The New Income Tax Bill, officially titled The Income-tax Bill, 2025, is a legislative proposal introduced by the Indian government to overhaul the existing Income Tax Act of 1961. This initiative aims to simplify the tax regime, reduce the compliance burden on taxpayers, and modernize the taxation framework to better align with contemporary economic realities.
Key Features of the Proposed Bill:
- Comprehensive Structure: The bill comprises 536 sections and 16 schedules, meticulously reorganized to enhance clarity and understanding. en.wikipedia.org
- Introduction of ‘Tax Year’: A significant shift from the traditional ‘Previous Year’ and ‘Assessment Year’ concepts to a unified ‘Tax Year’ system, streamlining the tax assessment process. en.wikipedia.org
- Decriminalization Measures: Non-filing of Income Tax Returns (ITR) is proposed to be categorized as a non-cognizable offense, aiming to eliminate ‘tax terrorism’ and foster a more taxpayer-friendly environment. en.wikipedia.org
- Alignment with Modern Practices: The bill seeks to incorporate contemporary economic activities and digital transactions, ensuring the tax code remains relevant and effective in the current economic landscape.
The introduction of this bill reflects the government’s commitment to reforming India’s tax system, making it more transparent, efficient, and conducive to compliance. By addressing longstanding complexities and ambiguities in the old tax law, the New Income Tax Bill, 2025, endeavors to create a more straightforward and taxpayer-centric framework.
As of now, the bill is pending approval in Parliament. Once enacted, it is slated to come into effect from April 1, 2026, marking a new chapter in India’s taxation history.
The Indian government has introduced significant reforms to the income tax structure, aiming to boost economic growth by increasing household consumption, savings, and investment.
Revised Income Tax Slabs:
The new tax regime has adjusted the income tax slabs as follows:
| Income Range (₹) | Tax Rate (%) |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5 |
| 8,00,001 to 12,00,000 | 10 |
| 12,00,001 to 16,00,000 | 15 |
| 16,00,001 to 20,00,000 | 20 |
| 20,00,001 to 24,00,000 | 25 |
| Above 24,00,000 | 30 |
Notably, the tax-free income threshold has been raised to ₹12 lakh, with a standard deduction of ₹75,000, effectively making income up to ₹12,75,000 exempt from income tax.
Additional Tax Reforms:
- TDS and TCS Rationalization: The limit for Tax Deducted at Source (TDS) on interest for senior citizens has been doubled from ₹50,000 to ₹1 lakh. Additionally, the annual limit for TDS on rent has increased from ₹2.4 lakh to ₹6 lakh. en.wikipedia.org
- Tax Exemption on NSS Withdrawals: Withdrawals made from the National Savings Scheme (NSS) by individuals on or after August 29, 2024, will be exempt from tax. en.wikipedia.org
- Extended Deadline for Filing Updated Returns: The timeframe to file updated income tax returns has been extended from two to four years, providing taxpayers with more flexibility. en.wikipedia.org
Projected Impact:
These tax reforms are expected to result in substantial tax savings for middle-income individuals, thereby boosting consumer demand and reviving economic growth. The government projects a loss of approximately ₹1 trillion annually due to these cuts but aims to offset this through increased economic activity.
Overall, these measures reflect the government’s commitment to simplifying the tax system and stimulating the economy by enhancing the disposable income of the middle class.