The New Income Tax Bill, 2025 set to take effect from April 1, 2026, represents a comprehensive overhaul of the existing tax framework. It consists of 536 clauses, 16 schedules, and 23 chapters, introducing significant changes to streamline and modernize tax administration. Key shifts include the introduction of a “tax year” concept, retention of the old tax regime with existing deductions, and the establishment of a new tax regime with updated rates. The bill delegates more powers to the Central Board of Direct Taxes (CBDT), enabling it to implement tax schemes independently and enhance digital tax monitoring without frequent legislative amendments. It also strengthens compliance mechanisms, including faceless assessments and digital record-keeping, and introduces a more structured approach to penalties for non-compliance. The bill aims to provide clarity in areas such as international taxation, digital transactions, and the taxation of specific entities like startups, SEZ units, and political parties. While it offers easier access to tax benefits for certain groups, it also imposes stricter rules and potentially higher compliance costs. Overall, taxpayers will need to adapt to the new legal framework, ensuring accurate record-keeping and timely filings to navigate the updated tax landscape efficiently.
1. New Income Tax Bill has 536 clauses, 16 Schedules and 23 Chapters
2. New Income Tax Bill to be applicable with effect from 1 April 2026
3. The concept of previous year and assessment year in the present Income tax Act to be replaced by the term “tax year” as defined in Clause 3 of the Income Tax Bill which shall be the twelve months period of the financial year commencing on the 1st of April.
4. Definition of “Accountant” under Clause 515(3)(b) of the New Income Tax Bill to remain the same as earlier and covers only Chartered Accountants.
5. Old Tax Regime continues in the new Income Tax Bill as deductions currently available under Chapter VI-A of the present Income Tax Act are still available in the new Income Tax Bill under Chapter VIII vide Clauses 122 to 154.
6. New Tax Regime rates & provisions u/s 115BAC(1A) of the Income Tax Act covered under Clause 202 of the Income Tax Bill.
7. Tax Deduction at Source (TDS) Sections of present Income Tax Act Viz. Section 192 to 196 are covered under Clause 393 of the New Income Tax Bill.
8. Tax Collection at Source (TCS) Sections of Income Tax Act viz. 206C are covered under Clause 394 of the New Income Tax Bill.
9. Tax Audit u/s 44AB of the Income Tax Act to be governed by Clause 63 of the New Income Tax Bill. Furthermore Clause 63 of the New Income Tax Bill reiterates that tax audit shall be conducted by Chartered Accountants only.
10. Rebate currently governed by Section 87A of the Income Tax Act covered under Clause 156 of the new Income Tax Bill.
11. Due dates for ITR filing to remain the same in the new Income Tax Bill viz.
a. Individuals – 31st July
b. Company – 31st October
c. Tax Audit Cases – 31st October
d. Transfer Pricing Cases – 30th November
e. Revised Return – 31st December [9 months from the end of relevant tax year or before the completion of assessment whichever is earlier]
12. 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.
13. 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.
