New Income Tax Bill: Check How Is It Different From the Old Income Tax Law

The newly introduced Income Tax Bill, which has been shared with Parliament members, seeks to replace the existing Income Tax Act of 1961 with the updated Income Tax Act, 2025. Spanning a total of 622 pages, this bill is set to be implemented starting April 1, 2026. It includes 23 chapters and 16 schedules.

In the interim, tax calculations and reporting for FY 2024-25 and FY 2025-26 will continue to follow the current law. In this read, we will have a look at how the New income tax bill is different from the old income tax law

Structural and Terminology Updates

The proposed bill reshapes the tax law by reducing the number of chapters from 51 to 23 while increasing the number of sections from 298 to 536. It also introduces more straightforward terminology, replacing terms like “assessment year” and “previous year” with “tax year” and “financial year.”

Enhancing Compliance and Interpretation

To make the tax law easier to understand, the new bill eliminates excessive explanations and provisos. It reduces cross-references to other sections, allowing taxpayers to interpret provisions with less need to consult multiple clauses. A Taxpayer’s Charter will also be introduced to ensure more transparency, alongside enhanced digital compliance measures.

Key Provisions and Simplifications

Several key provisions are included in the bill:

• Tax Rates: The bill retains the existing tax rates for individuals, corporations, and capital gains. It classifies virtual digital assets as “property,” though the tax rate remains unchanged at 30%.
• Service Contracts and MTM Loss: The bill clarifies rules around revenue recognition for service contracts, mark-to-market (MTM) loss provisions, and inventory valuation, which were previously part of the Income Computation and Disclosure Standards (ICDS).
• Deductions for Salaries: Deductions such as standard deduction, gratuity, and leave encashment are now consolidated into a single section, offering better organization.
• Income Categories: Income that is excluded from total income will be clearly listed in schedules for improved clarity.
• Formula-Based Definitions: Complex definitions, such as for the Written-Down Value (WDV) of assets, are now replaced with a simpler, formula-based approach.
• TDS Provisions: TDS provisions are consolidated under one clause and presented in tabular formats for clearer understanding.
• Penalties: The bill introduces stricter penalties for misreporting, non-compliance, and incorrect disclosures.

Conclusion

The Income Tax Bill, 2025, is a significant step towards modernizing India’s tax laws. By simplifying structures, clarifying provisions, and embracing digital compliance, the bill promises to make the tax filing process more efficient and user-friendly.

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