New Income Tax Bill 2025, Objectives, Features, Need

14-02-2025

10:30 AM

The New Income Tax Bill has been introduced by the Finance Minister Nirmala Sitharaman in her Budget 2025 speech on 1 February, 2025 with the goal of streamlining tax compliance, reduction in disputes and improving clarity in taxation process. The New Income Tax Bill was approved by the Union Cabinet on 7 February 2025 and will be now tabled in front of the Lok Sabha and sent to the standing committee of finance. The new bill follows the approach of “Trust First, Scrutinise Later” with the aim of building taxpayer confidence and ensuring that the tax rules are followed by the citizens of the country.

New Income Tax Bill 2025

The New Income Tax Bill 2025 aims to simplify and modernise the Indian Income tax system through proposed legislation. The bill focuses on important reforms that would enhance tax compliance, reduce litigation and give better clarity in tax laws. At the end of the day, the goal is to optimize and simplify the tax process for authorities as well as tax taxpayers. This would help in creating a better and efficient tax system.

New Income Tax Bill 2025 Objectives

The New Income Tax Bill 2025 has been designed to make tax compliance simpler and more user-friendly. Here’s how:

Simpler Legal Language: The bill replaces complex jargon with clear, straightforward language, making it easier for taxpayers to understand and comply without needing legal expertise.
Shorter, More Efficient Laws: The new legislation will be about half the length of the current tax laws, removing redundant sections and reducing legal disputes. This will streamline processing for both taxpayers and officials.
No New Taxes: This reform isn’t about adding more taxes—it’s about simplifying existing laws. By cutting down on complexity, taxpayers can navigate the system with ease and minimal bureaucratic hurdles.
Budget Announcements Included: Key tax updates from the national budget, like income tax rate changes and TDS revisions, will be seamlessly integrated, ensuring clarity and smoother implementation.

This reform is all about making taxation simpler, more transparent, and easier to follow for everyone.

New Income Tax Bill 2025 Features

The key features of New Income Tax Bill 2025 include:

Feature	Description
Simplified Tax Law	Reduces word count by almost 50%, making tax laws clearer and more accessible.
Alignment with Global Tax Norms	Enhances India's ease of doing business by meeting international taxation standards.
Trust-Based System	Minimizes manual scrutiny and increases self-assessment reliability.
Tax Base Expansion	Expand the tax net by incorporating the informal sector while increasing exemptions for lower-income groups.
Efficient Litigation Management	Introduces clearer provisions to minimize disputes and ensure statutory certainty.
Rationalized TDS/TCS	Simplifies tax deducted at source (TDS) and tax collected at source (TCS) provisions to reduce compliance burdens.
Higher Exemption Limits	Raises the income tax exemption limit from Rs 7 lakh to Rs 12 lakh, benefiting lower-income taxpayers.

New Income Tax Bill Need

The New Income Tax Bill 2025 was needed to simplify the Income Tax Act 1961, which had more than 298 sections. The new bill removes the old unwanted sections. The requirement of the New Income Tax bill 2025 includes:

293 sections and 23 chapters was a lot of content and it was difficult to manage and navigate.
The provisions did not have clearly mentioned guidelines making them difficult for taxpayers and authorities to manage.
The current system was reducing the revenue efficiency, leaving the informal sector untapped.
A lot of old provisions have lost relevance in present times.

Comparison Between the Old and New Income Tax Bills

Aspect	Old Income Tax Bill	New Income Tax Bill
Tax Slabs	Complex structure with multiple slabs and higher tax rates	Simplified structure with fewer tax slabs and lower rates
Exemptions & Deductions	Numerous exemptions (HRA, 80C, etc.) and deductions available	Reduced exemptions and deductions; fewer options for tax saving
Rebate on Income	Limited rebates based on specific conditions (e.g., 87A)	Broader rebate under section 87A for incomes up to ₹7 lakh, making it tax-free for lower-income individuals
Tax Filing Process	Complex filing process, multiple forms required	Simplified filing with fewer forms and a more streamlined process
Corporate Tax Rates	Higher corporate tax rates	Reduced corporate tax rates to make India more competitive globally
Focus on Technology	Relatively less reliance on digital infrastructure	Strong emphasis on digital filing, processing, and technology integration
Taxpayer Benefits	Greater scope for reducing taxable income through exemptions	Lower tax rates but fewer options to reduce taxable income, simplifying the system for general taxpayers

The New Income Tax Bill 2025 showcases a reform in India’s tax system and replaces the Income Tax Act 1961. The new changes create a simpler more efficient taxation regime benefitting all individuals, businesses and the economy eventually driving economic growth.

New Income Tax Bill FAQs

Q1. When was the Income Tax Act introduced?

Ans. The Income Tax Act was introduced in 1961 and came into effect on 1st April 1962.

Q2. When was the new income tax slab introduced?

Ans. The latest income tax slab revision was introduced in Union Budget 2025.

Q3. Who introduced income tax in 1858?

Ans. James Wilson, the first Finance Member of the British Indian government, introduced income tax in 1860, not 1858.

Q4. Who is the father of income tax?

Ans. James Wilson is considered the father of income tax in India.

Q5. What was the Act of 1858?

Ans. The Government of India Act 1858 transferred rule from the East India Company to the British Crown, marking the beginning of direct British rule in India.