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The draft new Income Tax Bill 2025 PDF that is being circulated in public domain is a 622 pages document constituting 536 clauses, 23 chapters and 16 schedules. This new law is proposed to be effective from 1st April, 2026. The Government is likely to table this bill in the Parliament on 13th February, 2025. The key points of the proposed new income tax bill 2025 are elaborated as under:-
Applicability and Tax Regime
The new direct tax law is proposed to be effective from 1st April, 2026. The new tax regime will be applicable on all individuals.
Change in terminology of PY and AY
The proposed bill suggests that the terms – ‘Previous Year’, ‘Financial Year’ and ‘Assessment Year’ will be replaced with the concept of ‘Tax Year’.
Definition of Accountants
As per Section 515(3)(b) of the proposed new income tax bill 2025, there will be no change in the definition of accountants. As per Section 63 of the proposed new income tax bill, Chartered Accountants retain the sole power to conduct tax audits.
Deductions under the New Tax Regime
Section 19(1) of the proposed new income tax bill 2025 contains list of deductions which will be permitted under the new tax regime.
Tax audit applicability
As per the propose new income tax bill, where the profits declared are lower than the profit to be declared as per Section 44AD, the taxpayer will be liable for tax audit.
No change in STCG
As per the proposed new income tax bill 2025, there will be no change in the tax rate and tenure for computation of short term capital gains. The period will be 12 months and 20% will be the STCG rate of tax.
Benefit of presumptive taxation
In the existing Income Tax Act, 1961, the benefit of presumptive taxation was limited to certain businesses and professions. However, as per the proposed new income tax bill, this benefit will be available across more categories including digital businesses for ease to the small businesses.
TDS and TCS
In the existing Income Tax Act, 1961, there were various rates for different heads of income for deduction of TDS and TCS. In the proposed new income tax bill, there will be a unified and simplified structure for TDS and TCS.
New Digital Economy Taxation
The proposed new income tax bill 2025 will include specific provisions for taxation of digital economy including crypto currency and e-commerce with penalties for lapses in reporting of crypto currency transactions.
Residential Status
In the existing Income Tax Act, 1961, the determination of residential status was based on number of days. However, in the new proposed income tax bill, there will be new definitions for NRIs and tax residency to curb instances of tax avoidance.
Scope of GAAR (General Anti-Avoidance Rules)
In the proposed new income tax bill, the scope of GAAR (General Anti-Avoidance Rules) will be strengthened to ensure stricter ant-avoidance measures and reduce tax evasion.
No new taxes introduced
The proposed new income tax bill does not introduce any new taxes and focuses on simplifying the existing direct tax law.
Click here to read more about the Focus areas of the New Income Tax Bill 2025.
Click here to read about the Highlights of the Union Budget 2025.