Finance Minister Nirmala Sitharaman tabled the new Income Tax Bill 2025 in the Lok Sabha on Thursday. The bill, which aims to replace the Income Tax Act of 1961, is set to become effective from April 2026.
The minister also moved a motion to form a select committee on the bill, which was passed by the House. The new bill will reduce the number of sections from 819 to 536, streamlining the tax code significantly.
Changes
Concept Of Tax Year
The new Income Tax Bill introduces the concept of the tax year, merging the current terms of the assessment year and the previous year. This change aims to simplify the process for taxpayers, making it clearer for which year Income Tax Returns are being filed and taxes are being deposited.
Faceless Assessment
The bill codifies a comprehensive framework for faceless assessments under Clause 273. This includes automated case allocation via a National Faceless Assessment Centre, covering all stages of communication and compliance. This is a significant enhancement from the previous system, which did not explicitly include faceless assessments.
Digital Earnings
The new bill introduces definitions for digital assets and aligns the tax year with the financial year. This change simplifies the language and modernises the terminology, making it easier for taxpayers to understand and comply with the regulations.
What's Unchanged
Financial Year
The concept of the financial year remains unchanged. It will continue to start on April 1 and end on March 31, and the new income tax bill will not adopt the calendar year as a tax year.
Residency Laws
The residency laws remain the same under the new bill. There are no changes to the criteria that determine an individual's tax residency status.
TDS Compliance
While all TDS-related sections have been consolidated under a single clause with simplified tables for ease of understanding, the overall compliance requirements remain largely the same. This consolidation aims to make it easier for taxpayers to navigate TDS regulations.
ITR Filing Deadlines, Income Tax Slabs, Capital Gains
There are no changes to the income tax return filing deadlines, income tax slabs or capital gains taxation. These elements remain consistent with the announcements made in Budget 2025, promoting tax certainty for taxpayers.
HUF Income
The factors determining the income of Hindu Undivided Families remain unchanged. The clauses related to income from business or profession and total sales, turnover, or gross receipts continue to apply as before.
The new Income Tax Bill 2025 aims to simplify and modernise the tax code while maintaining stability in key areas, providing a balanced approach to tax reform.
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