How New Income Tax Bill 2025 Could Affect Taxpayers

The Income Tax Bill 2025 was introduced in Lok Sabha on February 13, 2025, by the Finance Minister, Nirmala Sitharaman, with the aim to replace the current Income Tax Act, 1961. This bill was sent to the select committee of the Lok Sabha to examine the Bill. After this, the selected committee submitted its report suggesting 285 changes.

The Union Finance Minister Nirmala Sitharaman is likely to table the new Income Tax Bill 2025 in Parliament on August 11, 2025 to replace the current Income Tax Act, 1961.

Key Changes in Income Tax Bill 2025

The new income tax bill focuses on implementing easy tax rules to ensure efficient compliance. The Income Tax Bill 2025 will replace the concept of previous year and assessment year by introducing the word “tax year.” The FY and AY caused confusion among the taxpayers. Therefore, the concept of tax year will be introduced.

The changes in the bill aim to simplify language and eliminate unnecessary provisions. The Income Bill has reduced the words in the Current Act from 5.12 lakh words to 2.6 lakh words. The number of chapters has been reduced from 47 to 23, and the sections have been cut from 819 to 536. Over 1200 provisos and 900 explanations have been eliminated to make the bill easier and cleaner.

Key Suggestions Given by Select Committee

The select Committe of Lok Sabha has given the following key suggestion:

• To update some definitions, such as “capital asset,” “micro and small enterprises,” and “infrastructure capital company“, so that these definitions match with the current laws.
• low-income individuals with TDS should not need to be forced to file returns just to claim a refund.
• To use a fairer method to compute deductions on house property income
• To keep helpful phrases like “in the circumstances of the case” in certain tax avoidance rules, so people do not face unnecessary legal issues.
• Taxing donations at 30% for religious and charitable organisations and giving full exemptions to purely religious trusts.