The Income Tax 2025, a document of 622 pages consisting of 536 sections and 23 chapters, is expected to be introduced in the Lok Sabha on Thursday 13 February 2025.
Once determined, the proposed bill will replace the six-decennium old Income Tax Act of 1961, which has become increasingly complex and more cumbersome due to countless changes.
New income tax account versus old regime
One of the most important changes to the new law is the replacement of the term “last year” in the Income Tax Act, 1961, by “tax year”. Moreover, the concept of a “assessment year” has been eliminated. Tax for income is currently earned in the previous year (eg 2023-24) paid in the assessment year (e.g. 2024-25). The new account simplifies this structure by introducing a single “tax year”.
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The income tax, 2025, consists of 536 sections, an increase of 298 in the existing income tax law, 1961. The number of schemes will also increase from 14 to 16. However, the number of chapters remains unchanged at 23. In sections the total length is considerably reduced to 622 pages from the legislation almost half of the current law, which has collected changes for six decades. For comparison, the original income tax law, 1961, had 880 pages.
AMRG & Associates senior partner Rajat Mohan told the news agency PTI“The increase in sections reflects a more structured approach to tax administration, with modern compliance mechanisms, digital administration and streamlined provisions for companies and private individuals. The new law introduces 16 schemes and 23 chapters.”
The proposed legislation is also intended to provide more clarity about the tax treatment of stock options (ESOPs) to minimize tax disputes. Moreover, it contains judicial judgments of the past 60 years to improve legal security.
An important shift of the existing law is the delegation of certain powers to the Central Council of Direct Taxes (CBDT). According to the current system, the income tax department must request parliamentary approval for various procedural matters, tax schemes and compliance frameworks. The new bill enables the CBDT to introduce such regulations independently, to reduce bureaucratic delays and make tax board more efficient.
According to Clausule 533 of the new law, the CBDT will have the authority to set up rules for tax administration, to implement complement measures and forcing digital tax monitoring systems without frequent changes in legislation.
After the introduction, the bill is expected to refer to a parliamentary permanent committee for further investigation.
Minister of Finance Nirmala Sitharaman had announced in the 2025-26 budget that the new tax assessment would be introduced during the current session of parliament. The extensive assessment of the Income Tax Act, 1961, was first announced in the July 2024 budget.
To facilitate the assessment, the CBDT formed an internal committee to simplify and streamline the law, aimed at reducing disputes and to provide greater tax. In addition, 22 specialized subcommittees were established to investigate various aspects of the income tax Act.
Public feedback was invited to four important areas: simplifying language, reducing lawsuits, reducing compliance and eliminating redundant provisions. The income tax department received 6,500 suggestions from stakeholders as part of this assessment process.
Reviews for a new regime
There will be no tax burden on a maximum of RS 12 Lakh annual income, except for special income. The revised records will benefit those who earn more than those from the following financial year, so that taxpayers help more disposable income.
Here are the new tax plates and how it relates to the current structure:
Tax plates for FY25-26 (proposed)
- Up to RS 4 Lakh: zero
- RS 4-8 LAKH: 5%
- RS 8-12 LAKH: 10%
- RS 12-16 LAKH: 15%
- RS 16-20 LAKH: 20%
- RS 20-24 LAKH: 25%
- Above RS 24 Lakh: 30%
Tax plates for FY24-25 (current)
- To RS 3 Lakh: zero
- RS 3-7 LAKH: 5%
- RS 7-10 LAKH: 10%
- RS 10-12 LAKH: 15%
- RS 12-15 LAKH: 20%
- Above RS 15 Lakh: 30%
- No load to RS 12 Lakh
Those who earn up to RS 12 Lakh do not have to pay an income tax annually under the new regime. Add the standard deduction of RS 75,000 and taxpayers with a maximum of RS 12.75 Lakh Annual income will have to pay zero tax.
