India has taken a historic step in reforming its tax laws. On August 12, 2025, both houses of Parliament passed the Income Tax Bill, 2025, replacing the 64-year-old Income Tax Act, 1961. This new law is being hailed as the most significant tax overhaul in decades — designed to make compliance simpler, bring more clarity, and modernize India’s tax system.
Why Was the Change Needed?
The Income Tax Act, 1961, had been amended hundreds of times over the years, making it bulky and complicated. Taxpayers and professionals often complained about outdated language, complex provisions, and inconsistencies.
The new bill aims to:
- Simplify tax laws and language
- Reduce ambiguity in interpretation
- Adapt to modern economic realities, including digital assets
- Promote paperless and faceless compliance
Key Features of the New Income Tax Bill 2025
1. Simpler Structure
The old law has been condensed into:
- 23 Chapters
- 16 Schedules
- Clear, plain-language drafting
This makes the law easier to navigate and understand for ordinary taxpayers.
2. Introduction of a Single “Tax Year”
Under the old system, income earned in a “Previous Year” was taxed in the following “Assessment Year.”
The new bill replaces both terms with a unified “Tax Year”, meaning:
- Income earned in a financial year will be taxed in the same year.
- This change eliminates confusion and streamlines compliance.
3. No Tax Up to â‚ą12.75 Lakh for Salaried Individuals
In line with Union Budget 2025, the new bill continues the promise of relief:
- Zero tax on income up to â‚ą12 lakh
- For salaried individuals, a â‚ą75,000 standard deduction increases the effective no-tax limit to â‚ą12.75 lakh.
This is a significant boost for middle-class earners.
4. Inclusion of Digital Assets
The bill broadens the definition of “undisclosed income” to include:
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- Non-fungible tokens (NFTs)
- Other virtual digital assets
This means these assets are now clearly under the tax net, with penalties for non-disclosure.
5. Streamlined TDS Rules
All Tax Deducted at Source (TDS) provisions have been consolidated into one section with easy-to-read tables, reducing complexity for both individuals and businesses.
6. Property & Pension Clarifications (Effective from April 1, 2026)
- Clear rules for claiming pre-construction interest deduction on let-out properties.
- Broader eligibility for commuted pension deductions, including some non-employee beneficiaries.
7. Focus on Digital & Faceless Processes
The bill pushes for a paperless tax environment:
- Faceless assessments to reduce corruption and personal bias.
- Digital-first compliance for faster, more transparent processes.
What’s Not Changing
- Tax slabs remain the same as per Budget 2025.
- No new taxes or additional levies have been introduced.
- The focus is on simplifying the framework, not increasing the tax burden.
When Will It Come Into Effect?
Most provisions of the Income Tax Bill, 2025 will be applicable from April 1, 2026, i.e., the Tax Year 2026–27.
Why This Matters
This reform is more than just a legal rewrite. It’s a step toward:
- Easier compliance for ordinary citizens
- Transparent, digital governance
- A modern tax system that can adapt to emerging financial trends
Summary Table
| Change | Impact |
|---|---|
| Single “Tax Year” | Eliminates confusion between AY & PY |
| Zero tax up to â‚ą12.75L (salaried) | Boosts disposable income |
| Digital assets under tax net | More clarity, better compliance |
| Simplified TDS rules | Easier for individuals & businesses |
| Property & pension clarifications | Fairer deductions |
| No new taxes/slabs | Stability for taxpayers |
💬 Final Word: The Income Tax Bill 2025 makes paying taxes simpler and less intimidating. For middle-income earners and digital-savvy taxpayers, this could be the most user-friendly version of India’s tax law in decades.
