India’s taxation framework has long been based on the Income Tax Act, 1961, a comprehensive law that has guided the country’s income tax system for over six decades. However, over the years, the complexity and outdated provisions of the Income Tax Act have called for a major overhaul. To address this, the Income Tax Bill, 2025 was introduced, aiming to simplify the tax structure, reduce procedural complexities, and accommodate new economic realities such as digital transactions and assets.
As the Income Tax Bill, 2025 moves closer to becoming law, with an expected effective date of April 1, 2026, it’s essential to analyze the key differences between the existing Income Tax Act and the proposed bill. This blog provides a detailed comparison of the two legislations to understand the fundamental changes that will impact both taxpayers and tax professionals.
1. Structural Overhaul: A Simplified Approach
One of the most significant changes in the Income Tax Bill, 2025, is its streamlined structure. The current Income Tax Act, 1961 comprises over 700 sections spread across 23 chapters, making it a highly complex document. In contrast, the new Income Tax Bill reduces the number of sections to 536 while maintaining the number of chapters at 23.
While the number of sections in the new bill appears larger due to sequential numbering, the actual content has been condensed to remove redundancies and streamline the provisions. This structural simplification is expected to make the tax law easier to navigate for both taxpayers and professionals.
Here’s a comparative look at the structural elements:
| Particulars | Income Tax Act, 1961 | Income Tax Bill, 2025 |
| Number of Sections | Over 700 | 536 |
| Number of Chapters | 23 | 23 |
| Number of Schedules | 14 | 16 |
| Content (in pages) | 823 | 622 |
| Effective Date | Ongoing | April 1, 2026 |
The reduction in pages (from 823 to 622) reflects the bill’s focus on eliminating outdated provisions and unnecessary complexities. This structural change will provide taxpayers with a more manageable and accessible tax system.
2. Tax Year: Simplification of the Previous and Assessment Year Concept
The most notable change in the Income Tax Bill, 2025, is the removal of the dual references to Previous Year and Assessment Year that currently exist under the Income Tax Act, 1961. In the existing Act, the Previous Year refers to the year in which the income is earned, while the Assessment Year is the year in which the income is taxed.
The current system creates confusion as the Assessment Year starts immediately after the Previous Year, leading to complexity when filing tax returns. In response, the new Income Tax Bill introduces the term Tax Year, which will refer to the financial year running from April 1 to March 31. This removes the confusion between the two terms and creates a more straightforward timeline for taxpayers.
The new Tax Year concept also makes it easier to file tax returns, as it eliminates the need to account for the overlap between the Previous Year and the Assessment Year.
3. Digital Assets and Transactions: Addressing Modern Economic Realities
The rise of digital transactions and virtual assets has transformed the global financial landscape, and the new Income Tax Bill, 2025, seeks to bring India’s tax system in line with these changes. The Income Tax Act, 1961 does not specifically address the taxation of digital assets such as cryptocurrencies, NFTs, and other virtual financial instruments. However, with the growing importance of these assets, the 2025 Bill includes provisions that recognize and regulate digital income and transactions.
The Bill specifically defines Virtual Digital Assets (VDAs) as any asset with a digital representation of value that is secured using cryptographic technology. This broadened definition provides clarity on how digital assets will be taxed in India, ensuring that both individuals and businesses engaging in digital transactions are compliant with tax laws.
The Income Tax Bill, 2025 also includes provisions related to the taxation of income generated from digital assets, ensuring that digital income is taxed at appropriate rates.
4. Tax Filing Deadlines: A Shift in Nomenclature
While the filing deadlines under the Income Tax Act, 1961 remain largely unchanged, the Income Tax Bill, 2025, introduces a shift in nomenclature. In the current Act, the filing due dates fall within the Assessment Year, while in the new bill, they will fall within the Succeeding Tax Year.
For instance, under the current system, an individual’s tax filing deadline for the financial year 2024-25 would be July 31, 2025. Under the new bill, the deadline would be the same, but it will be referred to as July 31 of the Succeeding Tax Year, which helps eliminate confusion related to overlapping years.
The new bill maintains the following filing deadlines:
- Individuals, HUF, or Firms not subject to tax audit: July 31
- Companies: October 31
- Assessees subject to tax audit: October 31
- Partners in firms subject to tax audit: October 31
- Assessees subject to transfer pricing provisions: November 30
5. New Tax Regime: Section 202 vs. Section 115BAC
Under the existing Income Tax Act, Section 115BAC introduces the New Tax Regime for individuals and Hindu Undivided Families (HUF), offering a lower tax rate in exchange for the forfeiture of certain exemptions and deductions. In the Income Tax Bill, 2025, this is addressed under Section 202, which expands the scope of the New Tax Regime to include Association of Persons (AOP), Body of Individuals (BOI), and Artificial Juridical Persons.
The New Tax Regime under both the existing and new Bills continues to be the default tax regime. However, taxpayers will have the option to opt-out of the new regime and return to the old tax structure with deductions and exemptions.
6. TDS Provisions: Consolidation Under One Section
The Income Tax Bill, 2025 consolidates all the provisions related to Tax Deducted at Source (TDS), which are currently spread across multiple sections (192 to 194T) of the Income Tax Act, under a single section, Section 393. This consolidation aims to simplify the TDS provisions and make compliance easier for businesses and individuals alike.
While the TDS rates and thresholds remain largely unchanged, the new approach to organizing these provisions ensures greater clarity and ease of reference.
7. Conclusion: A Modernized Tax Framework for India
The Income Tax Bill, 2025 marks a significant shift from the complex and often outdated provisions of the Income Tax Act, 1961. By simplifying tax filing procedures, addressing the rise of digital assets, and consolidating various provisions, the new bill promises to make India’s tax system more user-friendly and aligned with modern economic realities.
While the Income Tax Act, 1961 has served its purpose over the years, the 2025 Bill is designed to meet the challenges of today’s fast-evolving economy, offering a clearer, more efficient framework for taxation in India.
As the bill progresses through Parliament, taxpayers and professionals alike must stay informed about these changes, as they are set to redefine India’s taxation system starting April 1, 2026.
