New Income Tax Bill 2025: Key Changes, Slab Revisions, and Old vs New Regime Differences

The much-anticipated Income Tax Bill 2025 is set to be introduced in the Lok Sabha on February 13, 2025. The bill, spanning 622 pages with 536 sections and 23 chapters, aims to replace the outdated Income Tax Act, 1961, which has seen numerous amendments over the past six decades. The proposed bill seeks to simplify tax compliance, modernize tax administration, and introduce structural changes, including revised tax slabs, new terminologies, and a streamlined governance framework.

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New Income Tax Bill vs. Old Regime

One of the most significant changes in the Income Tax Bill 2025 is the replacement of "previous year" with "tax year", and the elimination of the concept of "assessment year." Under the new system, taxpayers will pay taxes for a specific "tax year" rather than using the previous year's earnings to determine liability in the assessment year.

Additionally, the number of sections in the new bill has increased from 298 to 536, while schedules have risen from 14 to 16. Despite this expansion, the overall length of the legislation has been reduced to 622 pages, a significant cut from the accumulated amendments of the current 1961 Act, which originally spanned 880 pages.

According to Rajat Mohan, Senior Partner at AMRG & Associates, the increase in sections reflects a more structured tax administration approach, incorporating modern compliance mechanisms, digital governance, and streamlined provisions for individuals and businesses.

Key Features of the Income Tax Bill 2025

1. Greater Authority to CBDT

A notable shift in the proposed law is delegating more powers to the Central Board of Direct Taxes (CBDT). Currently, any modifications in procedural matters, tax schemes, or compliance frameworks require parliamentary approval. The new bill, however, empowers the CBDT to introduce and implement tax administration rules without waiting for legislative amendments. Clause 533 of the bill enables the CBDT to establish compliance measures, digital tax monitoring systems, and administrative frameworks more efficiently.

2. Enhanced Tax Clarity on Stock Options (ESOPs)

The bill introduces greater clarity on the taxation of stock options (ESOPs), aiming to minimize tax disputes and ensure a fair taxation approach for salaried professionals and startups. Additionally, judicial pronouncements from the last 60 years have been incorporated into the new law to enhance legal certainty and reduce litigation.

3. Public Feedback and Consultation Process

Before drafting the Income Tax Bill 2025, the government sought public feedback in four key areas:

• Simplifying legal language
• Reducing litigation
• Easing compliance
• Eliminating redundant provisions
• The Income Tax Department received 6,500 suggestions from taxpayers and stakeholders, leading to the formation of 22 specialized sub-committees to address various aspects of the law.

New Tax Slabs: FY 2025-26 vs. FY 2024-25

The revised tax slabs aim to reduce the tax burden on individuals, providing relief to middle-class taxpayers and ensuring more disposable income.

New Tax Slabs for FY 2025-26 (Proposed)

• Up to ₹4 lakh – Nil
• ₹4 lakh - ₹8 lakh – 5%
• ₹8 lakh - ₹12 lakh – 10%
• ₹12 lakh - ₹16 lakh – 15%
• ₹16 lakh - ₹20 lakh – 20%
• ₹20 lakh - ₹24 lakh – 25%
• Above ₹24 lakh – 30%

Current Tax Slabs for FY 2024-25

1. Up to ₹3 lakh – Nil
2. ₹3 lakh - ₹7 lakh – 5%
3. ₹7 lakh - ₹10 lakh – 10%
4. ₹10 lakh - ₹12 lakh – 15%
5. ₹12 lakh - ₹15 lakh – 20%
6. Above ₹15 lakh – 30%
7. No Tax for Income Up to ₹12 Lakh

A significant benefit of the new tax regime is that individuals earning up to ₹12 lakh annually will not be required to pay any income tax. With the addition of the ₹75,000 standard deduction, taxpayers earning up to ₹12.75 lakh per year will effectively have zero tax liability.

Conclusion

The Income Tax Bill 2025 marks a historic shift in India’s tax framework, replacing the outdated 1961 Act with a modern, simplified, and efficient tax law. By streamlining compliance, introducing a single "tax year," delegating authority to CBDT, and revising tax slabs, the bill aims to reduce litigation, enhance transparency, and provide relief to taxpayers. With no tax liability for incomes up to ₹12 lakh, the new regime is expected to benefit a large section of middle-class taxpayers, making tax compliance easier and more transparent. Once tabled in Parliament, the bill will likely be referred to a standing committee for further review, with its implementation expected from the next financial year.