FM Nirmala Sitharaman to Introduce Income-Tax Bill 2025 in Parliament - Here Are Key Highlights

The much-anticipated new Income-Tax Bill 2025 is likely to be presented on Thursday in Parliament by Finance Minister Nirmala Sitharaman, according to Mint. The bill consists of 23 chapters, 16 schedules, and 536 clauses which seek to replace the six-decade old Income Tax Act 1961.

The Income-Tax Bill 2025 will be effective from April 2026, once passed.

"The new bill aims to reduce the number of sections by 25-30%, making the tax code more straightforward and user-friendly," said Dinkar Sharma, partner at Jotwani Associates.

Key Highlights of Income Tax Bill 2025

The bill notably seeks to introduce simpler terminology such as replacing ‘Assessment Year’ with 'Tax Year' and ‘Previous Year’ with 'Financial Year'.

Here are some of the key reforms that the bill includes :

Section 19: Deductions from Salaries

The income which is chargeable under the head "salaries" will be computed after making deductions of the following natures, to the extent specified.

The sum paid by the assessee as a tax on employment as per article 276(2) of the Constitution, is entirely deductible.

A standard deduction is available to employees, amounting to ₹50,000 or the salary, whichever is less.

Gratuity received on death or retirement is also entirely deductible.

New Tax Slabs

The new tax slabs will be as follows -

Up to Rs 4,00,000: No tax to be levied.

From Rs 4,00,001 to Rs 8,00,000: The tax rate is 5%.

From Rs 8,00,001 to Rs 12,00,000: The tax rate is 10%.

From Rs 12,00,001 to Rs 16,00,000: The tax rate is 15%.

From Rs 16,00,001 to Rs 20,00,000: The tax rate is 20%.

From Rs 20,00,001 to Rs 24,00,000: The tax rate is 25%.

Above Rs 24,00,000: The tax rate is 30%.

Furthermore, the new bill will also address the evolving financial landscape by expanding definitions related to digital transactions, electronic record-keeping, and crypto-assets.

It also includes specific references to "Finance Companies" and "Finance Units" in the context of dividends.

Further to its new compliance and procedural changes, the bill proposes to introduce a Taxpayer’s Charter. It has a detailed segment dedicated to how foreign companies be deemed as residents under certain conditions.