NEW INCOME TAX BILL 2025:10 KEY CHANGES

Union Minister of Finance Nirmala Sitharaman tabled the Income Tax Bill (ITB) 2025 in Lok Sabha on February 13, 2025. The new Bill will replace the Income-tax Act, 1961 (I-T Act, 1961) and will come into effect from April 1, 2026. All the changes in Budget 2025 have been incorporated in this new Bill. Let us take a look at 10 key changes that will affect you directly from financial year 2026-27

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Change 1

It's Simpler

ITB 2025 aims to provide a simpler tax code that is less complex, easier to understand, and easier to interpret. For instance, tax provisions for salary have been consolidated and tax deducted at source (TDS) and tax collected at source (TCS) provisions have been simplified. ITB has also scrapped more than 300 obsolete and redundant laws. However, it has more sections than earlier.

Income Tax Bill, 2025Income-tax Act, 1961Sections536298Chapters2323Schedules1614

Change 2

Tax Year

ITB has introduced the concept of a tax year, replacing both financial year (FY) and assessment year (AY). The tax year is a 12-month period from April 1 of one year to March 31 of the following year.

Says Gouri Puri, partner, Shardul Amarchand Mangaldas & Co., a law firm, "Multiple concepts of FY, AY and previous year confused taxpayers, which impacted the readability of the tax law. The concept of a tax year is easy to understand and in line with international practice."

Change 3

Streamlined TDS, TCS

ITB 2025 proposes to simplify the compliance burden by widening the scope of payments covered for obtaining a lower TDS or TCS certificate.

"It is proposed to cover all payments and/or receipts vis-a-vis certain payments and/or receipts covered under the current law. This will reduce the amount of cash locked in tax withholding for such taxpayers who were not covered earlier," says Aarti Raote, partner, Deloitte India.