Key Takeaways from New Income Tax Bill 2025 to be Introduced in Parliament on 13 February 2025
The government has introduced the new Income Tax Bill 2025, which will be tabled in Parliament on February 13, 2025. After parliamentary committee review and Cabinet approval, the Bill will return to Parliament for finalization and rollout. This new legislation aims to replace the six-decade-old Income Tax Act of 1961 with a more simplified framework, making tax provisions easier to understand for taxpayers. While no major structural changes have been introduced, the Bill focuses on clarity and ease of compliance. Let’s explore the key changes in the Income Tax Bill 2025 and their impact.
Minimizing Cross References
In the earlier law, there were multiple cross referencing between sections and rules which often led to complications for taxpayers. In the new Bill, the number of proviso and explanations have been substantially reduced and the references to rules and other sections have been curtailed. This will ensure that a taxpayer will be able to gain a sensible understanding of the section by reading the section itself and he does not need to refer to other rules and sections.
Further, the old income tax Act was amended several times over the course of the past 60 years and hence, there were ample references to redundant sections, previous dates and years, which have been removed now. The language of the provisions has been simplified. For instance, the term “notwithstanding” has been replaced with “irrespective of anything” in many places.
Introduction of New Sections
New sections covering revenue recognition for service contracts, provisions on allowability of MTM losses, and valuation of inventory at lower cost or net realizable value, which were hitherto sheltered under ICDS, have now been brought into the new bill itself. Certain provisions, such as allowability of set-off of short-term capital loss against business income on scrapping of business-held capital assets, which was interpreted in favor by the Courts, have now been brought into the PGBP computation section itself. Income not forming part of total income has now been moved to schedules to simplify the statute.
Change in Section Numbers
The upcoming income tax bill may also change the sections for various tax components, such as long-term and short-term capital gains calculations and more. For instance, under the current Income Tax Act, income tax return filing is covered under Section 139, and the new tax regime will probably cover the same under Section 115BAC. Owing to reduction and simplifications of tax laws in this bill, the section numbers will also undergo a change.
Effective Date
The new law is likely to be effective only from April 1, 2026, which implies that computation of taxable income and its reporting, for Financial Years ending March 2025 and March 2026, would still be required to be done under the existing Income Tax Act itself.
Size of the New Document
In its efforts to simplify the tax language the length of new document has also been reduced by 23%. The existing act comprises 5.20 lakh words, which have been reduced by half in the new proposed bill. The Income Tax Act 1961 has 823 pages as amended in 2024, and the new income tax bill is spread across 622 pages. So it is shorter by 201 pages.
Number of Sections & Schedules
The new Income Tax bill consists of 536 sections and 16 schedules, compared to existing Income Tax Act with 298 sections and 14 schedules. Five Heads of Income which is the same as the current law.
New Tax Regime vs Old
The bill proposes a new tax regime for individuals, Hindu Undivided Families (HUFs), and others. The new proposed changes in personal income tax under the new regime, announced on February 1, have also been incorporated into the bill. Once a taxpayer opts for the new regime, it cannot be withdrawn in later years unless specific conditions are violated. The bill retains the provision of the old regime for personal income tax.
Introduction of Formulas in place of Definitions
The new income tax bill is expected to use formulas rather than complicated definitions for various concepts like capital gains, cost of acquisition and inventory valuation. This move is likely to help reduce errors and prevent differing interpretations.
Section 54E Removed
Section 54E that details exemptions for capital gains on transfer of capital assets prior to April 1992 has been removed in the new Bill along with streamlining of deductions and removal of outdated exemptions.
Stricter Rule for Crypto Traders & Investors
Crypto traders and investors will need to comply with stricter taxation and reporting requirements. The Bill reinstates a flat 30% tax on income from virtual digital assets including – crypto, NFTs, etc. There will be no deductions or exemptions allowed, except for the cost of acquisition. It also proposed a 1% TDS on crypto transactions remains applicable to track digital transactions.
New Concept of Tax Year Introduced
According to the upcoming IT bill, the government is set to introduce a tax year to make it easier for people to understand. Unlike the concept of the previous year (the year for which income tax is computed) and assessment year (the year wherein the tax is computed), the tax year is now known as the tax year. The financial year concept has not changed. The financial year will start on April 1 and end on March 31. The new income tax bill will not follow the calendar year as a tax year.
