The much-anticipated Income-Tax Bill, 2025, is set to be tabled in Parliament on February 13. If passed, it will replace the Income Tax Act of 1961, marking the biggest overhaul of India’s tax system in over six decades. The bill, spanning 622 pages, aims to simplify tax laws, modernize compliance, and introduce new tax slabs. The proposed changes could have far-reaching implications for individuals, businesses, and the digital economy.
Key Terminology Changes for Simplification
One of the most noticeable updates in the draft bill is the simplification of tax terminology. The government aims to make tax filing more accessible by replacing complex terms with clearer alternatives.
- ‘Assessment Year’ will now be called ‘Tax Year’
- ‘Previous Year’ will be termed ‘Financial Year’
The alignment of the tax year with the financial year (April 1 to March 31) is expected to streamline tax calculations and record-keeping, making it easier for taxpayers to understand and comply with regulations.
New Tax Slabs and Rates: What’s Changing?
A major highlight of the Income-Tax Bill, 2025, is the restructuring of income tax slabs. While the specific rates are yet to be finalized, sources suggest that the government is considering a more progressive tax structure with the following proposed brackets:
| Income Range (INR) | Existing Tax Rate | Proposed Tax Rate |
|---|---|---|
| Up to 5,00,000 | 0% | 0% |
| 5,00,001 – 10,00,000 | 10% | 5% |
| 10,00,001 – 15,00,000 | 15% | 10% |
| 15,00,001 – 25,00,000 | 20% | 15% |
| Above 25,00,000 | 30% | 25% |
If implemented, the new slabs will bring relief to middle-class taxpayers while ensuring higher earners contribute more. The government is also reportedly considering additional deductions and exemptions to encourage savings and investments.
Broader Tax Regulations for a Digital Economy
The bill reflects India’s evolving financial landscape by expanding tax regulations to cover digital transactions and virtual assets. With cryptocurrencies and other digital assets gaining traction, the government seeks to clarify taxation on these emerging asset classes.
- Crypto-assets will be explicitly defined under taxable income categories.
- Digital transactions will be subject to enhanced compliance measures.
- Electronic record-keeping standards will be revised to ensure transparency.
By incorporating these elements, the bill aims to prevent tax evasion and align India’s tax policies with global standards in the digital economy.
New Taxation Rules for Businesses and Startups
The bill introduces a significant shift in how new businesses and income sources are taxed. Under the new rules:
- The tax year for a newly established business will start from the date of its setup and conclude on March 31 of the following year.
- This eliminates the need for complex adjustments in the first year of business operations.
- The change is expected to ease compliance for startups and small businesses, which often struggle with rigid tax timelines.
This provision is being viewed as a move to support India’s growing startup ecosystem by reducing bureaucratic hurdles in the initial years of business.
What’s Next for the Income-Tax Bill, 2025?
As the bill gets tabled in Parliament, it is likely to face rigorous debates and potential amendments. Stakeholders, including business groups, tax experts, and policymakers, will closely examine its provisions before it is passed into law. If approved, the new tax regime will take effect from April 1, 2026, marking a historic shift in India’s taxation framework.
