All about the New Income Tax Bill 2025 | Personal Finance | Tax slabs | New tax regime

Summary

India’s new Income Tax Bill 2025 introduces key changes, simplifying tax rules and reducing complexities. It replaces the old law, active since 1961, with clearer terms and fewer pages. The tax year now aligns with the financial year, and asset depreciation has been simplified. Crypto and NFT income will be taxed, and small businesses benefit from raised turnover limits for presumptive tax schemes. Pension benefits for government employees are tax-exempt, and tax rates remain unchanged. The bill, which will take effect in April 2026, also updates NRIs' tax regulations and streamlines deductions for salaried individuals.

Takeaways

• 😀 The Income Tax Bill of 2025 will replace the current tax law from 1961, simplifying tax processes.
• 😀 A new, simpler term 'tax year' replaces confusing terms like 'assessment year' and 'previous year', aligning with the financial year (April 1 to March 31).
• 😀 The new bill reduces the size of tax laws from 823 pages to 622, making tax filing easier with fewer complexities.
• 😀 Nonprofit organization tax rules are now grouped together for better clarity and simplification.
• 😀 Common salary-related deductions (e.g., gratuity, leave encashment, pensions) are now in a single section for clearer understanding.
• 😀 Asset depreciation rules for businesses have been simplified, improving ease of compliance.
• 😀 Cryptocurrencies and NFTs will now officially be taxed under the new bill, aligning with international standards.
• 😀 The turnover limit for businesses to opt for presumptive tax has been raised from ₹2 CR to ₹3 CR.
• 😀 For professionals, the threshold for opting for presumptive taxation has increased from ₹50 lakh to ₹75 lakh.
• 😀 Retired government employees will no longer have to pay taxes on commuted pensions, offering significant relief.
• 😀 The new tax regime's tax rates remain unchanged, with the old regime still available, but taxpayers can't switch back once they opt for the new one.

Q & A

What is the major change in India's income tax system with the 2025 bill?

The Income Tax Bill 2025 introduces the term 'tax year,' which simplifies the current system by replacing confusing terms like 'assessment year' and 'previous year.' The tax year will now follow the financial year from April 1 to March 31.

How has the length of the income tax law changed in the new bill?

The new income tax bill has reduced the length of the tax law from 823 pages to 622 pages, and from 5.2 lakh words to 2.6 lakh words. This reduction aims to make the tax system simpler and more accessible.

What impact does the new income tax bill have on non-profit organizations?

The new bill groups all the tax rules related to non-profit organizations in one section, making it easier to understand and comply with regulations.

How does the new bill affect tax on cryptos and NFTs?

The new bill officially taxes cryptocurrencies and NFTs, bringing India's tax system in line with international standards for such digital assets.

What changes are made in the presumptive tax scheme under Section 44AD and Section 44AA?

The turnover limit for businesses to opt for the presumptive tax scheme under Section 44AD has been increased from ₹2 crore to ₹3 crore. Similarly, for professionals under Section 44AA, the threshold has been raised from ₹50 lakh to ₹75 lakh.

How will retired government employees be impacted by the new pension tax rules?

Retired government employees will no longer have to pay tax on commuted pensions, which is a major relief for them.

Are there any changes in tax rates for individuals with the new bill?

The tax rates remain the same as announced in the latest Union Budget. The new tax regime will be the default, but individuals can still opt for the old regime if they prefer.

What are the changes in standard deductions for salaried individuals under both tax regimes?

Under the old tax regime, the standard deduction for salaried individuals remains unchanged at ₹50,000 or the salary amount, whichever is lower. Under the new regime, the standard deduction is ₹75,000, effectively making salary up to ₹12.75 lakh tax-free.

How does the new bill address deductions related to gratuity and pension?

The new bill simplifies deductions related to gratuity, with payment under the Gratuity Act fully deductible. Similarly, pension commutation and retrenchment compensation have specific deduction limits, like ₹75,000 for gratuities and up to ₹5 lakh for voluntary retirement payments.

How will the new tax bill affect Non-Resident Indians (NRIs)?

For NRIs, dividend income will be taxed at 20%, with dividends from units in an International Financial Services Center taxed at 10%. Interest income from Indian government or companies will be taxed at 20%, except for infrastructure debt funds. NRIs earning ₹15 lakh or more in India will be classified as residents for tax purposes.