New Income Tax Bill 2025: Know Important Key Points about the New Bill

The New Income Tax Bill, 2025, which goes into effect on April 1, 2026, represents a significant revision of the existing tax system. It consists of 536 clauses, 16 schedules, and 23 chapters that introduce significant changes to streamline and modernise tax administration.

Key changes include the introduction of a “tax year” concept, the preservation of the old tax regime with current deductions, and the development of a new tax regime with updated rates.

The bill gives the Central Board of Direct Taxes (CBDT) more authority, allowing it to execute tax schemes independently and improve digital tax monitoring without requiring regular legislative amendments. It also increases compliance measures, such as faceless assessments and digital record-keeping, and adopts a more systematic approach to penalties for noncompliance.

The bill seeks to clarify international taxation, digital transactions, and the taxation of particular enterprises such as startups, SEZ units, and political parties. While it makes tax benefits more accessible to certain groups, it also imposes stricter standards and may result in increased compliance expenses. Overall, taxpayers will need to adjust to the new legal framework, requiring accurate record-keeping and timely filings in order to navigate the updated tax landscape effectively.

Important Key Points about New Bill

• The new Income Tax Bill includes 536 clauses, 16 schedules, and 23 chapters.
• New Income Tax Bill to be effective April 1, 2026.
• The concept of previous year and assessment year in the current Income Tax Act will be replaced by the term “tax year” as defined in Clause 3 of the Income Tax Bill, which will be the twelve-month period of the financial year beginning on April 1st.
• The definition of “Accountant” under Clause 515(3)(b) of the New Income Tax Bill will continue the same as before, encompassing only Chartered Accountants.
• The old tax regime continues in the new Income Tax Bill, as deductions authorised under Chapter VI-A of the current Income Tax Act are still accessible in the new Income Tax Bill under Chapter VIII, Clauses 122–154.
• Clause 202 of the Income Tax Bill covers the new tax regime rates and conditions under section 115BAC(1A) of the Income Tax Act.
• Tax Deduction At Source (TDS) Clause 393 of the New Income Tax Bill addresses sections 192–196 of the present Income Tax Act.
• Tax Collection At Source (TCS) Clause 394 of the New Income Tax Bill covers sections of the Income Tax Act, including 206C.
• Tax audit under Section 44AB of the Income Tax Act will be controlled by Clause 63 of the New Income Tax Bill. Furthermore, Clause 63 of the New Income Tax Bill states that tax audits must be done by Chartered Accountants alone.
• The rebate now governed by Section 87A of the Income Tax Act is covered by Clause 156 of the new Income Tax Bill.
• Due dates for ITR filing will stay the same in the new Income Tax Bill, such as –
  • Individuals – 31st July
  • Company – 31st October
  • Tax Audit Cases – 31st October
  • Transfer Pricing Cases – 30th November
  • Revised Return – 31st December [9 months from the end of the relevant tax year or before the conclusion of the assessment, whichever comes first].
• A significant shift from the existing law is the delegation of some powers to the Central Board of Direct Taxes (CBDT). Under the current framework, the Income Tax Department must obtain parliamentary approval for a variety of procedural issues, tax schemes, and compliance structures. The new bill empowers the CBDT to introduce such schemes on its own, reducing bureaucratic delays and improving tax governance efficiency.
• Clause 533 of the new law grants the CBDT the authority to develop tax administration rules, execute compliance measures, and enforce digital tax monitoring systems without the need for regular legislative amendments.

New Income Tax Bill 2025 vs. Income Tax Act of 1961: How taxpayers will be affected by the proposed amendments?

