Finance Minister Nirmala Sitharaman introduced the New Income Tax Bill in Parliament today, aiming to eventually replace the Income Tax Act of 1961. The New Income Tax Bill was approved by PM Narendra Modi's Union Cabinet last week. It contains 536 clauses spread across 622 pages, replacing the current 823-page law that has been in effect for 64 years. According to the Lok Sabha schedule, the New Income Tax Bill will be introduced today. The expected implementation date is April 1, 2026.  As expected, the new Income-tax Act will not be a complete overhaul of existing law, but rather a simplified version that eliminates obsolete provisions and complex language. Individual taxpayers should pay attention to a few key areas:

1. There are still two types of taxation. The new tax regime is the default, but you can also choose the old regime. As a result, taxpayers will continue to bear the burden of weighing both regimes.

2. There is no change in the various types of income subject to taxation, but the scope is expanded to include modern income streams from virtual assets and online activities.

3. Maintain the same income-tax slab rate with a rebate to ensure that taxable income of up to INR 12 lakhs remains tax-free.

4. The framework for determining residential status remains unchanged.

5. According to Preeti Sharma, Partner - Tax & Regulatory Services, BDO India LLP, there will be a greater emphasis on streamlining taxpayer-friendly administration, with a focus on automation to reduce human intervention.

Key Pointers of the New Income Tax Bill

• The old tax regime will continue in the new legislation, but the new tax regime will be chosen as aThe old tax regime will continue in the new legislation, but the new tax regime will be chosen as the default regime for taxpayers.

• The term 'assessment year' has been replaced by 'tax year' in the new bill.

• The 44AD limit for businesses has been raised from two crore to three crore. For professionals, the limit has been raised from Rs 50 lakh to Rs 75 lakh.

• Once passed by Parliament, the Bill will be referred to a Parliamentary Standing Committee on Finance for review.

Highlights

• The Income Tax Bill, 2025 simplifies language, eliminates unnecessary provisions, and uses concise sentences.  No additional taxes are introduced in the Bill; it consolidates existing tax provisions from the Income Tax Act of 1961.

• Includes 536 sections, 23 chapters, and 16 schedules in 622 pages, as opposed to the 1961 Act's 298 sections, 23 chapters, and 14 schedules;

• Implementation is scheduled for April 1, 2026; regulations will be established following Act notification.

• Provides both traditional and modern tax frameworks for individuals, HUFs, and entities.  

• Introduces the 'Tax year' concept, replacing complex terms such as 'Previous year' and 'Assessment year'.

• To improve clarity, 'notwithstanding' is replaced with 'irrespective'.

• Uses tables and formulae rather than 'explanations or provisos';

• Incorporates Taxpayer's Charter, which outlines rights and responsibilities;

• Contains specific provisions for calculating capital gains on market-linked debentures.

• Moves income exclusions to Schedules for better clarity.

• Consolidates salary deductions, such as standard deductions, gratuities, and leave encashment, into a single section rather than dispersing them across multiple sections or rules.

New Income Tax Bill 2025: Latest Income Tax Slabs under the New Tax Regime

• 0-4,00,000 - 0%
• 4,00,001-8,00,000 - 5%
• 8,00,001-12,00,000 - 10%
• 12,00,001-16,00,000 - 15%
• 16,00,001-20,00,000 - 20%
• 20,00,001-24,00,000 - 25%
• 24,00,001 and above - 30%

Kuldip Kumar, Partner, Mainstay Tax Advisors

"A first look at the proposed Income Tax Bill, 2025 (Bill), which contains 536 clauses, 16 schedules, and 23 chapters, appears to fulfill the Hon'ble Finance Minister's promise in her July 2024 budget speech to make the Act concise, lucid, and easy to read and understand. A comprehensive, structured approach has been used to group all relevant sections on a specific topic, eliminating the need to flip through pages, as required by the current Income Tax Act of 1961. Although the language and various terms used have been simplified, a closer examination is required to determine the extent to which it will help reduce disputes and litigation."

