The Indian Union Cabinet has approved the Income Tax Bill 2025, which will supersede the old Income Tax Act of 1961. The proposed legislation seeks to streamline tax laws, remove outdated provisions, and simplify compliance processes.
Union Finance Minister Nirmala Sitharaman is expected to introduce the new Income Tax Bill 2025 in Parliament (Lok Sobha) on Thursday, 13 February 2025. If approved, it will take effect from 1 April 2026.
The new Bill introduces significant changes, including a reduction in length from 1647 to 622 pages and a reorganisation of complex provisions into 536 simpler sections for easier interpretation. It uses simple language to minimise ambiguities, focuses on simplification without adding new taxes, and empowers the CBDT to implement tax schemes and compliance measures independently. Another notable change includes replacing the “assessment year” with the “tax year.”
Other notable changes include enhanced business thresholds and revised income tax slabs.
Enhanced business thresholds
For businesses, the turnover limit to qualify for the presumptive tax scheme under Section 44AD has been raised from INR 2,000,000 to INR 3,000,000.
Revised income tax slabs (proposed)
- Income up to INR 4,00,000 – No tax
- INR 4,00,001 to INR 8,00,000 – 5%
- INR 8,00,001 to INR 12,00,000 – 10%
- INR 12,00,001 to INR 16,00,000 – 15%
- INR 6,00,001 to INR 20,00,000 – 20%
- INR 20,00,001 to INR 24,00,000 – 25%
- Above INR 24,00,000 – 30%
Earlier, India’s Finance Minister Nirmala Sitharaman presented the Union Budget 2025-2026 on 1 February 2025. India’s Central Board of Direct Taxes (CBDT) launched a public consultation on 7 October 2024 on a comprehensive review of the Income Tax Act 1961.