Also Read: Section 269SS Not Applicable to Brokers Acting as Agents or Facilitators: ITAT Chennai
Return Filing Due dates
There has been no major change in the income-tax due dates for filing ITRs, and that they remain the same as before. For Individuals- 31st July, For Companies- 31st October, For Tax Audit Cases—31st October, For Transfer Pricing Cases—30th November, For Revised Return – 31st December [9 months from the end of relevant tax year or before the completion of assessment, whichever is earlier]
Consolidation of Provisions for Charitable Trusts
The consolidation of provisions relating to charitable trusts and other non-profit organisations under a separate part is commendable.
Encouragement for Digital Transactions
There is an encouragement of sorts for digital transactions with audit relief of upto ₹10 crore turnover.
No Change in residency Law
The new income tax bill has not changed the residency laws. They are likely to remain the same in the new act as well. Current income tax laws divide the residency provisions into three categories: (i) Ordinarily resident individual, (ii) Non-ordinarily resident individuals, and (iii) Non-residents individuals.
Deductions from Salaries Tabulated in one Place
Deductions from salaries, such as standard deduction, gratuity, leave encashment, etc, have now been tabulated in one place instead of being scattered over different sections and rules.
Also Read: 10 Key Takeaways from New Income Tax Bill 2025
Depreciation
The new income tax bill has simplified the computation of depreciation for businesses by providing the formula.
Provisions on TDS/TCS
All TDS-related sections have been brought together under a single clause with simple tables, for ease of understanding. The new bill proposes that TDS rules will apply to salaries, professional fees, interest income, rent, and more. TCS is applicable on specific transactions, such as: The Sale of alcohol, tendu leaves, minerals, and scrap materials (1%-5%), Sale of motor vehicles above ₹10 lakh (1%), Foreign remittances exceeding ₹7 lakh (5%). Failure to deduct/pay TDS or TCS results in an assessee being considered in default. Interest on unpaid TDS/TCS will be charged at 1% per month.
Advance Tax Provisions
According to the new income tax bill taxpayers liable for advance tax must pay it in four instalments: June 15 – At least 15% of total tax due, September 15 – At least 45% (cumulative), December 15 – At least 75% (cumulative), and March 15 – 100% of the tax due. Non-payment of advance tax results in penalties and interest charges.
Digital creators, YouTubers & Social media influencers as taxable entities
The bill explicitly categorizes digital creators, YouTubers, and social media influencers as taxable entities under business income. Revenue generated from paid promotions, sponsored content, advertisements, and fan subscriptions is subject to taxation under business income.
Provisions for Search, Seizure & Raids
The Income-Tax Bill, 2025, introduces detailed provisions for search, seizure, and tax raids. These provisions will empower tax authorities to conduct raids, seize assets, and scrutinize undisclosed income. The reason to believe or reason to suspect for ‘Searches’ need not be disclosed as per Sec 149.
Penalties for Delayed Filing or return
The new income tax bill has not imposed any new penalties or charges for delay in tax filing. According to the provisions in the proposed bill Taxpayers must pay self-assessment tax before filing income tax returns. Late filing leads to Interest charges at 1% per month and Late fees of ₹5,000 and ₹1,000 for taxpayers with income below ₹5 lakh.
Taxation on Specific Incomes
The new income tax bill states, that income interest will be subject to rates in force with ₹10,000 threshold for general taxpayers and ₹50,000 for senior citizens. Income from securities, mutual funds, and offshore investments will be taxed at 10%-12.5% depending on the nature of investment. Online gaming and gambling winnings will attract a flat tax rate, with a ₹10,000 threshold per transaction for lottery and gambling wins.
Corporate taxes
The Bill states, that new manufacturing companies incorporated on or after a specified date can opt for a 15% concessional tax rate. The concessions will be taken provided they do not claim deductions. All other domestic companies opting for the new tax system will be taxed at 25%.
Definition of Accountant
Accountants will now be defined as chartered accountant under the Chartered Accountants Act, 1949. However, certain individuals are excluded from acting as an accountant for tax purposes, such as: A company’s statutory auditor and a relative, employee, or business associate of the taxpayer.
More Power to CBDT
The new bill empowers the CBDT to introduce such schemes independently, reducing bureaucratic delays and making tax governance more efficient. As per Clause 533 of the new law, the CBDT will have the authority to establish tax administration rules, implement compliance measures, and enforce digital tax monitoring systems without requiring frequent legislative amendments.
Changed Conditions for getting Books of Account Audited
The total sales, turnover or gross receipts from business or profession during the tax year of any person who— (a) is carrying on business and at least 95% of aggregate of all the receipts and payments from the business during the tax year are through specified banking or online mode, is more than Rs 10,00,00,000; or (b) is carrying on business and not covered under serial number 1, is more than Rs 1,00,00,000.
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