The New Income Tax Bill 2025 is expected to be presented in the Lok Sabha soon. Before its official introduction, a draft copy has been released, consisting of over 600 pages. As previously anticipated, this bill is designed to be simpler compared to the old Income Tax Act, with several terms either modified or removed. One significant change is that the entire 12-month financial year will now be referred to as the tax year, eliminating the term assessment year. Additionally, the draft clarifies aspects such as standard deductions and capital gains tax. The new tax bill is set to take effect from April 1, 2026.
Capital gains tax rates remain unchanged
According to the 622-page draft, which includes 536 sections, the term assessment year has been completely removed and replaced with tax year to define the full financial year of 12 months. Regarding stock market investments, there are no changes in the short-term capital gains period. Under Section 101(b), gains from assets held for up to 12 months will continue to be considered short-term capital gains. Additionally, the tax rate for short-term capital gains remains unchanged at 20 percent.
Reduction in pages of the Income Tax Act
Another significant change in the New Income Tax Bill 2025 is the reduction in the number of pages. Compared to the Income Tax Act of 1961, which had 880 pages, the new bill has only 622 pages, although the number of chapters remains the same at 23.
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CBDT gains more authority
One of the major reforms in the New Tax Bill 2025 relates to the Central Board of Direct Taxes (CBDT). Previously, the Income Tax Department had to seek parliamentary approval to introduce various tax schemes. However, under the new bill, CBDT has been granted independent authority to launch tax-related schemes without requiring legislative amendments repeatedly under Section 533. This aims to eliminate bureaucratic delays and improve efficiency. Additionally, the bill allows for the implementation of a digital tax monitoring system.
No changes in tax regime
The new tax bill does not introduce any changes to the new tax regime. The tax slabs announced in the budget remain unchanged. Under the new regime, income up to 12 lakh rupees is exempt from taxation. The standard deduction is set at 75,000 rupees for the new tax regime, while it remains at 50,000 rupees under the old tax regime.
New tax slabs 2025
Income up to 4 lakh rupees – No tax
4 lakh 1 rupee to 8 lakh rupees – 5 percent tax
8 lakh 1 rupee to 12 lakh rupees – 10 percent tax
12 lakh 1 rupee to 16 lakh rupees – 15 percent tax
16 lakh 1 rupee to 20 lakh rupees – 20 percent tax
Next steps
Last week, the Union Cabinet, led by Prime Minister Narendra Modi, approved the New Tax Act 2025. The bill will now be introduced in the Lok Sabha and then sent to the Standing Committee for detailed discussions.