Overview of the New Income Tax Bill 2025
- Introduced by Finance Minister Nirmala Sitharaman, the bill comprises 622 pages, 536 sections, 23 chapters, and 16 schedules.
- It focuses on simplifying the existing Income Tax Act from 1961 without adding new taxes.
Simplification of Language:
- The bill replaces complex terms with simpler alternatives, aiming to reduce tax litigation.
- Simplified language benefits both taxpayers and the tax department, making laws easier to understand.
Editing of Existing Provisions:
- Critics view the bill as an editing job rather than introducing impactful changes to the tax code.
- It aims to maintain the essence of the previous law while simplifying its wording and structure.
Conciseness in Structure:
- The new bill reduces the number of chapters and sections, indicating a move towards a more straightforward tax framework.
- The previous act had 47 chapters and is lengthy at 1647 pages, compared to the new, more concise version.
Revised Income Tax Slabs:
- Income up to ₹12 lakh is exempt from taxes, effectively allowing income up to ₹12.75 lakh tax-free for salaried individuals.
- Revised tax slabs are designed to provide financial relief to the middle class.
Extended Filing Period:
- The timeframe for filing updated income tax returns has been extended from two years to four years.
- This extension allows taxpayers more time to correct potential errors or omissions.
Introduction of ‘Tax Year’:
- The bill introduces ‘tax year’ terminology, simplifying previous financial concepts.
- Maintains existing tax principles while clarifying the scope of total income for residents and non-residents.
Taxation of Virtual Digital Assets:
- Specific provisions for virtual digital assets, including cryptocurrencies, are introduced within the bill.
- These updates reflect the growing significance of digital transactions in the global economy.
Introduction of New Income Tax Bill 2025:
- The New Income Tax Bill, presented by Finance Minister Nirmala Sitharaman, aims to replace the outdated 1961 Income Tax Act.
- This bill, comprising 622 pages, is set to be implemented in April 2026.
Simplification of Tax Structure:
- The bill is designed to simplify the tax structure, thereby providing substantial relief to taxpayers.
- It adheres to ‘SIMPLE’ principles, as promoted by the finance minister.
Detailed Compliance Guidelines:
- Clauses 332 to 355 create a detailed compliance framework, defining taxable income and compliance rules.
- Stricter compliance regulations are introduced, enhancing oversight on commercial activities.
Provisions for Startups:
- The bill includes supportive measures for startups, digital enterprises, and investments in renewable energy.
- New regulations are outlined under Clauses 11 to 154, targeting innovation and growth in these sectors.
Changes in Capital Gains Tax:
- The bill modifies capital gains tax classifications, revising criteria for short-term and long-term capital gains.
- Previous categorizations under Sections 45 to 55A are updated to better reflect current market conditions.
Referral to Select Committee:
- Finance Minister Sitharaman has proposed referral of the bill to a select committee before its finalization.
- The committee will be tasked with reviewing the bill and reporting back by the next parliamentary session.
Union Budget Context:
- The introduction of the New Income Tax Bill was part of the Union Budget presented on February 1, 2025.
- This budget outlines significant reforms focusing on taxpayer relief and simplification of tax obligations.