How taxpayers are affected due to the changes proposed in the New Income Tax Bill, 2025 compared with the Income Tax Act, 1961:
| Aspect | Income-Tax Act, 1961 (Amended in 2024) | Income-Tax Bill, 2025 | Impact on Taxpayers |
| Nature of Document | Existing legislation, amended over time | Proposed new legislation | Taxpayers must adapt to new legal framework, requiring changes in compliance methods. |
| Structure | Divided into sections and chapters, originally passed in 1961 | Comprehensive, reorganized chapters with new numbering and terminology | Easier to understand, but requires adjustment for professionals and businesses familiar with the old Act. |
| Tax Year Definition | Financial year (April-March) | Introduces the concept of “Tax Year” but same as Financial Year | Businesses need to align accounting with the new tax year. |
| Basis of Taxation | Based on total income from different sources, including residential status | Retains similar provisions but introduces refinements on the scope of total income and residency rules | Non-residents may face changes in tax liabilities. More clarity for domestic taxpayers. |
| Exemptions and Deductions | Existing provisions with periodic amendments | More streamlined and reorganized list of exemptions and deductions | Tax planning adjustments needed. |
| Computation of Income | Segregated under different heads like Salary, House Property, Business, Capital Gains, and Other Sources | Retains similar heads but introduces refinements for clarity and modern application | More structured income computation; certain loopholes may be closed, affecting tax-saving strategies. |
| Depreciation and Deductions | Defined under existing provisions | Some modifications in business expenditure rules | Potential impact on businesses; some industries may gain additional benefits, while others may lose certain deductions. |
| International Taxation | Covered under various sections related to DTAA and international transactions | Expands and modernizes the rules, including changes in royalty, technical fees, and taxation of non-residents | Foreign investors and businesses with global transactions may experience tax rate adjustments and compliance formalities. |
| General Anti-Avoidance Rules (GAAR) | Introduced in earlier amendments | More structured provisions on GAAR to prevent tax evasion | More scrutiny on aggressive tax planning and corporate tax avoidance; stricter enforcement expected. |
| Assessment and Tax Administration | Defined under existing provisions with digital amendments | Introduces faceless assessments and improved digital compliance mechanisms | Faster, more transparent tax assessments; reduced interaction with tax officials, minimizing corruption risks. |
| Appeals and Dispute Resolution | Existing appellate structure | Strengthened dispute resolution, introduction of Dispute Resolution Committee | Faster resolution of disputes; relief for taxpayers dealing with prolonged litigation. |
| Penalty and Compliance | Penalty provisions exist but scattered across the Act | More structured approach to penalties, non-compliance, and late filings | Stricter enforcement may increase penalties for non-compliance; taxpayers need to ensure timely filings. |
| Digital Transactions and Record Keeping | Included in amendments (e.g., electronic filings) | Strengthens provisions for digital compliance and electronic record-keeping | More reporting requirements, especially for businesses; ensures transparency but may increase compliance costs. |
| Taxation of Political Parties and Electoral Trusts | Exemptions provided under certain conditions | Retains exemptions but introduces additional conditions | Political donations and trusts must ensure compliance with stricter rules to maintain tax-exempt status. |
| Treatment of Co-operatives and LLPs | Covered under existing provisions | More detailed provisions for taxation of co-operative societies and LLPs | Clarity in taxation for co-operatives and LLPs; may affect tax benefits enjoyed earlier. |
| Special Provisions for Startups, SEZs, and New Industries | Existing provisions with benefits | More structured tax incentives for startups and SEZ units | Easier access to tax benefits for eligible startups and businesses in SEZs; encourages entrepreneurship. |
| Taxation of Digital Transactions and Cryptocurrency | Limited provisions | Expanded and clearer rules for taxation of digital assets | Crypto investors and traders face clearer tax obligations; potential increase in tax liability. |
| Foreign Institutional Investors (FIIs) and Venture Capital | Covered under existing provisions | More clarity and expansion of tax treatment for FIIs, venture capital, and investment funds | Foreign investors may face changes in capital gains taxation; better clarity on tax obligations. |
| Implementation Timeline | Ongoing and amended periodically | To be implemented after approval from Parliament | Taxpayers must stay updated and prepare for transition once the bill is passed. |
Key Takeaways for Taxpayers:
1. Compliance Burden: Stricter penalties and digital record-keeping requirements mean taxpayers must maintain accurate financial records and adhere to deadlines.
2. Tax Planning Adjustments: Some deductions and exemptions may change, requiring individuals and businesses to rethink their tax-saving strategies.
3. International Taxation: Non-residents and businesses engaged in international transactions may face revised tax treatments.
4. Easier Dispute Resolution: Introduction of a Dispute Resolution Committee may speed up tax dispute settlements, benefiting taxpayers stuck in prolonged litigation.
5. Faceless Assessments: Reduction in face-to-face interactions with tax authorities will decrease the chances of harassment and increase transparency.
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