New Income Tax Bill 2025: Finance Minister Nirmala Sitharaman has introduced the new Income Tax Bill 2025 in the Lok Sabha. This new law will replace the 6-decade-old Income Tax Act.
Finance Minister Nirmala Sitharaman has introduced the New Income Tax Bill 2025 in the Lok Sabha . Earlier, on 7 February 2025, the Union Cabinet had approved this bill. This new bill will replace the nearly 60-year-old Income Tax Act and will make the tax system simpler, transparent and more effective.
Proposed reforms in the new income tax bill
- Use of ‘tax year’: The new bill will replace the term ‘assessment year’ with ‘tax year’, which will be a period of 12 months from 1 April to 31 March.
- Tax Year for New Business: If a new business or work is started, its tax year will start from that day and end at the end of the same financial year.
- Improved legal language: The new bill has simplified and shortened legal terms, making it easier to understand.
- Legal documents have been reduced: The new Income Tax Bill is 622 pages long compared to the old 823 pages.
- Chapters and sections increased: The number of chapters in the Bill remains 23, but the number of sections has increased from 298 to 536.
- Schedules also expanded: The number of schedules increased from 14 to 16.
- Removal of complex provisions: Complex explanations and provisions present in the old law have been removed, making it easier to understand.
- Tighter rules on virtual digital assets: Virtual digital assets like cryptocurrencies will now be considered under undisclosed income.
- Measures to curb tax evasion: Strict provisions on digital transactions and crypto assets have been implemented to enhance transparency and curb tax evasion.
- Taxpayers Charter: The new bill also includes a Taxpayers Charter, which will protect the rights of taxpayers and make tax administration transparent.
Why was the new income tax bill introduced?
The existing Income Tax Act had become technically complex and practically cumbersome due to being several decades old. Changes were made in it from time to time, but it was not fully suited to today’s digital and modern economy. Therefore, the government has introduced the new Income Tax Bill 2025 to simplify the tax system, provide relief to taxpayers and simplify the compliance process.
The slab has been modified
Finance Minister Nirmala Sitharaman had announced the new tax slab in Budget 2025, which is as follows-
0 – 4 Lakh No Tax
4 – 8 Lakh 5%
8 – 12 Lakh 10%
12 – 16 Lakh 15%
16 – 20 Lakh 20%
20 – 24 Lakh 25%
Above Rs 24 Lakh 30%
Earlier the no-tax limit was Rs 7 lakh, which has been increased to Rs 12 lakh. This change will provide great relief to the middle class, as their taxable income will be taxed less than before.
There were many problems with the old law
The current Income Tax Act was implemented in 1961. Over the years, the Indian economy has seen many major changes, but the tax system was still based on the old structure. This was causing many problems to taxpayers. Here are some of the problems.
- There was difficulty in understanding complex tax rules.
- There were increased administrative hassles in filing and compliance of tax returns.
- The resolution of tax disputes was very slow and complicated.
- There were no proper provisions to properly accommodate the digital economy.
How will the common man benefit from the new tax law?
Middle class people will get relief as income up to Rs 12 lakh will be tax free. Apart from this, tax filing will be easy, paperwork will be reduced and online tax return filing will be promoted. The new settlement mechanism will resolve tax disputes quickly. At the same time, digital payments and business will get a boost due to this bill.
