FM Nirmala Sitharaman tables New Income Tax Bill in Lok Sabha

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The much-awaited New Income Tax Bill 2025 was introduced in the Lok Sabha on February 13, 2025, by Finance Minister Nirmala Sitharaman. This bill aims to simplify the Income Tax Act of 1961, eliminating complexities and making tax laws easier to understand for individuals and businesses. If passed, the new tax regime will take effect from April 1, 2026.

Why the New Income Tax Bill 2025?

The existing Income Tax Act, 1961, has been amended multiple times, making it more complex and difficult to interpret. The new bill does not introduce new taxes or increase tax rates but instead focuses on simplifying language, reducing ambiguities, and making compliance easier for taxpayers.

Key Highlights of the New Income Tax Bill 2025

📌 Concise & Streamlined – The 801-page tax act has been condensed to 622 pages, with 536 sections across 23 chapters, eliminating unnecessary provisions.

📌 Introduction of “Tax Year” – Replaces confusing terms like Assessment Year, Previous Year, and Financial Year, making tax filing easier to understand.

📌 Sectional Changes – Section 44AD (Presumptive Taxation) has been removed and replaced with Section 58.

📌 Accountant Definition – Only a Chartered Accountant (CA) qualifies as an accountant under the new bill.

📌 No Change in Income Tax Slabs – Old and new tax regimes remain unchanged, ensuring tax stability.

📌 Capital Gains Tax Remains Same – Short-term capital gains tax stays at 20%, while long-term capital gains remain at 12.5%.

📌 STT Not Allowed as an Expense – Securities Transaction Tax (STT) paid on shares cannot be claimed as an expense for capital gains computation.

📌 Capital Gains Utilization Rule – Unutilized capital gains must be deposited in a government-specified bank account.

📌 Time Limit for New Asset Purchase – The countdown starts from the date of compensation receipt (instead of the asset acquisition date in the old act).

📌 Agricultural Income Exemptions – No changes; agricultural income remains fully exempt.

📌 ITR Filing Due Dates – Remains unchanged – July 31st for individuals & HUFs.

📌 Updated ITR Rules – Taxpayers can now revise their ITRs up to 4 years from the relevant tax year.

📌 Applicability – New tax provisions apply from the tax year 2026-27.

📌 Five Heads of Income Stay – The classification of income sources remains unchanged.

📌 Exemptions Moved to Section 10 – Exemptions have been shifted to a separate schedule for better clarity.

📌 TDS Provisions Simplified – Streamlined further based on past finance acts.

📌 CH VIA & Profit-Linked Deductions Remain – No sunset provisions, deductions stay intact.

📌 Sector-Specific Deductions Unchanged – Industry-based exemptions and deductions continue.

📌 Legal & Tax Proceedings Unaffected – Assessment, appeals, rectifications, and DRP procedures remain the same.

Important Exemptions to Note

✅ MPs/MLAs Allowances – Daily & Constituency Allowances remain exempt.
✅ Political Party Exemptions – No change in tax exemptions for political parties.

Impact of the New Income Tax Bill 2025

Easier Compliance – Simplified provisions will help individuals and businesses file returns with ease.
Reduction in Litigation – Eliminating complex clauses will reduce tax disputes.
Clarity in Tax Laws – With the removal of outdated provisions, tax regulations become more transparent.
No Additional Burden – No increase in tax rates or new taxes, ensuring financial stability.

When Will the New Income Tax Bill Be Implemented?

The bill is expected to be passed in Parliament in 2025, and once enacted, the new tax system will be applicable from April 1, 2026.

Conclusion

The New Income Tax Bill 2025 is a game-changer in India’s tax system, bringing much-needed simplification and transparency. While it does not introduce new taxes, it ensures that tax compliance is less confusing and more efficient. Taxpayers, businesses, and professionals must stay updated to adapt to these changes smoothly.

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