New Income Tax Bill: Here's what to expect

Finance Minister Nirmala Sitharaman had announced in the Union Budget presentation on February 1 that a new Income Tax Bill would be introduced during the ongoing session of the Parliament. With the first part of the Budget Session expected to draw to a close on February 13, speculations are rife that the new I-T Bill could be tabled in the Parliament on Thursday.

Here we take a look at the expectations from the new I-T Bill:

• The new Income Tax Bill, 2025, which will replace the six-decade-old Income Tax Act, 1961, is expected to be shorter and concise with simplified and easy-to-understand language. The Income Tax Act, 1961, had 880 pages and was bulkier and more complex with amendments.

• The new Income Tax Bill, 2025 will have reduced pages of 622, comprising 536 sections, 16 schedules and 23 chapters. The Act will be free of all the amendments and sections which are no longer relevant.

• The proposed law is expected to replace the term 'previous year or 'financial year' with 'tax year'. Also, the concept of assessment year is likely to be done away with.

• Currently, for income earned in the previous year (say 2023-24), tax is paid in the assessment year (say 2024-25). This previous year and assessment year concept will now be termed as tax year.

• For reduced tax disputes and to ensure transparency, the proposed law is likely to include clearer tax treatment on stock options (ESOPs).

• Another key change likely to be introduced is empowering the CBDT to independently deal with procedural matters, tax schemes, and compliance frameworks in order to reduce bureaucratic delays and making tax governance more dynamic.

• As per the new law, the CBDT can now frame tax administration rules, introduce compliance measures, and enforce digital tax monitoring systems without requiring frequent legislative amendments as per the Clause 533.

• Although the purpose of the new legislation is to simplify the regulations and make the process of tax paying easier, the insurance industry expects that the new bill increases the existing deductions available for life and health insurance premiums.

• The bill is also likely to propose retaining the standard deduction of Rs 50,000 for salaried individuals under the old tax regime.

• In addition to this, the taxes paid by employees under Article 276(2) of the Constitution, the professional tax, is likely to be made fully deductible.

• As per the income tax cuts announced in the Budget presented by FM, the individuals earning up to Rs 12 lakh per year will not have to pay any taxes, raising this exemption threshold from Rs 7 lakh at present. So the upcoming Bill will not introduce any new changes in the tax slabs. Plus, all amendments announced in the FY26 Budget will be incorporated in the new Bill.

• The new income tax slab:

  Upto Rs 4,00,000- NIL

  Rs 4,00,001 - Rs 8,00,000 -5% tax

  Rs 8,00,001 - Rs 12,00,000- 10% tax

  Rs 12,00,001 - Rs 16,00,000-15% tax

  Rs 16,00,001 - Rs 20,00,000-20% tax

  Rs 20,00,001 - Rs 24,00,000-25% tax

  Rs 24,00,000 and above -30% tax

After the introduction, the bill will be sent to a parliamentary standing committee for scrutiny. The new Bill is likely to become law by next April.