Income Tax Bill 2025 Introduced: Key Changes Every Taxpayer Must Know

India is on the verge of implementing a historic reform in income tax legislation. On Monday, the government introduced the Income Tax Bill, 2025 in the Lok Sabha, signaling a major shift from the Income Tax Act of 1961 that has governed the nation’s tax system for more than 60 years.

The new bill is part of a broader plan to simplify tax compliance and make the law easier for both professionals and ordinary citizens to understand.

“A new Income Tax Bill, 2025, which promises to make paying taxes simpler and clearer, will be placed before the Lok Sabha on Monday.”

From Complexity to Simplicity: Key Changes in the New Law

Shorter, Simpler, and More Streamlined

One of the most striking changes is the drastic reduction in size and complexity of the law.

“The new Bill aims to replace the old Income Tax Act, 1961, with a much shorter and easier-to-read law.”

Here are some major structural revisions:

“The number of sections drops from 819 to 536, and the chapters are cut down from 47 to just 23.”

The draft has been reviewed by a parliamentary panel, which submitted 285 suggestions, many of which have been incorporated into the final version being presented in the Monsoon Session (July 21 to August 21).

Aiming to Cut Legal Disputes and Enhance Clarity

The old Act was known for its legal jargon, countless provisos, and complex explanations, which often resulted in legal disputes and confusion.

“One big aim of this revamp is to reduce confusion and stop endless court cases.”

To address this, the Bill removes 1,200 provisos and 900 explanations and adds 57 easy-to-read tables, up from just 18 earlier.

“Instead, the new version uses plain language and adds more easy-to-read tables, 57 in total, up from just 18 earlier.”

'Tax Year' to Replace ‘Assessment Year’ and ‘Previous Year’

Key Change in Tax Filing Terminology

The most noticeable change for ordinary taxpayers will be in the calendar system used for tax filing.

“The new Bill replaces the idea of a ‘previous year’ and ‘assessment year’ with a simple ‘tax year’.”

Currently, income earned in one financial year is assessed and taxed in the following year. The new system will make taxation concurrent, meaning taxes are paid in the same year the income is earned.

“Right now, you earn income in one year and pay tax on it in the next. But with the new law, you pay tax in the same year you earn it.”

This change is aimed at reducing confusion and making the taxation process more intuitive for salaried individuals and small business owners.

Additional Reforms in Exemptions, TDS, and Compliance

Simpler Rules for Tax Deduction and Non-Profits

The Income Tax Bill, 2025, also lays out clearer rules for exemptions, TDS (Tax Deducted at Source), TCS (Tax Collected at Source), and guidelines for not-for-profit organisations.

“The Bill also makes clearer rules for exemptions, TDS, TCS, and not-for-profit organisations.”

These updates aim to make compliance easier and reduce the burden on taxpayers and NGOs, thereby streamlining audit and filing requirements.

Nirmala Sitharaman’s Statement on the New Tax Code

Finance Minister Nirmala Sitharaman, who introduced the draft version of the bill in February, emphasized that the move is intended to bring tax certainty and create a more efficient tax environment.

“This new law will help bring tax certainty and make things easier for honest taxpayers.”

If passed in the current session, the bill would be one of the biggest structural reforms to India’s tax system in decades.

Conclusion: A New Era for India’s Taxpayers

The Income Tax Bill, 2025 seeks to transform India's tax landscape by making it more transparent, readable, and less prone to litigation. For millions of taxpayers across the country, these reforms signal a friendlier and less stressful tax compliance experience. With simplified language, a new taxation calendar, and streamlined processes, India is stepping into a new era of digital and inclusive taxation.