New Income Tax Bill 2025 Highlights: FM Sitharaman Introduces New Income Tax Bill in Parliament

According to reports, the new Income Tax Bill will be tabled in Parliament today. The bill aims to simplify tax laws by making them clearer and more accessible. Once introduced, it will be sent to the Parliament’s Standing Committee on Finance for further review.

In her Budget Speech, Sitharaman said, "Over the past 10 years, our Government has implemented several reforms for convenience of tax payers, such as (1) faceless assessment, (2) tax payers charter, (3) faster returns, (4) almost 99 per cent returns being on selfassessment, and (5) Vivad se Vishwas scheme. Continuing these efforts, I reaffirm the commitment of the tax department to "trust first, scrutinize later. I also propose to introduce the new income-tax bill next week." (ANI)

"With the commitment of the Government to ‘Trust first, scrutinize later,’ the proposal for an introduction of New Income Tax Bill 2025 (new IT Bill) has been a matter of current buzz. Various stakeholders are anticipating numerous changes as compared to erstwhile income-tax law," said Harsh Bhuta, Partner, Bhuta Shah & Co LLP.

He further stated, "The new IT Bill is anticipated to address this issue by eliminating certain redundant as well as obsolete provisions and reducing its volume considerably. It is contemplated to raise the level of transparency in tax laws by adopting clear and unambiguous language in tax provisions which allows taxpayers to easily understand their obligations and rights. The new IT Bill is set to reduce the complex compliance burden by simplifying the compliance process, making it easier and comprehensible for all taxpayers, thereby ensuring savings in cost and time."

According to a report by global consultancy KPMG, conducted in January 2025 to capture industry views on the ongoing simplification of the Income-tax Act, 1961, "84 per cent of respondents identified dispute/litigation simplification as the most critical need. 96 per cent support the creation of a government-published income-tax commentary, similar to the OECD model, to provide clarity. 98 per cent want mandatory timelines for disposal of appeals by CIT(A) to reduce litigation backlog. Other areas requiring attention include TDS (Tax Deducted at Source) simplification, transfer pricing (50 per cent), and challenges with faceless assessments."

Kunal Varma, Co-Founder and CEO of Freo, says, “The new Income Tax Bill is expected to simplify tax laws, reduce legal complexities, and make compliance easier, something that insurance policyholders have long hoped for. Increasing these limits will provide stronger financial incentives for individuals to secure adequate insurance coverage. Policyholders want assurance that the maturity amount from life insurance policies remains tax-exempt as long as premiums paid do not exceed a certain limit, ensuring that their long-term financial planning remains intact.”

Congress MP Manish Tewari criticises the new Income Tax Bill, stating, "The Union Finance Minister, Nirmala Sitharaman, said that the new Income Tax Bill would be easy, but it has instead become more complicated." (PTI)

The simplified new Income Tax Bill will have 536 sections, and 23 chapters running into 622 pages. The proposed law replaces the term 'previous year' as mentioned in the Income Tax Act, 1961 with 'tax year'. Also, the concept of the assessment year has been removed, reported PTI.

Munjal Almoula, Head of Tax at BDO India, says, "The objective of the new tax bill is to do away with redundant provisions and simplify the language of the Tax Law, making it more succinct and easier to comprehend. Keeping this in mind, I do not expect any additional tax burden to be cast upon taxpayers through the new tax bill."

He also added, "The directionality of the new tax bill seems to be simplifying the language and removing redundant tax provisions, making compliance simpler and less cumbersome for taxpayers. Accordingly, we can expect a simpler compliance mechanism, greater transparency in tax assessments, and a quicker, more efficient refund process."

According to sources, there are no changes expected to the short-term capital gains (STCG) tax in the new Income Tax Bill. The STCG holding period stays at 12 months, and the tax rate remains at 20 per cent.

The Union Budget 2025–2026 announced the new tax regime which includes the following tax slabs:

Up to Rs 4,00,000: No tax

Rs 4,00,001 to Rs 8,00,000: 5 per cent

Rs 8,00,001 to Rs 12,00,000: 10 per cent

Rs 12,00,001 to Rs 16,00,000: 15 per cent

Rs 16,00,001 to Rs 20,00,000: 20 per cent

Rs 20,00,001 to Rs 24,00,000: 25 per cent

Above Rs 24,00,000: 30 per cent

Also, the Budget 2025-26 introduces a tax rebate for individuals earning up to Rs 12 lakh annually.

