC. The new bill will likely restructure and simplify these sections, making tax compliance easier for individuals and businesses.

4. Residency Rules Remain Unchanged

As per the media reports, the new Income Tax Bill does not propose changes to residency provisions. The three existing residency categories—

• Ordinarily resident individuals
• Non-ordinarily resident individuals
• Non-resident individuals

5. Simplification of Tax Deductions and Salary Components

Taxpayers may benefit from a more structured and user-friendly tax deduction system. Currently, deductions like standard deduction, gratuity, and leave encashment are scattered across different sections and rules. The new bill consolidates these deductions into a single section, making it easier for salaried employees to understand their tax liabilities.

Businesses may benefit from simplified depreciation calculations under the new framework. The bill introduces a clear formula for computing depreciation, reducing ambiguity and making tax compliance more straightforward for corporate taxpayers.

6. No Changes to Income Tax Slabs, ITR Filing Deadlines, and Capital Gains Tax

The new bill retains the existing income tax slabs, capital gains tax rules, and ITR filing deadlines, as announced in the Union Budget 2025. This decision ensures tax certainty for individuals and businesses, allowing them to plan their finances without unexpected changes.

7. Implementation Timeline: April 1, 2026

As per news reports, the new Income Tax Bill 2025 will likely come into effect from April 1, 2026, marking the beginning of FY 2026-27. This gives taxpayers ample time to understand and prepare for the new regulations before implementation.

Conclusion

The new Income Tax Bill 2025 is expected to bring greater transparency, reduce tax-related complexities, and improve compliance rates. Businesses, salaried employees, and individual taxpayers will benefit from a more structured tax framework.

As FM Nirmala Sitharaman presents the bill in Parliament today, stakeholders across industries will keenly watch its progress that may shape its final version before becoming law.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.