New Income Tax Bill 2025: Key Highlights and What It Means for You

Finance Minister Nirmala Sitharaman will be introducing the new Income Tax Bill 2025, soon in parliament, replacing the nearly 60-year-old Income Tax Act, 1961, aimed at simplifying the tax structure and providing much-needed relief to taxpayers. New Income bill is expected to come into effect from April 1, 2026, to make India's income tax system more modernised and easier to understand. Let's look at the key features and benefits of this bill and what it means for you.

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Impact on Taxpayers and Key Provisions

The new income tax bill will bring significant changes for individual taxpayers, focusing on making the tax process more straightforward.

• New Tax Regime: The bill proposes a new tax regime for individuals and Hindu Undivided Families (HUFs). Taxpayers need to forgo certain deductions and exemptions in exchange for lower tax rates under this system, and once opted in, it cannot be withdrawn in later years unless specific conditions are violated.
• Income Tax Exemption: On Budget 2025 FM Nirmala Sitharaman made a big statement for middle and salaried class, no income tax will be payable on earnings up to INR 12 lakh.  
• Revised Tax Slabs: New tax slabs and rates have been introduced: 

• Tax Relief Measures: Individuals earning up to INR 12,00,000 annually will have no tax liability due to an increased rebate of INR 60,000. Salaried employees with incomes up to INR 12,75,000 will be tax-free. A standard deduction of INR 75,000 was introduced.
• Digital Transactions and Crypto Assets: The bill expands definitions related to digital transactions and crypto assets, including specific references to 'Finance Companies' and 'Finance Units' in the context of dividends.
• Tax Provisions for Cryptocurrency: The Bill reinstates a flat 30% tax on income from virtual digital assets, including crypto and NFTs. There will be no deductions or exemptions allowed, except for the cost of acquisition, and a 1% TDS on crypto transactions remains applicable to track digital transactions.

Modernising India's Tax System

FM Nirmala Sitharaman plans to modernise India's tax system with the Income Tax Bill 2025.

• Global Tax Standards: New Income Tax Bill is standarised with the international taxation norms, making Indian tax system more effective for business and increasing investor confidence.
• Foreign Companies as Residents: The new income bill proposes classifying certain foreign companies as Indian residents, which may impact their tax obligations.

The new Income Tax Bill 2025 simplifies and modernise the Indian tax system, which makes it easier for taxpayers to understand. The focus is on easy and plain language and reduced complexities, to create a taxpayer-friendly environment and easy to understand.

Also Read | Union Budget 2025 For Middle Class: Nil Income Tax upto Rs 12 Lakh?