New Income Tax Bill 2025: Check Key Changes and Features

India's Income Tax Bill 2025 represents a revolutionary change in the country's direct tax environment. Introduced into Parliament on August 11, 2025, by Finance Minister Nirmala Sitharaman, the bill will repeal the almost 65-year-old Income Tax Act, 1961. The bill reflects suggestions made by a parliamentary select committee and seeks to streamline tax laws, update compliance, and set right historical uncertainties. 

1. Purpose & Objectives

• Simplicity and Clarity: The bill employs simple language, restructures sections logically, and does away with duplicative provisions.

• Faceless Administration: Facilitations for faceless collection of information and evaluation persist, minimizing personal interface and ensuring transparent digital proceedings.

• Unified Tax Year: Attempts towards harmonized assessment timelines for improved compliance and fewer litigations.

• Reduction of Disputes: Improved rules and more precise definitions seek to reduce ambiguities and court challenges.

2. Revised Income Tax Slabs (New Regime)

• Increased Rebate: 100% rebate of income tax (limited to ₹12,500) for incomes up to ₹5 lakh. New tapering rebate system provides up to ₹60,000 rebate for incomes up to ₹12 lakh, with tapering off for increased incomes.

• Normal Deduction: 30% normal deduction of house property income, worked out after municipal tax.

• Interest Deduction: Interest on pre-construction homeloans can be deducted for self-occupation as well as rented homes, in five equal installments after completion.

• Commuted Pension Deduction: Now equally available to both employees and non-employees if received under listed funds.

• Simplified Capital Gains: Entire capital gains provisions restructured and clarified; official inclusion and taxation of cryptocurrencies and digital assets as capital gains.

3. Business & MSMEs

• Presumptive Taxation: Threshold increased to ₹2 crore for business and ₹75 lakh for professionals, facilitating convenience for MSMEs and professionals. Need to report profits under this scheme for five continuous years, otherwise, keep audited books.

• MSME Redefinition: MSMEs now harmonized with official MSME Act definitions for harmonization and inclusion.

• Inter-Corporate Dividends: 80M deduction revoked, impacting tax treatments for groups of corporates.

• NIL-TDS Certificates: Taxpayers with nil liability can issue advance certificates, facilitating convenience.

4. Important Administrative, Structural, and Compliance Reforms

• Faceless Assessment Continued: Enhances faceless schemes of assessments, gathering of information, and appeals, minimizing human interface and maximizing efficiency.

• Grouping of Sections: Logical grouping of sections of deductions and TDS/TCS provisions to facilitate easy accessibility.

• Procedural Simplification: Advance ruling charges, TDS on withdrawal from PF, and penal powers made clear for increased fairness.

• Refund Policy: Taxpayers are allowed refunds even on delayed returns, in bona fide situations such as sickness or system breakdowns—more taxpayer protection and convenience.

• Digital Compliance & Dispute Resolution: More robust systems of e-filings and redressal of grievances online.

5. Reforms for Asset Owners & Investors

• House Property Valuation: Tax now calculated on the higher of actual rent received or deemed rent, with words clarified to prevent confusion regarding "normal course".

• Vacant Property Relief: Exemption from notional rent tax on temporarily vacant commercial buildings.

• Associated Enterprises: Modifying the shareholding limit for tax effects in cross-border deals.

6. Special Provisions & Exemptions

• Unified Pension Scheme: Exemption from taxation for certain subscribers under the 2025 plan.

• International Investors: Exemption from taxation for Saudi Public Investment Fund and its affiliates.

7. Implementation Timeline

• Anticipated Start Date: April 1, 2026—provides taxpayers, businesses, and agencies with time to prepare for new provisions.

Features of Income Tax Bill 2025

While preserving strong revenue collection and legal consistency, the New Income Tax Bill 2025 is set to usher in a new era of taxpayer-friendly policies, simpler compliance, and fewer disputes. Knowing these changes will help you maximize your future tax planning and get ready for the February 2026 transition, regardless of whether you are a business owner, investor, property owner, or salaried employee.