In the 2025 Union budget, the Finance Minister, Nirmal Sitharaman, revealed a huge surprise to the taxpaying citizens of the country which is the introduction of a new income tax act. The Income Tax Bill 2025 which will be presented by the FM in the coming days in the parliament is out now.
The Income Tax Bill 2025 consists of 536 sections,16 (XVI) schedules, and 23 chapters.
Once the bill gets assent and comes into effect, it will be known as the Income Tax Act, 2025.
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The bill has introduced a new term, ‘Tax Year,’ which will replace the term ‘Previous Year,’ which has been in use or practice for more than 6 decades. Section 3 of the Income Tax Act, 1961, defines the term ‘previous year.’ In the new bill, Section 3 defines ‘previous year’ as the twelve-month period of the financial year commencing on the 1st of April.
Section 3(2) of the Income Tax Bill 2025 also states that: ‘In the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with (a) the date of setting up of such business or profession, or (b) the date on which such source of income newly comes into existence, and ending with the said financial year.’
It is vital to note that the term tax year has completely replaced the previous year completely and thus one cannot find the term previous year anywhere in the new bill. This shows the steps taken by the union to ensure better understanding and simplicity.
Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here
The implementation of the New Income Tax Bill 2025 is expected to have far-reaching effects for Indian taxpayers. Tax reform and exemption reductions may have varying effects on different sectors. Simplification of legal language aims to make tax rules more accessible by utilising plain and basic language, lowering the need for specialised legal knowledge, and facilitating better, easier compliance by citizens.
Read more at: New Income Tax Bill 2025 Out Now, set to be Tabled Soon
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