New Income Tax Bill 2025: Higher Exemptions, Simpler Rules, Easier Tax Filing – Here’s What Changes For You
Both the old and new tax regimes for individuals and Hindu Undivided Families (HUFs) will be retained, allowing taxpayers to choose the most beneficial structure for their income.
New Income Tax Bill: Finance Minister Nirmala Sitharaman introduced the much-anticipated Income Tax Bill 2025 in the Lok Sabha on February 13. The proposed legislation aims to simplify the country’s tax system by modernising language, removing complex terminology, and restructuring provisions without imposing new taxes.
Streamlined, Concise Tax Code
The new bill spans 622 pages and is divided into 536 sections, 23 chapters, and 16 schedules. This is a significant reduction from the 1961 Income Tax Act, which had 298 sections across 14 schedules but ran into 1,647 pages.
The primary objective is to make tax compliance easier for individuals, businesses, and organisations by eliminating unnecessary explanations and provisos.
Key Changes Introduced
- Introduction of ‘Tax Year’: The bill replaces technical terms like ‘assessment year’ and ‘previous year’ with the simpler ‘tax year,’ making it easier for taxpayers to understand.
- Higher Exemptions and Standard Deduction: Salaried individuals earning up to Rs 12 lakh will now be exempt from taxation, with a standard deduction of Rs 75,000. Effectively, income up to Rs 12.75 lakh will be tax-free, providing relief to middle-class taxpayers.
- Updated Capital Gains Provisions: The bill revises capital gains taxation by consolidating various provisions from the 1961 Act, streamlining the rules for securities and other investments.
- Virtual Digital Assets (VDAs) Defined: Clauses 67 to 91 introduce explicit provisions for digital assets, including cryptocurrency, ensuring clear tax treatment. "This formalisation by the Union Government is a significant milestone as it is indicative of bringing crypto within the ambit of the Indian financial framework. By legally classifying VDAs, we are moving towards greater regulatory clarity. This is crucial in the mainstream adoption of blockchain-based financial instruments," Vikram Subburaj, CEO, Giottus Crypto Platform told ABP Live.
- Extended Time for Filing Updated Returns: Taxpayers now have four years instead of two to file updated returns, offering more flexibility to correct errors or omissions.
- Simplification of Deductions and Exemptions: Previous tax laws scattered deductions under Sections 10 and 80C to 80U. The new bill consolidates these, making them more accessible.
- Removal of Legal Jargon: The word ‘notwithstanding’ is replaced with ‘irrespective,’ and tables and formulas are used instead of complex explanations.
- Introduction of Taxpayer’s Charter: The bill includes a taxpayer’s charter outlining rights and responsibilities, ensuring a transparent tax system.
- Clearer Compliance Rules for Non-Profit Organisations: Clauses 332 to 355 introduce well-defined compliance guidelines for tax-exempt entities, regulating their commercial activities more strictly.
Implementation Timeline
The new law is set to come into effect from April 1, 2026, once the necessary rules and regulations are formalised. Both the old and new tax regimes for individuals and Hindu Undivided Families (HUFs) will be retained, allowing taxpayers to choose the most beneficial structure for their income.
The Income Tax Bill 2025 represents a major overhaul aimed at making tax compliance less burdensome while ensuring clarity for taxpayers. By restructuring provisions and updating definitions, the Government hopes to reduce disputes and litigation, ultimately leading to a more efficient tax administration system.
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