1. Replacement of 1961 Act
- The Income Tax Bill, 2025 replaces the six-decade-old Income Tax Act, 1961.
- Objective: simplification, modernization, and digitalization of tax laws.
2. Reduction in Complexity
- Sections reduced from 819 → 536.
- Chapters brought down from 47 → 23.
- Word count trimmed from 5.1 lakh → 2.6 lakh.
- Use of plain English with fewer provisos, making it easier for common taxpayers to understand.
3. Introduction of “Tax Year”
- The dual concepts of Previous Year and Assessment Year have been merged into a single Tax Year (April–March).
- For new businesses, the tax year starts from the date of commencement.
4. No Change in Tax Rates
- Tax slabs and rates remain as announced in Budget 2025.
- The new tax regime continues as default, while the old regime is optional.
5. Digital & Faceless Assessments
- Expansion of faceless e-assessments to reduce corruption and personal interface.
- Notices and actions must follow transparent digital procedures.
6. Faster Refunds & Late Filing Relief
- Refunds will be allowed even if returns are filed late, provided there are valid reasons.
- Improves trust between taxpayers and authorities.
7. Inclusion of Virtual Digital Assets (VDAs)
- Cryptocurrencies, NFTs, and other digital assets are now clearly included under taxable income.
- Treated under capital gains provisions, removing earlier ambiguity.
8. Presumptive Taxation Reforms
- Higher limits for small taxpayers:
- ₹2 crore for businesses.
- ₹75 lakh for professionals.
- Aimed at reducing compliance burden for small entities.
9. Protection for LLPs
- Clarification in Alternative Minimum Tax (AMT) ensures LLPs are not unfairly taxed if their income is primarily long-term capital gains.
10. Taxpayer’s Charter & Transparency
- New Taxpayer’s Charter guarantees rights, responsibilities, and grievance redressal.
- Anonymous donations to trusts restricted unless they provide defined social services.
11. Legislative Timeline
- Introduced in Parliament: February 2025.
- Replaced with revised draft: August 2025.
- Passed by Lok Sabha (Aug 11) and Rajya Sabha (Aug 12).
- Received Presidential Assent: Aug 21, 2025.
- Effective date: April 1, 2026.
✅ Conclusion
The Income Tax Bill, 2025 marks the biggest overhaul in India’s tax system in over 60 years. By simplifying legal language, reducing compliance hurdles, and embracing digital assessments, it makes the tax process more transparent, accessible, and citizen-friendly. Importantly, while tax rates remain unchanged, the Bill focuses on ease of compliance, clarity for digital assets, and stronger taxpayer rights. When it comes into force in April 2026, it is expected to boost voluntary compliance, cut litigation, and align India’s tax laws with modern global standards.
