10 takeaways in new Income Tax Bill for taxpayers

According to media reports, the new income tax bill is likely to be tabled in Parliament on Thursday, i.e., on February 13, 2025. The new income tax bill aims to simplify the current Income Tax Act, 1961 to help the common man understand the income tax laws and reduce litigation. The current Income Tax Act 1961 has seen changes from 66 Budgets (including two interim budgets) since its existence.

However, many taxpayers may be worried if the new tax bill will actually simplify the laws as it intends to do. As per government sources, here are 10 takeaways from the new income tax bill, 2025 which will impact the taxpayers the most:

1. Concept of tax year: The new income tax bill will likely introduce the concept of the tax year. This concept is being introduced to resolve problems that taxpayers face due to the current terms of the assessment year and the previous year. Many taxpayers confuse the assessment year and financial year (previous year) when depositing taxes and filing tax returns. The single merged concept of the tax year will likely help taxpayers know for which ITRs are being filed and taxes are being deposited.

2. No change in the financial year: Taxpayers should remember that the financial year concept has not changed. The financial year will start on April 1 and end on March 31. The new income tax bill will not follow the calendar year as a tax year.

3. Changes in sections: The new income tax bill is likely to change the sections under the new income tax bill. For instance, under the current Income Tax Act, income tax return filing is covered under Section 139, and the new tax regime is covered under Section 115BAC. The new income tax bill will likely the section number being changed. This is likely to happen as the language of the direct tax laws will be simplified. Due to this, changes can happen in the sections of the Income Tax Act, 2025.

4. No change in the residency laws: According to sources, the new income tax bill has not changed the residency laws. They are likely to remain the same in the new act as well. Current income tax laws divide the residency provisions into three categories:

• Ordinarily resident individual
• Non-ordinarily resident individuals
• Non-residents individuals

According to tax experts, there is a need for a change in the residency laws. The current residency laws require taxpayers to look back for 10 years to determine their residential status in the current financial year.

5. Comprehensive Income Tax Bill: In a bid to simplify the current income tax laws, the new income tax bill has made some changes. Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Andersen LLP says, "Carved out now in 23 chapters divided into 536 sections and 16 schedules, over 600 pages, a quick look at the new bills demonstrates its comprehensiveness compared to existing Income Tax Act with 298 sections and 14 schedules."

"This increase in sections reflects a more structured approach to tax administration, incorporating modern compliance mechanisms, digital governance, and streamlined provisions for businesses and individuals," AMRG & Associates Senior Partner Rajat Mohan told PTI.

7. Ease of interpretation for taxpayers: Jhunjhunwala says, “The concepts of explanations and provisos have been removed from the new version, for ease of interpretation and understanding. New concepts such as tax year, instead of previous year and assessment year, have been introduced.”

Deductions from salaries, such as standard deduction, gratuity, leave encashment, etc, have now been tabulated in one place instead of being scattered over different sections and rules. The new income tax bill has simplified the computation of depreciation for businesses by providing the formula.

8. Ease in TDS compliance but more headache later: “All TDS-related sections have been brought together under a single clause with simple tables, for ease of understanding, though this would mean post implementation of this bill, a lot of changes would be required in forms and utilities, for reporting purposes”, says Jhunjhunwala.

9. No change in ITR filing deadlines, income tax slabs, and capital gains: As announced in Budget 2025, no changes have been made to the income tax return filing deadlines, income tax slabs, and capital gains taxations to promote tax certainty for taxpayers.

10. Implementation of the new law: According to tax experts and government sources, the new income tax bill is likely to come into effect from April 1, 2026, i.e. from FY 2026-27. Jhunjhunwala says, "The new law is likely to be effective only from April 1, 2026, which implies that computation of taxable income and its reporting, for Financial Years ending March 2025 and March 2026, would still be required to be done under the existing Income Tax Act itself."