Everything You Need to Know About the New Income Tax Bill 2025
Union Finance Minister Nirmala Sitharaman presented the new Income Tax Bill 2025 in the Lok Sabha on Thursday. This bill, announced during her Budget speech on February 1 and approved by the Cabinet on February 7, aims to replace the six-decade-old Income Tax Act of 1961.
Bill Introduction and Next Steps
Following its introduction, the Finance Minister requested that the bill be sent to the Parliament's Standing Committee on Finance for detailed discussions and consultations before returning to both Houses of Parliament for final approval. The new Income Tax Act, once enacted, will take effect from April 2026.
The bill spans 622 pages and will be officially titled the Income Tax Act, 2025 after its passage. It is expected to simplify and modernize the outdated provisions of the 1961 act.
Key Changes in the New Bill
The new Income Tax Bill is described as “crisper and simplified.” It introduces several key updates:
- The term ‘previous year’ is replaced by ‘tax year’.
- The concept of ‘assessment year’ is eliminated.
New Income Tax Slabs (Proposed)
The revised tax slabs under the new regime are:
- Income up to ₹4 lakh – No tax
- ₹4 lakh – ₹8 lakh – 5% tax
- ₹8 lakh – ₹12 lakh – 10% tax
- ₹12 lakh – ₹16 lakh – 15% tax
- ₹16 lakh – ₹20 lakh – 20% tax
- ₹20 lakh – ₹24 lakh – 25% tax
- Above ₹24 lakh – 30% tax
What’s New for Salaried Employees?
In the Union Budget, Finance Minister Nirmala Sitharaman provided relief to the middle class by increasing the exemption limit and revising tax slabs. Salaried employees will now benefit from a higher nil tax limit of ₹12.75 lakh per annum, factoring in a standard deduction of ₹75,000.
How Will This Bill Impact You?
The New Income Tax Bill is expected to simplify the tax filing process by reducing the number of sections by 25-30%. The simplified language and reorganized clauses aim to make compliance easier and more transparent for taxpayers, ultimately replacing the complex structure of the 1961 act.
Stay tuned for updates as the consultation process begins and the Parliamentary Standing Committee on Finance reviews the bill further.