Income Tax Bill 2025: Key Changes and What They Mean for Taxpayers

Anita: Hey, Priya! Have you heard about the new Income Tax Bill 2025? I read that it’s going to change to make taxes easy and simple to understand.

Priya: Really? I haven’t had the chance to look into it yet. What’s new in this bill?

Anita: Let’s dive into it together. It’s essential for us to understand these changes to manage our finances better.

The New Income Tax Bill 2025 was introduced by the Honorable Finance Minister on 13th February 2025. It brings long-awaited reforms and aims to replace the old Income Tax Act of 1961. The goal? A simpler, digital, and more structured tax system for both individuals and businesses. Much like how investment for women is empowering individuals to take control of their financial future, this proposal seeks to streamline and modernize tax processes.

However, remember – this bill is still a proposal. It will come into effect only after both Houses of Parliament pass it and the President gives assent. For now, it’s a draft and not yet a law.

What is the Income Tax Bill?

The Income Tax Bill is basically a set of rules created by the government about how our income will be taxed. It defines tax slabs, exemptions, deductions, and everything that decides how much of your income you get to keep and how much goes to taxes.

Major Updates in the Income Tax Bill 2025

The Income Tax Bill 2025 introduces several significant changes to simplify the tax system and reduce the compliance burden. Here’s a breakdown of the key updates:

1. Introduction of “Tax Year”

The bill introduces the concept of a “Tax year,” replacing the traditional dual financial year (April to March) and assessment year system. This change aims to simplify the tax filing process by aligning the income-earning period and the tax assessment period into a single “tax year.”

For example: 

Before (Old System):

– Financial Year (FY): April 2024 to March 2025 – when you earn your income.

– Assessment Year (AY): 2025-26 – when you file your taxes for the income earned in the FY.

Two terms, often confusing: Financial Year vs Assessment Year

After (New System – Tax Year Concept):

– Tax Year: April 2025 to March 2026 – earning and filing taxes for the same period.
Now no separate assessment year and it is easier to understand – Income earned and tax filing both in one “Tax Year”

2. Revised Income Tax Slabs

The income tax slabs have been revised under the new tax regime to provide relief to individual taxpayers. The updated slabs are as follows (These are the same as announced in Budget 2025):

3. Increase in Tax Rebate 

No income tax payable up to ₹12 lakh & ₹12.75 lakh for salaried individuals under the new tax regime (excluding special rate income like capital gains).

4. Comparison with the Old Income Tax Act of 1961

The new Income Tax Bill 2025 has reduced content compared to the previous Income Tax Act of 1961. The number of sections has been reduced from over 700 to 536, making the law more concise and easier to understand. This change is meant to make it easier to follow the rules and avoid disputes between taxpayers and the tax department.

5. Simple and Short Tax Laws
The Income Tax Bill 2025 aims to make tax rules easier to understand by using simpler language, removing outdated provisions, and reducing confusion and disputes.

While the old Income Tax Act, 1961 had 52 chapters across 823 pages, the new bill has been trimmed down to 23 chapters and 16 schedules in 622 pages for better clarity and easier reading.

6. TDS Provisions Made Simple
Earlier, there were 43 different sections for TDS rules based on who was paying or receiving the amount. Now, the new bill combines all of them into one section (Section 393) with three simple tables for – Residents, Non-residents, and any person.
Each table clearly shows the type of income, limit, payer, and TDS rate, making it easier to understand.

7. Virtual Digital Assets (VDAs) Classified as Assets

The Income Tax Bill 2025 officially treats Virtual Digital Assets (VDAs) such as cryptocurrencies, NFTs, and other digital assets as “assets”, just like a property, jewelry, paintings, or shares. This means they will be taxed the same way as these assets. However, the tax applicable to the assets is different.

Also, if you want to go through the changes announced in Budget 2025 then check this out.

What Do These Changes Mean for You?

• Simplified Tax Filing: The introduction of the “tax year” simplifies the tax filing process, making it more straightforward for taxpayers.
• Easier Compliance: The reduction in the number of sections and the introduction of a simplified tax regime aim to make tax laws easier to understand and comply with.

There are no changes in:

1. Tax return filing deadlines, 

2. Income tax heads such as salaries, income from house property, profits and gains from business or profession, capital gains, and income from other sources.

3. No changes in provisions for belated returns, revised returns, and updated returns.

Understanding these changes in the Income Tax Bill 2025 is crucial for effective financial planning. As women investors, staying informed empowers us to make better financial decisions, optimize our tax liabilities, and achieve our financial goals. Platforms like lxme provide valuable insights and tools to help navigate these updates effectively. Let’s continue to educate ourselves and take charge of our financial futures!

FAQs:

Further read:

• What are Large Cap Funds and Should We Invest in Them?

• 10 Reasons to Invest in Equity Market

• How the 8th Pay Commission Could Impact Women?