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Income Tax Bill 2025: Finance Minister Nirmala Sitharaman has introduced a new Income Tax Bill in the Lok Sabha, which aims to replace the decades-old Income Tax Act of 1961. The proposed legislation seeks to simplify the tax structure and make it easier for taxpayers to access, addressing long-standing criticisms of complexity and ambiguity.

The new bill proposes 23 chapters, 16 schedules and around 536 clauses, as against 23 chapters, 14 schedules and 298 sections in the existing law. The law has changed significantly due to the consolidation of laws and is now over 823 pages long.

In her speech, Finance Minister Sitharaman said, "We are reducing the income tax sections to 536. There will be major changes in the Income Tax Bill and the chapters will be reduced."

Introducing the bill, Sitharaman asked Lok Sabha speaker Birla to send the draft law to the House Select Committee, which will submit its report by the first day of the next session. The minister asked the Speaker to decide on the composition and rules of the proposed panel.

The bill will now be sent to the Parliamentary Standing Committee on Finance for further review and consultation.

Key changes and highlights of Income Tax Bill 2025

- The Income Tax Bill 2025 aims to repeal and replace the Income Tax Act, of 1961.

- The Income Tax Bill, 2025 replaces 298 sections and 14 schedules of the more than six-decade-old Income Tax Act, 1961, and completely revises 622 pages of the old Act, which now consists of 536 sections, 23 chapters and 16 schedules.

- The Income Tax Bill 2025 has 536 sections, up from 298 sections in the current Income Tax Act 1961. The provisions of the Act, which had 14 schedules, will be increased to 16 in the new Act; however, it is contained in only 23 chapters. Now the number of pages has been reduced to 622 – almost half of the previous vastness of the law, which included all the amendments of the last 60 years.

- Some unnecessary sections, such as fringe benefit tax, have also been removed. All anchors of 'description' or 'provisions' have been removed in the Bill, to make it reader-friendly.

- The Bill introduces a new concept of the tax year, establishing 1 April as beginning of the new year, and eliminates the existing assessment concepts and the previous year.

- The widely used word 'however' in the Income Tax Act, 1961 has been eliminated, its closely related meaning comes under the word 'notwithstanding anything,' all sections have been specified with an alternative.

- The Bill uses a differentiating phrase and provides a reader-friendly approach using tables and formulas. Tables have been provided for the provisions of deduction for TDS, presumptive tax, salaries and bad debts.

- The Bill mentions a 'Taxpayer Charter', which sets out what tax authorities should provide to taxpayers and the rights and obligations of taxpayers vis-à-vis each other.

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Where to download the Income Tax Bill, 2025?

Income Tax Bill 2025 PDF Download- Click on the following link to download Income Tax Bill 2025 PDF- (https://sansad.in/ls/legislation/bills).

Some More Proposed Changes

- A significant change in the new bill is the inclusion of simpler language and modern terminology. It replaces older terms and brings in new terms that are in line with today's economy.

- It also defines "virtual digital asset" and "electronic mode", reflecting the growing importance of digital transactions and cryptocurrencies in today's financial sector.

- Sections 5 and 9 of the new bill retain this rule but give a clear definition of deemed income (such as payments made to certain individuals), making tax rules more transparent for non-residents.

- The bill also changes deductions and exemptions. Earlier, deductions were allowed on investments, donations and certain expenses under sections 10 and 80C to 80U of the Income Tax Act, of 1961.

- The term capital gains tax has also been changed. Under the previous law, sections 45 to 55A classified capital gains into short-term and long-term based on the holding period, and prescribed different tax rates for securities.

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