According to sources, the new income tax bill is expected to keep the existing deadlines for income tax return filing unchanged with July 31 for individuals and October 31 for audit cases.

CA Anand Bathiya, President, BCAS, on the New Income Tax Bill expectation, “On first glance reading, the Bill seems to be a bunch-up and clean-up, old wine in a new bottle exercise. The form gets simpler with no major changes to affect the substance. Being an attempt to revamp after 65 years, the expectation was of a contemporary novel code including newer concepts like group taxation, carry-back of losses, etc. But it seems the wait will be longer.”

Sameer Gogia, Executive Director-Tax at Deloitte told Outlook Money that with the introduction of the new bill, the number of pages and the number of sections in the Income Tax Act may be reduced to half. He added that presently the Income Tax bill has over 470 sections. He also added that the new bill will have easier language. Read More

Pankaj Nawani, CEO, CarePal Secure, says, “The tax deductions might not be there for life and health insurance but extra money that will get saved will be utilised not only for consumption but also for better protection. It will also give a fillip to the employer-employee protection plan which can be made flexible. The provisions of making proceeds from life insurance policies bought from Gift City could see a lot of HNIs and the upper middle class get interested.” Read More

The session has been adjourned until 2:00 pm. According to media reports, Finance Minister Nirmala Sitharaman is expected to introduce the new Income Tax Bill in the Lok Sabha between 2:00 and 2:30 pm, although the exact timing of the tabling has not yet been confirmed.

Suresh Surana, a Mumbai-based chartered accountant, said that the new income tax bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. “It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation. This is a welcome move and would definitely boost trust and certainty for the taxpayers. This sets the context for a complete structural direct tax reform which has been partly unleashed by the changes in the personal tax rate slabs and rates as well as an increase in the rebate.”

Rohinton Sidhwa, Partner, Deloitte India Says, "The new Income Tax Bill 2025, set to replace the 1961 legislation, aims to simplify India’s tax laws, making them more transparent, easier to interpret, and taxpayer-friendly. A significant change is the shift from the ‘Assessment Year’ to the ‘Tax Year.’"

He added, "This reform represents significant step towards modernizing India's tax framework, bringing greater clarity and efficiency. Its success will depend on smooth implementation and how well taxpayers adapt to the changes. The bill promises a streamlined, accessible tax system, making it easier for businesses and individuals to meet their obligations and fostering greater trust in the system."

Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co. says, "At first blush, the code does not present any policy changes. As promised, the new tax law seems to focus primarily on simplification and consolidation such as Introducing the concept of tax year in place of assessment year in line with international parlance.

She added, Multiple concepts of financial year, previous year and assessment year often caused confusion amongst taxpayers because of the semantics: this impacted the readability of tax law. A single concept of a tax year is easy to understand and in line with international practice (even though there may not have been any substantive change)."

"The new Income Tax Bill is expected to have fewer provisions than the current law, with nearly half of its provisions. It is designed to be easier to read and understand for both taxpayers and tax authorities, offering more certainty in taxation and reducing litigation. The changes expected include simplified residence rules, a simplified tax structure, and easier compliance for taxpayers and authorities alike."

— Shefali Mundra, Tax Expert, ClearTax

Shefali Mundra, Tax Expert at ClearTax, also states that the new Income Tax Bill is expected to bring significant benefits, including reduced complexity by simplifying the tax structure, increased compliance through streamlined tax laws, unified tax rates aligning with global standards to attract businesses, and minimized legal disputes, reducing litigation burdens for individuals and businesses.

Says Suresh Surana, a Mumbai-based chartered accountant, "Section 10 of the ITA, which provided for exemption of certain income such as agricultural income, share of profit from partnership firms, family pension, scholarships, certain interest on NRE / FCNR deposits, short stay exemption, etc., has now been separately covered in Schedule II to Schedule VII of the ITB in a tabular format. This presentation makes it easier for the layman to refer to the specific schedule applicable in their case to determine whether any specific income is exempt or not. This change aligns with the objective to streamline the ITA and make it more comprehensible."

