India’s Revised Income Tax Bill 2025: Key Changes You Need to Know

India’s Revised Income Tax Bill 2025, officially called The Income-tax (No. 2) Bill, 2025, was presented in Parliament on August 11, 2025. 

This landmark legislation will replace the six-decade-old Income Tax Act of 1961 with a more streamlined, modern framework comprising 536 sections and 16 schedules.

The bill reflects over 200 amendments recommended by the parliamentary select committee and aims to simplify tax computation, clarify definitions, and bring tax laws in line with modern financial realities, including the taxation of cryptocurrencies.

New Simplified Tax Slabs in the 2025 Income Tax Bill

Under Clause 202(1), a new tax regime for individuals and Hindu Undivided Families (HUFs) will be implemented, mirroring rates from the Union Budget 2025:

• Up to ₹4,00,000: No Tax
• ₹4,00,001 – ₹8,00,000: 5%
• ₹8,00,001 – ₹12,00,000: 10%
• ₹12,00,001 – ₹16,00,000: 15%
• ₹16,00,001 – ₹20,00,000: 20%
• ₹20,00,001 – ₹24,00,000: 25%
• Above ₹24,00,000: 30%

This new structure aims to make tax filing easier and reduce ambiguity.

Expanded Income Tax Rebate

Section 87A of the new bill increases the rebate to ₹60,000 or the full tax payable (whichever is lower) for eligible residents. 

This higher rebate provides additional relief for middle-income taxpayers compared to earlier limits.

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Modernized and Clearer Tax Language

The bill focuses on simplified language and restructuring of provisions to minimize disputes. Notably, it introduces:

• Formal taxation of cryptocurrencies as capital assets
• Restructured capital gains definitions for clarity
• Streamlined classification of income categories

Reliefs for Pensions, LLPs, and Charities

Key compliance and relief measures include:

• Tax deductions for commuted pensions (lump-sum payouts)
• Removal of Alternate Minimum Tax (AMT) on LLPs
• Relaxed rules for charitable trusts
• Eased transfer pricing compliance requirements

Additional Major Changes

• No tax on notional rent for vacant properties
• Option for advance NIL-TDS certification to prevent excess deductions
• Flexible tax refund provisions for delayed filings
• MSME definitions aligned with the MSME Act for consistency

Implementation Timeline

The bill proposes to take effect from April 1, 2026, allowing a transition period for taxpayers and businesses to adapt to the changes.

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Final Thoughts

India’s Income Tax Bill 2025 marks one of the most significant tax law reforms in decades. 

By simplifying slabs, modernizing language, incorporating digital asset taxation, and easing compliance, the bill aims to make the system more taxpayer-friendly while retaining a progressive structure. 

With its 2026 rollout, individuals and businesses should begin preparing now to adapt to the new regime.

FAQ

When will the new Income Tax Bill take effect?

The proposed implementation date is April 1, 2026.

What are the new income tax slabs?

The bill introduces simplified slabs ranging from 0% for incomes up to ₹4 lakh to 30% for incomes above ₹24 lakh.

How does the bill address cryptocurrency taxation?

Cryptocurrencies will be classified as taxable capital assets, with structured provisions for gains.

Does the bill offer more rebates?

Yes, Section 87A increases the rebate limit to ₹60,000 or full tax payable, whichever is lower.

Are there compliance reliefs for businesses?

Yes, LLPs will no longer be subject to AMT, MSME definitions have been aligned, and several compliance burdens have been eased.