The New Income Tax Bill 2025: Key Highlights

 

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The New Income Tax Bill 2025: Key Highlights

The Indian government is gearing up to present the New Income Tax Bill 2025 in the Lok Sabha on February 13, 2025. This bill is designed to modernize the tax structure, reduce litigation, and make compliance easier for both individuals and businesses. Below is a simplified overview of the major changes, thresholds, and the overall impact you can expect once the bill is enacted.

Why a New Income Tax Bill?

The current Income Tax Act, 1961, even after amendments, has become lengthy and somewhat complex. The New Income Tax Bill 2025 aims to:

• Simplify the language and layout
• Enhance digital compliance and reduce paperwork
• Encourage small businesses and professionals by raising key limits
• Maintain continuity in core tax rates and capital gains provisions

Key Features and Changes

1. Fewer Pages, More Sections

• 622 Pages: The new bill is about 201 pages shorter than the old amended act.
• 536 Sections: Organized into 23 chapters and 16 schedules.
• Despite more sections numerically, the text is more concise, removing repetitive or outdated content.

2. Capital Gains and Core Provisions Unchanged

• Long-Term and Short-Term Capital Gains: No changes in the tax treatment.
• No Alterations in Basic Tax Rates: Core rates remain as before, ensuring stability for investors and businesses.

3. Higher Thresholds for Small Taxpayers

• Digital Transactions & Audit Relief: For taxpayers with turnover up to ₹10 crore, there’s additional audit relief, promoting digital transactions.
• Presumptive Taxation:
  • Section 44AD: Limit raised from ₹2 crore to ₹3 crore for businesses.
  • Section 44ADA: Limit raised from ₹50 lakh to ₹75 lakh for professionals.
    These changes help small businesses and professionals minimize paperwork and compliance burdens.

4. Extended Filing Deadlines

• Income Tax Return Filling for Individual, HUF, or Firm (Not under Audit) : 31st July (No Changes)
  
• Tax Audit Filing: Moved from September 30 to October 31.
• Income Tax Return Filing for Audit: Extended from October 31 to November 30. These extensions give taxpayers more time to reconcile accounts and avoid late fees or errors.

5. Audit by Chartered Accountants Only

• Section 515(3)(b) clarifies that only chartered accountants can conduct audits.
• Earlier speculation suggested Company Secretaries or Cost and Management Accountants might be included, but the bill confirms that audits remain the domain of CAs.

6. Parliamentary Approval & Standing Committee Review

• After being tabled in the Lok Sabha, the New Income Tax Bill 2025 will be sent to the Parliamentary Standing Committee on Finance for further review and stakeholder consultation.
• The final version will be enacted only after passing through this scrutiny.

7. Overall Impact

• Reduced Litigation: By clarifying provisions and removing ambiguous language, taxpayers can expect fewer disputes.
• Easier Compliance: Streamlined sections, higher thresholds, and extended deadlines make it simpler for both individuals and businesses.
• Continuation of Key Provisions: Core tax rates, capital gains treatment, and fundamental aspects of the existing system remain intact, providing stability.

Frequently Asked Questions (FAQs)

What is the New Income Tax Bill 2025?

It’s a modernized version of India’s tax legislation, aiming to reduce complexity, promote digital compliance, and maintain stable core tax provisions.

When will it be announced?

The bill is set to be announced in the Lok Sabha on February 13, 2025.

Are capital gains taxes changing?

No, both short-term and long-term capital gains provisions remain unchanged.

How does it help small businesses?

The presumptive taxation limits are raised, and there’s audit relief for turnovers up to ₹10 crore, making compliance easier for smaller entities.

What about the old Income Tax Act?

The new bill replaces or substantially revises the old act, but it retains many core tax concepts while simplifying the language.

Are filing deadlines extended?

Yes, tax audit filing moves to October 31, and the ITR filing deadline shifts to November 30, giving taxpayers more time to file.
But for  Income Tax Return Filling for Individual, HUF, or Firm (Not under Audit) : 31st July (No Changes)

Does it affect the basic income tax rates?

The bill does not introduce changes to the core tax rates, focusing instead on structural and administrative improvements.

Will chartered accountants still handle all audits?

Yes, the bill confirms that only chartered accountants can perform tax audits, excluding CS and CMA professionals from audit duties.

Does the new bill encourage digital transactions?

Absolutely, with higher turnover thresholds for digital transactions and special relief measures, the government is pushing for more digital adoption.

When will the New Income Tax Bill 2025 come into force?

After parliamentary approval, it’s expected to come into effect from the financial year starting April 1, 2026.

Conclusion

The New Income Tax Bill 2025 offers a streamlined, modern approach to tax legislation in India. By reducing the document’s length, increasing thresholds for small taxpayers, and keeping core provisions stable, it aims to simplify compliance and reduce litigation. While the final version awaits parliamentary approval and standing committee review, the bill is a strong step toward a more transparent and efficient tax system.

Keep an eye on official government notifications and reputable financial news outlets for the most accurate and up-to-date information on the bill’s progress and final provisions.