BJP MP Tejasvi Surya praised the new Income Tax Bill, stating, "For almost 60 years, India's Income Tax Act was not reviewed. Like many other areas where PM Narendra Modi's government has introduced significant reforms, the Direct Taxation System will be overhauled to make it modern, simple, rational, and more compliance-friendly." (ANI)

The Income Tax Act of 1961 is structured to categorize an individual’s taxable income into five heads: salaries, income from house property, profits and gains from business or profession, capital gains, and income from other sources.

The Income Tax Bill 2025 has been introduced in the Lok Sabha, but it will take time before it is passed in Parliament. The bill may now be referred to a committee for review. Following assessment and the committee's recommendations, the measure will be returned to the government through the Cabinet.

While introducing the new Bill, FM Sitharaman stated that significant changes had been made and urged the Lok Sabha Speaker to form a standing committee that will review New Income Tax Bill.

The Lok Sabha has been adjourned until March 10, 2025. The Parliament will then resume for the second phase of the Budget Session, which will continue until April 4, 2025.

The New Income Tax Bill consists of 622 pages, covering 536 sections, 23 chapters, and 16 schedules. It seeks to simplify the complex language of the existing Income Tax Act of 1961, which comprises 298 sections and 14 schedules.

"The Income Tax Bill of 2025 marks a significant step towards a simpler tax system. By cutting down on sections and words, it aims to make the tax code more straightforward and user-friendly. The introduction of a 'tax year' concept clears up confusion around tax periods, encouraging easier compliance. This Bill goes beyond its simplification objectives; it's a commitment to a transparent and efficient approach to taxation, designed to support the taxpayer and contribute to steady economic growth." - Sameer Gupta, National Tax Leader, EY India

Naveen Wadhwa, Vice President, Taxmann, said, "The Income Tax Bill (ITB) tabled in Parliament will replace the 65-year-old Income Tax Act of 1961 (ITA) and become the new Income Tax Act of 2025. However, it will apply from 1st April 2026. The ITB contains 2.56 lakh words, almost 50 per cent fewer than the half a million words in the ITA. Despite the significant reduction in the legislation's size, the essence has been retained. The ITB simplifies the structure, removes redundant provisions, and replaces Provisos and Explanations with sub-sections, clauses, or sub-clauses."

As per sources, There are no changes to the existing residency laws, which are expected to remain the same in the new Income Tax Bill.

Finance Minister Nirmala Sitharaman tabled the much anticipated New Income Tax Bill 2025 in the Lok Sabha today. If approved, this Bill will replace the existing Income Tax Act of 1961 and will come into effect from April 1, 2026.

As the parliamentarian proceeding continues to bring the new income tax rules into effect, let’s understand what this Bill would mean for the taxpayers of India. Read More

Suresh Surana, Chartered Accountant: "Under the ITB, the issue of overlapping and almost similar provisions of TDS was addressed by covering the TDS provisions (except salaries) under section 393 of the ITB in a concise and tabular manner. Further, the provisions of TDS on Salary contained in section 192 of the ITA have been covered in section 392 of the ITB. Similarly, the provisions of TCS contained in section 206C of the ITA have been covered in a tabular manner in section 394 of the ITB for ease of reference. This is a welcome move and would make the TDS/TCS provisions easier to understand, help in better compliance, avoid tax leakages, and ensure administrative ease."

The Income Tax Bill follows the same five income heads from the Income Tax Act 1961, including Salaries, Income from house property, Profits and gains of business or profession, Capital gains, and Income from other sources, maintaining the existing tax structure.

"The term ‘Tax Year’ has been defined under Section 3 of the ITB as the twelve-month period starting from April 1. In cases where a business or profession is newly set up, or a source of income comes into existence during the financial year, the tax year will begin from the date of commencement and end with the financial year. The ITB has replaced terms like ‘Assessment Year’ and ‘Previous Year’ with ‘Tax Year,’ eliminating confusion and ensuring greater clarity for both domestic and foreign taxpayers in understanding the applicable financial period," Says Suresh Surana, Chartered Accountant