Aspect	Income-Tax Act, 1961 (Amended in 2024)	Income-Tax Bill, 2025	Impact on Taxpayers
Nature of Document	Existing legislation, amended over time	Proposed new legislation	Taxpayers must adapt to new legal framework, requiring changes in compliance methods.
Structure	Divided into sections and chapters, originally passed in 1961	Comprehensive, reorganized chapters with new numbering and terminology	Easier to understand, but requires adjustment for professionals and businesses familiar with the old Act.
Tax Year Definition	Financial year (April-March)	Introduces the concept of “Tax Year” but same as Financial Year	Businesses need to align accounting with the new tax year.
Basis of Taxation	Based on total income from different sources, including residential status	Retains similar provisions but introduces refinements on the scope of total income and residency rules	Non-residents may face changes in tax liabilities. More clarity for domestic taxpayers.
Exemptions and Deductions	Existing provisions with periodic amendments	More streamlined and reorganized list of exemptions and deductions	Tax planning adjustments needed.
Computation of Income	Segregated under different heads like Salary, House Property, Business, Capital Gains, and Other Sources	Retains similar heads but introduces refinements for clarity and modern application	More structured income computation; certain loopholes may be closed, affecting tax-saving strategies.
Depreciation and Deductions	Defined under existing provisions	Some modifications in business expenditure rules	Potential impact on businesses; some industries may gain additional benefits, while others may lose certain deductions.
International Taxation	Covered under various sections related to DTAA and international transactions	Expands and modernizes the rules, including changes in royalty, technical fees, and taxation of non-residents	Foreign investors and businesses with global transactions may experience tax rate adjustments and compliance formalities.
General Anti-Avoidance Rules (GAAR)	Introduced in earlier amendments	More structured provisions on GAAR to prevent tax evasion	More scrutiny on aggressive tax planning and corporate tax avoidance; stricter enforcement expected.
Assessment and Tax Administration	Defined under existing provisions with digital amendments	Introduces faceless assessments and improved digital compliance mechanisms	Faster, more transparent tax assessments; reduced interaction with tax officials, minimizing corruption risks.
Appeals and Dispute Resolution	Existing appellate structure	Strengthened dispute resolution, introduction of Dispute Resolution Committee	Faster resolution of disputes; relief for taxpayers dealing with prolonged litigation.
Penalty and Compliance	Penalty provisions exist but scattered across the Act	More structured approach to penalties, non-compliance, and late filings	Stricter enforcement may increase penalties for non-compliance; taxpayers need to ensure timely filings.
Digital Transactions and Record Keeping	Included in amendments (e.g., electronic filings)	Strengthens provisions for digital compliance and electronic record-keeping	More reporting requirements, especially for businesses; ensures transparency but may increase compliance costs.
Taxation of Political Parties and Electoral Trusts	Exemptions provided under certain conditions	Retains exemptions but introduces additional conditions	Political donations and trusts must ensure compliance with stricter rules to maintain tax-exempt status.
Treatment of Co-operatives and LLPs	Covered under existing provisions	More detailed provisions for taxation of co-operative societies and LLPs	Clarity in taxation for co-operatives and LLPs; may affect tax benefits enjoyed earlier.
Special Provisions for Startups, SEZs, and New Industries	Existing provisions with benefits	More structured tax incentives for startups and SEZ units	Easier access to tax benefits for eligible startups and businesses in SEZs; encourages entrepreneurship.
Taxation of Digital Transactions and Cryptocurrency	Limited provisions	Expanded and clearer rules for taxation of digital assets	Crypto investors and traders face clearer tax obligations; potential increase in tax liability.
Foreign Institutional Investors (FIIs) and Venture Capital	Covered under existing provisions	More clarity and expansion of tax treatment for FIIs, venture capital, and investment funds	Foreign investors may face changes in capital gains taxation; better clarity on tax obligations.
Implementation Timeline	Ongoing and amended periodically	To be implemented after approval from Parliament	Taxpayers must stay updated and prepare for transition once the bill is passed.

Important Insights for Taxpayers

Compliance Burden: With stricter penalties and digital record-keeping requirements, taxpayers must preserve correct financial records and meet deadlines.

Tax Planning Changes: Certain deductions and exemptions may change, forcing both individuals and companies to reconsider their tax-saving methods.

International Taxation: Non-residents and businesses doing foreign transactions may face new tax treatments.

Quick Dispute Resolution: The establishment of a Dispute Resolution Committee could speed up tax dispute settlements, benefiting taxpayers stuck in lengthy court proceedings.

Faceless Assessments: Reducing face-to-face interactions with tax authorities will reduce the likelihood of harassment while increasing transparency.