A new Income Tax Bill 2025 is released for the public. The new document covers 622 pages and will take the place of the Income Tax Act 1961, which has been in use for sixty years. The Bill consists of 23 chapters, 16 schedules, and 536 clauses aimed at simplifying tax terminology.
The New Income Tax Bill suggests straightforward definitions like ‘tax year’. This means now onwards no confusion about FY – Financial Year and AY – Assessment Year. The New Definition is Tax Year.
It introduces a new tax regime with a focus on simplifying tax compliance and providing an alternative tax structure to individuals and businesses.
The Income-Tax Act, 2025 will be implemented from April 1, 2026.
Here are the key takeaways of Income Tax Bill 2025 for taxpayers –
Income Tax Bill 2025 – Key Updates Highlights
The new Income-Tax (I-T) Bill, announced by Finance Minister Nirmala Sitharaman during her Budget speech on February 1, is more concise and straightforward.
It has replaced the term ‘previous year’ from the 60-year-old Income Tax Act, 1961, with ‘tax year’ and done away with the concept of ‘assessment year’.
Once the New Income Tax Bill is passed in the Parliament, it will be referred to the Parliamentary Standing Committee on Finance, which will start the consultation process.
Income Tax Bill 2025 – New Tax Regime
The bill proposes a new tax regime for individuals, Hindu Undivided Families (HUFs), and others. Once a taxpayer selects the new regime, it cannot be reverted back in subsequent years unless specific conditions are violated.
With this system, taxpayers must give up specific deductions and exemptions for a reduced tax rate. Employees with a salary might experience lighter compliance responsibilities with the new system; however, they should consider the decrease in deductions before deciding to join. Companies can gain from reduced corporate tax rates, but they need to ensure they satisfy the qualifying criteria.
The new tax regime introduces revised tax slabs for individual taxpayers. While the exact slab rates are not detailed in this summary, the bill specifies that –
The tax rates for individuals have been modified under the new regime.
| Income range (₹) | Tax rate |
|---|---|
| 0 – 4 lakh | Nil |
| 4 – 8 lakh | 5% |
| 8 – 12 lakh | 10% |
| 12 – 16 lakh | 15% |
| 16 – 20 lakh | 20% |
| 20 – 24 lakh | 25% |
| Above 24 lakh | 30% |
Taxpayers must opt into the new regime and once selected, cannot revert back.
Corporate taxes
The Bill indicates that new manufacturing firms established on or after a certain date may choose a 15% reduced tax rate. The concessions will be accepted as long as they do not seek deductions.
All other local firms choosing the new tax scheme will be taxed at a rate of 25%.
New Tax Year Definition
In this Act, “tax year” refers to the twelve-month duration of the financial year starting on April 1st. So from now onwards no more Financial Year or Assessment Year only Tax Year.
For a newly established business or profession, or a new income source arising in any financial year, the tax year will start from –
(a) the date of establishment of that business or profession; or
(b) the date on which this source of income is newly established, concluding with the mentioned financial year.
Income Tax Bill 2025 – Special Tax Provisions for Cryptocurrency
Crypto traders and investors must adhere to more stringent taxation and reporting obligations. The Bill reintroduces a uniform 30% tax on earnings from virtual digital assets such as crypto, NFTs, etc. No deductions or exemptions will be permitted, aside from the acquisition cost. It also suggested that a 1% TDS on crypto transactions continues to apply to monitor digital transactions.
Income Tax Bill 2025 – Taxation on Other Specific Incomes
The updated income tax legislation specifies that income interest will be taxed according to existing rates, with a ₹10,000 limit for regular taxpayers and ₹50,000 for senior citizens.
Earnings from securities, mutual funds, and foreign investments will be subject to taxes ranging from 10% to 12.5%, based on the type of investment.
Winnings from online gaming and gambling will be subject to a uniform tax rate, with a threshold of ₹10,000 for each transaction related to lottery and gambling profits.
Income Tax Bill 2025 – Influencers and Digital Content Creators to be taxed
The Income-Tax Bill, 2025 has established particular regulations for social media influencers, YouTubers, freelancers, and digital content creators to guarantee adherence to income tax laws.
The legislation clearly defines digital creators, YouTubers, and social media influencers as taxable entities classified under business income.
The legislation has implemented stricter TDS regulations for brand partnerships – TDS on complimentary items and barter transactions: Brands providing products (cars, phones, luxury goods) are required to deduct TDS based on their fair market value, resulting in influencers being taxed on received gifts.
Income earned from paid promotions, sponsored posts, ads, and subscriber support is liable to taxation as business earnings.
Tax authorities are now able to monitor online income sources through digital forensics.
Income Tax Bill 2025 – Rules for TDS and TCS
The new bill proposes that TDS rules will apply to salaries, professional fees, interest income, rent, and more.
TCS is applicable on specific transactions, such as –
- The Sale of alcohol, tendu leaves, minerals, and scrap materials (1%-5%)
- Sale of motor vehicles above ₹10 lakh (1%).
- Foreign remittances exceeding ₹7 lakh (5%).
Penalties for TDS/TCS defaults will attract below mentioned penalties –
- Failure to deduct/pay TDS or TCS results in an assessee being considered in default.
- Interest on unpaid TDS/TCS will be charged at 1% per month.
Income Tax Bill 2025 – Advance Tax Payment Rules
According to the new income tax bill taxpayers liable for advance tax must pay it in four installments:
June 15 – At least 15% of total tax due.
September 15 – At least 45% (cumulative).
December 15 – At least 75% (cumulative).
March 15 – 100% of the tax due.
Non-payment of advance tax results in penalties and interest charges.
Income Tax Bill 2025 – Tax Raids and Searches
The Income-Tax Bill of 2025 presents comprehensive measures regarding search, confiscation, and tax investigations. These regulations will enable tax officials to execute raids, confiscate assets, and examine undeclared income.
The justification for believing or suspecting ‘Searches’ does not have to be revealed according to Sec 149.
Income Tax Bill 2025 – No new penalty for late filing of Income Tax return
The updated income tax legislation has not introduced any new fines or fees for late tax submissions. Per the regulations outlined in the proposed legislation, taxpayers are required to pay self-assessment tax prior to submitting income tax returns.
Submitting late results in: Interest charges of 1% monthly. Penalties of ₹5,000 and ₹1,000 for taxpayers earning less than ₹5 lakh.