Sameer Gupta, National Tax Leader at EY India

"The new Income Tax Bill represents a significant step towards a simpler tax system. By reducing the number of sections and words, it aims to make the tax code more understandable and accessible. "The introduction of a 'tax year' concept eliminates confusion about tax periods, promoting easier compliance," Gupta stated. He further went on to say that the Bill represents a commitment to a transparent and efficient taxation system that will benefit taxpayers while also contributing to steady economic growth."

Tejasvi Surya, a Bharatiya Janata Party (BJP) Lok Sabha MP

"The new legislation will make things easier for taxpayers across India. During his interview with ANI, the South Bengaluru BJP MP stated that the country's Direct Taxation System would undergo extensive changes to improve its efficiency, simplicity, and user-friendliness. For nearly 60 years, India's Income Tax Act has not been reviewed. Like many other areas where Prime Minister Narendra Modi's government has implemented significant reforms, India's Direct Taxation System will be overhauled to make it more modern, simple, rational, and compliance-friendly."

He drew parallels to the GST implementation, saying, "We did the same for India's indirect taxation system through GST... From the perspective of the average person, it has reduced the cost of goods and services, which was not the case under the previous VAT regime. The new Income Tax Bill will make the lives of Indian taxpayers much easier.

Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co

"A single concept of a tax year is easy to understand and is in line with international practice."

Also worth noting is that the much-anticipated Bill will replace terms like "assessment year" and "previous year" with the more understandable "tax year" as part of a move to simplify language while eliminating provisos and explanations. Once enacted, the Bill will replace the six-decade-old Income Tax Act of 1961, which has grown in size and complexity as a result of amendments. The proposed law replaces the term 'previous year' as used in the Income Tax Act of 1961 with 'tax year'. In addition, the concept of an assessment year has been eliminated.

Currently, income earned in the previous year (say 2023-24) is taxed in the assessment year (say 2024-25). The previous year and assessment year concepts have been removed, and only the tax year under the simplified bill has been introduced.

The Income Tax Bill of 2025 contains 536 sections, more than the current Income-Tax Act of 1961, which has 298 sections. The current law has 14 schedules, which will be increased to 16 under the new legislation.

Riaz Thingna, Partner - Tax, Grant Thornton Bharat

“Income tax Bill 2025 that has been tabled in the parliament today takes into consideration several suggestions of taxpayers on simplification of the statute. There is an attempt to simplify the language by using shorter sentences, removing provisos and explanation and deleting the obsolete provisions. It is heartening to see use of tables with notes and use of formulae, which will make it easier for taxpayers to comprehend and comply with law. As it is effective from 1 April 2026, there will be adequate time available to stakeholders to assess and imbibe these changes."

Himanshu Parekh, Partner, Tax at KPMG India

“Notably, the Bill introduces a "trust first, scrutinize later" philosophy, aligning with the government's ideology of "minimum government and maximum governance." Unlike the 1961 Act, the Bill empowers the CBDT to establish tax administration rules and implement digital tax monitoring systems, thereby increasing efficiency without frequent legislative changes. Scheduled to take effect on April 1, 2026, the Bill is set to foster a more transparent and taxpayer-friendly environment, representing a historic milestone in India's tax landscape."

Amrit Kiran Singh, President, Skill Online Games Institute

“The new Income Tax Bill is progressive in that it makes a serious attempt to simplify and remove ambiguity. With sharp definitions of new growth industry’s such as Online Games with its humongous potential (4 times the size of the Movie and Music industry taken together worldwide) it makes a sincere effort to stay abreast with the times. It also recognises the importance of such industries in contributing to India’s economic growth both in terms of GDP growth and jobs and shows that a lot of thought and sensitivity has gone into creating this important Bill.”

Sameer Gupta, National Tax Leader, EY India

"The Income Tax Bill of 2025 marks a significant step towards a simpler tax system. By cutting down on sections and words, it aims to make the tax code more straightforward and user-friendly. The introduction of a 'tax year' concept clears up confusion around tax periods, encouraging easier compliance. This Bill goes beyond its simplification objectives; it's a commitment to a transparent and efficient approach to taxation, designed to support the taxpayer and contribute to steady economic growth.”