The much-awaited Income Tax New Bill 2025 was presented in Parliament on February 13, marking a major reform in India’s taxation system. A specialized committee is reviewing the bill and will submit its report by the first day of the Monsoon Session. The government aims to modernize tax laws, simplify provisions, and enhance transparency for both taxpayers and businesses.

Introduction to the Income Tax New Bill 2025

The draft of the Income Tax New Bill 2025 is now available to the public, allowing taxpayers, professionals, and students to examine its provisions. Earlier speculations suggested renaming the law as the Direct Tax Code, but the government has confirmed it will be officially known as the Income Tax Act 2025.

Implementation Date & Exam Guidance

Taxpayers and students appearing for professional exams are curious about the applicability of the new tax law. The Income Tax Act 2025 will come into effect from April 1, 2026. This means that the financial year 2026-27 will be the first to be taxed under this new framework.

Key Timeline for Students:

• Exams conducted on or after April 1, 2027, will be based on the Income Tax Act 2025.

• Exams held before March 31, 2026, will continue following the Income Tax Act 1961.

Objectives of the Income Tax New Bill 2025

The government introduced the Income Tax New Bill 2025 to achieve three primary objectives:

1. Align taxation with global best practices.

2. Simplify legal provisions for better clarity and compliance.

3. Improve efficiency in tax calculations for individuals and businesses.

To meet these objectives, several structural reforms have been implemented, which we will explore below.

Key Highlights of the Income Tax New Bill 2025

The Income Tax New Bill 2025 introduces several reforms, making tax laws more accessible and streamlined. Here are the most crucial updates:

1. Reduction in the Number of Sections

Previously, the Income Tax Act contained 298 sections, expanding to over 800 due to multiple subsections. The Income Tax Act 2025 streamlines this structure to 536 sections, eliminating redundant provisions.

2. Restructuring of Chapters

The old tax law had 47 chapters. The Income Tax New Bill 2025 consolidates them into 23, creating a more concise and logical framework.

3. Simplified Language and Reduced Word Count

To improve readability, the government has significantly reduced the document’s word count:

• Old Act: 5.12 lakh words

• Income Tax New Bill 2025: 2.6 lakh words

Additionally, the total number of pages has been reduced by 200, making it more accessible for taxpayers.

4. Introduction of ‘Tax Year’

The traditional terms ‘Previous Year’ and ‘Assessment Year’ have been replaced with ‘Tax Year’ for better clarity. The first tax year under this system will be 2026-27.

5. Reduction of Tax Disputes

A significant aim of the Income Tax New Bill 2025 is to reduce litigation. By incorporating previous judicial rulings, the bill ensures better legal clarity, reducing disputes between taxpayers and authorities.

6. Retention of Old and New Tax Regimes

Contrary to earlier expectations, the government has decided to retain both the old and new tax regimes, providing flexibility for taxpayers to choose the most beneficial option.

7. Taxation of Virtual Digital Assets (VDA)

The Income Tax New Bill 2025 now classifies cryptocurrencies, NFTs, and other digital assets as taxable properties. Previously, taxable assets included money, bullion, and jewelry. This update ensures better regulation and prevents tax evasion.

8. Unchanged Tax Slab Structure

The tax slab structure remains unchanged from the one announced in the Union Budget 2025. For instance, individuals earning INR 12 lakh annually will not owe taxes due to applicable rebates.

9. Retention of Five Heads of Income

Despite multiple structural changes, the five traditional income categories remain unchanged:

• Salary

• House Property

• Business/Profession

• Capital Gains

• Other Sources

10. Changes in Section Numbers

To improve tax law organization, section numbers have been modified as follows:

• Salary Income: Old sections 15–17 → New sections 15–19

• House Property Income: Old sections 20–27 → New sections 20–25

• Business/Profession Income: Old sections 28–44 → New sections 26–66

• Capital Gains: Old sections 45–55 → New sections 67–91

• Other Sources: Old sections 56–59 → New sections 92–95

While the number of sections has decreased, the core tax provisions remain largely the same.