The Income Tax Bill 2025, a document of 622 pages comprising 536 sections and 23 chapters, is anticipated to be introduced in the Lok Sabha on Thursday, February 13, 2025.
Once enacted, the proposed bill will replace the six-decade-old Income Tax Act of 1961, which has become increasingly complex and cumbersome due to numerous amendments.
New Income Tax Bill VS Old Regime
One of the key changes in the new law is replacing the term "previous year" in the Income Tax Act, 1961, with "tax year." Additionally, the concept of an "assessment year" has been eliminated. Currently, tax for income earned in the previous year (e.g., 2023-24) is paid in the assessment year (e.g., 2024-25). The new bill simplifies this structure by introducing a single "tax year."
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The Income Tax Bill, 2025, consists of 536 sections, up from 298 in the existing Income Tax Act, 1961. The number of schedules will also increase from 14 to 16. However, the number of chapters remains unchanged at 23. Despite the expansion in sections, the overall length of the legislation has been significantly reduced to 622 pages- almost half of the current Act, which has accumulated amendments over six decades. For comparison, the original Income Tax Act, 1961, had 880 pages.
AMRG & Associates Senior Partner Rajat Mohan told news agency PTI, "The increase in sections reflects a more structured approach to tax administration, incorporating modern compliance mechanisms, digital governance, and streamlined provisions for businesses and individuals. The new law introduces 16 schedules and 23 chapters."
The proposed legislation also aims to provide greater clarity on the tax treatment of stock options (ESOPs) to minimize tax disputes. Additionally, it incorporates judicial pronouncements from the past 60 years to enhance legal certainty.
A major shift from the existing law is the delegation of certain powers to the Central Board of Direct Taxes (CBDT). Under the current system, the Income Tax Department must seek parliamentary approval for various procedural matters, tax schemes, and compliance frameworks. The new bill empowers the CBDT to introduce such schemes independently, reducing bureaucratic delays and making tax governance more efficient.
As per Clause 533 of the new law, the CBDT will have the authority to establish tax administration rules, implement compliance measures, and enforce digital tax monitoring systems without requiring frequent legislative amendments.
After its introduction, the bill is expected to be referred to a parliamentary standing committee for further scrutiny.
Finance Minister Nirmala Sitharaman had announced in the 2025-26 Budget that the new tax bill would be introduced during the ongoing session of Parliament. The comprehensive review of the Income Tax Act, 1961, was first announced in the July 2024 Budget.
To facilitate the review, the CBDT formed an internal committee to simplify and streamline the law, aiming to reduce disputes and provide greater tax certainty. Additionally, 22 specialized sub-committees were established to examine various aspects of the Income Tax Act.
Public feedback was invited in four key areas: simplifying language, reducing litigation, easing compliance, and eliminating redundant provisions. The Income Tax Department received 6,500 suggestions from stakeholders as part of this review process.
Slabs Revised For New Regime
There will be no tax burden on up to Rs 12 lakh annual income, except special income. The revised slabs will benefit those earning more than that from the next financial year, helping taxpayers with more disposable income.
Here are the new tax slabs and how it compares with the current structure:
Tax Slabs For FY25-26 (proposed)
- Up to Rs 4 Lakh: Nil
- Rs 4-8 lakh: 5%
- Rs 8-12 lakh: 10%
- Rs 12-16 lakh: 15%
- Rs 16-20 lakh: 20%
- Rs 20-24 lakh: 25%
- Above Rs 24 lakh: 30%
Tax Slabs For FY24-25 (current)
- Up to Rs 3 lakh: Nil
- Rs 3-7 lakh: 5%
- Rs 7-10 lakh: 10%
- Rs 10-12 lakh: 15%
- Rs 12-15 lakh: 20%
- Above Rs 15 lakh: 30%
- No Tax Up To Rs 12 Lakh
Those earning up to Rs 12 lakh annually won't have to pay any income tax under the new regime. Add to it the standard deduction of Rs 75,000 and taxpayers with up to Rs 12.75 lakh annual income will have to pay zero tax.
