Union Finance Minister Nirmala Sitharaman Thursday introduced the Income Tax Bill 2025 in the Lok Sabha.
The new income tax bill will replace terminologies like assessment and previous year with easier-to-understand ‘tax year’ as part of the move to simplify language while removing provisos and explanations.
The bill is 622 pages long and comprises 536 sections, 23 chapters, and 16 schedules. The existing Income Tax Act of 1961 has 298 sections and 14 schedules.
Implementation of the provisions in the new bill is scheduled for April 1, 2026.
The new bill seeks to introduce changes that affect different categories of taxpayers, including individuals, businesses, and non-profit organisations.
The proposed draft also brings changes to deductions and exemptions, as earlier, Sections 10 and 80C to 80U of the Income Tax Act, 1961, allowed deductions in investments, donations, and specific expenses.
Also, the timeframe for filing updated returns is extended from two to four years.
Significantly, the new income tax bill, in Clauses 67 to 91, has also introduced explicit provisions for virtual digital assets and updates beneficial tax rates.
With this, it aims to ensure that digital assets, including cryptocurrency, are covered under a proper tax framework. The Bill also defined “virtual digital asset” and “electronic mode”.
It also introduced new provisions to support startups, digital businesses, and renewable energy investments. Changes have also been made to the term capital gains tax.
For non-profit organisations, the new bill, in Clauses 332 to 355, establishes a more detailed framework, clearly defining taxable income, compliance rules, and restrictions on commercial activities.
The previous law provided income tax exemptions for certain charitable purposes but had limited compliance guidelines.
The bill also introduces provisions for a faceless jurisdiction of income-tax authorities, enabling remote and digital tax administration.
Also, it includes measures for alternate dispute resolutions, such as a Dispute Resolution Committee and advance rulings, to facilitate efficient resolution of tax disputes.
The Bill also enhances the existing General Anti-Avoidance Rules (GAAR) to cover a wider range of tax avoidance schemes. Clauses 178 to 184 focus on addressing impermissible transactions and arrangements designed to exploit legal loopholes.
These expanded provisions are intended to promote fairness and compliance across the board.
Additionally, the Bill introduces changes to the capital gains tax framework, particularly concerning short-term and long-term gains. These reforms aim to simplify the rules surrounding capital gains, with new provisions designed to support the growth of startups, digital businesses, and renewable energy investments.