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India’s New Income Tax Bill 2025:Key Changes & Simplifications

Parliament passes a historic bill to replace the Income Tax Act 1961, introducing major edits for clarity and ease of compliance

India Input August 13, 2025

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India’s New Income Tax Bill 2025 : Key Changes & Simplifications. India’s tax landscape is on the cusp of a major transformation with the passage of the new Income Tax Bill, 2025, by the Lok Sabha. This landmark legislation is set to replace the antiquated Income Tax Act, 1961, a law that had become increasingly complex with over 4000 amendments.

Finance minister Nirmala Sitharaman presented the updated new I-T bill, which was passed on 12 August, after incorporating a majority of the recommendations from a Parliamentary Select Committee, aims to simplify the tax system, reduce the compliance burden for citizens and businesses, and foster a more transparent and dispute-free framework. It is designed to be reader-friendly, cutting the total text by nearly 50% presenting provisions in a more straightforward and comprehensible manner.

— Zee Business (@ZeeBusiness) tweets on X !

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पुराने Income Tax का THE END! जानिए नए TAX Bill के 10 बड़े बदलाव | आप पर होगा सीधा असर!#incometax #NewTaxBill2025 #TaxUpdate #IncomeTaxChanges #Budget2025 #TaxReforms #IndianTax #FinanceNews @koul_Navmi pic.twitter.com/pkYOha4yWu

— Zee Business (@ZeeBusiness) August 13, 2025

One of the most significant changes is the introduction of a unified “tax year” which eliminates the confusing distinction between the previous year and the assessment year. This single-year concept is expected to provide much-needed clarity for taxpayers. The bill also includes several key edits that directly impact individual taxpayers and businesses.

For instance, it allows for a 30 percent standard deduction on house property income after the deduction of municipal taxes, and it extends the benefit of pre-construction interest deduction to let-out properties, a welcome relief for real estate owners.

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#NewTaxBill2025 :आज लोकसभा में पेश होगा नया आयकर विधेयक, वित्त मंत्री बताएंगी… इसमें क्या-क्या बदलाव? https://t.co/EFl68d9NH2 #WeRIndia pic.twitter.com/fMJ2O8fXiZ

— Werindia (@werindia) August 11, 2025

The duration for submitting TDS correction statements has been reduced from six years to two years, which is expected to significantly cut down on complaints from deductees.

The revised I-T bill introduces provisions for taxpayers to claim refund when even returns are submitted after deadlines, which should provide significant relief to individuals filing their taxes.

The new Income tax bill clarifies the tax treatment of anonymous donations for religious and charitable trusts and adjusts MSME9micro,smalland medium enterprises), aligning the provisions to prevent unintended tax burdens on these organizations. It also clarifies deductions for commuted pensions, extending benefits to a broader category of recipients.

While these changes are geared towards simplification, the bill also enhances the powers of tax officials during search and seizure operations, granting them access to electronic records, a provision that has been a subject of debate. The new law is scheduled to take effect from April 1, 2026.

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New Tax Bill 2025 boosts tax-free perks for Indian salaried folks! 🚗💸 Commute costs and medical travel now exempt, lifting take-home pay by 15% for many. Big win for the middle class. What’s your next financial move? #newtaxbill2025 #taxrelief pic.twitter.com/paPtXKqHId

— Accumo (@Accumo_) March 19, 2025

Overall, while the Income Tax Bill 2025 is seen as a progressive step towards a more modern and efficient tax system, its ultimate success will depend on effective implementation and clear guidelines that address the concerns raised by experts and taxpayers alike. The financial year 2026-27, when the new law is slated to take effect, will be a crucial period for understanding its real-world impact.

Source :

https://incometaxindia.gov.in

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