On February 13, 2025, Finance Minister Nirmala Sitharaman, Finance Minister of India introduced the New Income Tax Bill 2025 in the Lok Sabha, aiming to modernize and simplify India’s tax system by replacing the six-decade-old Income Tax Act of 1961.
Key Features of the New Income Tax Bill 2025:
1. Simplification of Language:
The bill is written in clearer language to enhance understanding and compliance among taxpayers.
2. Introduction of ‘Tax Year’
The term “tax year” will replace “assessment year.” This change aligns the tax year with the financial year, running from April 1 to March 31 each year. This adjustment aims to reduce confusion about tax filing deadlines.
3. Revised Tax Slabs
The new tax bill introduces updated income tax brackets. Here’s how much tax different income groups will have to pay:
- ₹0 – ₹4,00,000: 0% (No tax)
- ₹4,00,001 – ₹8,00,000: 5%
- ₹8,00,001 – ₹12,00,000: 10%
- ₹12,00,001 – ₹16,00,000: 15%
- ₹16,00,001 – ₹20,00,000: 20%
- ₹20,00,001 – ₹24,00,000: 25%
- Above ₹24,00,000: 30%
This restructuring reduces the tax burden on middle-income earners while ensuring higher-income individuals contribute more.
4. Increased Digital Oversight by Tax Authorities
A significant change in the bill grants tax authorities broader access to digital records. This includes emails, online investments, bank accounts, and even social media during tax investigations. While this measure aims to combat tax evasion, it has raised concerns about privacy and data security.
5. Streamlined Tax Compliance
The bill simplifies tax rates and rules, making them easier to understand. The new format aims to minimize errors in tax filings, reduce legal disputes, and ensure a smoother tax-paying experience for individuals and businesses.
When Will These Changes Take Effect?
The new tax system is set to be implemented on April 1, 2026. Before then, the bill will undergo further review and possible revisions.
How Will This Impact You?
For most taxpayers, these changes will simplify the tax filing process. Many middle-income earners may benefit from lower tax rates, while higher earners could see increased tax liabilities. Businesses may also experience reduced bureaucratic hurdles due to clearer regulations.
