The New Income Tax Bill 2025, set to be introduced in the Lok Sabha this week, has received cabinet approval and is poised to bring significant changes to India’s tax framework.
One of the key updates is the replacement of the term “assessment year” with “tax year”, aiming to simplify taxpayer understanding.
According to the Bill, the “tax year” will be defined as the 12-month financial year period starting on April 1. For newly established businesses or newly arising income sources, the tax year will begin from the date of setup or income generation and end on the subsequent March 31.
This change is expected to provide clarity and streamline tax calculations for individuals and businesses alike.
The proposed legislation, spanning 622 pages, seeks to replace the six-decade-old Income Tax Act of 1961. Once passed, it will be known as the Income Tax Act, 2025, and is expected to come into effect from April 1, 2026. The Bill aims to modernise India’s tax system, making it more aligned with contemporary economic realities.
Finance Minister Nirmala Sitharaman announced the introduction of this Bill during the July Budget session last year, highlighting its importance in simplifying tax compliance and fostering a more taxpayer-friendly environment. The move is seen as a significant step towards overhauling India’s tax infrastructure, ensuring greater transparency and ease of understanding for taxpayers across the country.
With these changes, the government aims to reduce complexities and create a more efficient tax regime, paving the way for a smoother financial ecosystem.