'The new Bill introduces no policy or rate changes, leaving financial planning strategies largely unaffected.'
'The considerations for choosing between the old and new tax regimes remain essentially unchanged.'
The original Income Tax Bill, 2025, introduced in February 2025, was withdrawn on August 8, 2025, after concerns were raised over certain provisions.
A revised version, incorporating the recommendations of a Parliamentary Select Committee, was reintroduced in the Lok Sabha on August 11, 2025, and passed on the same date. The Rajya Sabha cleared the Bill on August 12.
This legislation is slated to come into force from April 1, 2026.
Easier to comprehend tax laws
The hallmark of the new I-T Bill is simplification.
"The new Income Tax Bill, 2025, is concise, lucid, and easy to read and understand. It has simplified the language to make the law more accessible," says Mrinal Mehta, joint secretary, Bombay Chartered Accountants' Society
Many amendments have been consolidated, thereby reducing the fragmentation present in the old Act.
Complex rules have been streamlined, and redundant provisions eliminated, resulting in increased clarity in provisions that were ambiguous earlier.
The total number of sections has been reduced from 819 to 536. Fifty-seven tables and 46 formulae have been added to make the law easier to comprehend.
"Simpler language and standardised procedures are likely to reduce disputes between taxpayers and the tax department," says Suresh Surana, a Mumbai-based chartered accountant..
The new Bill expands the definition of undisclosed income to include virtual digital assets. All assessee categories have been consolidated in one place for easier return filing obligations.
The Bill also codifies a taxpayer charter, ensuring accountability of tax authorities and safeguarding the rights of taxpayers.
Digital-first approach
The Bill promotes digitisation and automation. It encourages the use of technology to file returns, process them, and for grievance redressal.
Minimising human interface is expected to improve efficiency.
"The digital-first approach will also curb corruption and enhance taxpayer convenience," says Abhishek Soni, co-founder, Tax2Win.
The scope of faceless assessments has been expanded significantly.
"It now encompasses additional processes, including scrutiny, reassessment and appeals," says Surana.
It mandates the use of electronic notices for the majority of communications with the department, thereby minimising the need for physical office visits.
Parity between NPS and UPS
The new Bill aligns the taxation of the Unified Pension Scheme (UPS) with the National Pension System (NPS).
"At retirement -- superannuation, voluntary exit, or early retirement -- up to 60 per cent of the pension corpus withdrawn by a UPS subscriber will be tax-free, same as in NPS. Premature withdrawals from UPS will also be taxed in the same way as NPS withdrawals, removing earlier inconsistencies. This ensures tax equity between UPS and NPS contributors," says Soni.
Uniform treatment of commuted pension
The current law exempts commuted pension from approved pension funds, regardless of employment status.
The original Income Tax Bill, 2025, limited this exemption to employees while excluding non-employees.
On the select committee's recommendation, even non-employees will receive full deduction.
"This ensures equitable treatment for all investors in approved pension schemes," says Surana.
All the approved schemes are listed in Schedule VII, thereby removing doubts about exemptions.
File tax return, get refund
The first draft of the Income Tax Bill introduced in February 2025 had included a provision that mandated taxpayers eligible for a refund to file their tax returns on or before the due date.
"The new Bill has removed this provision and restored the law regarding taxpayers as existed in the current tax regime," says Mehta.
In other words, taxpayers will be eligible for refund so long as they file their tax return, even if it is after the deadline.
Clarification on advance tax penal interest
On August 12, 2025, the ministry of finance issued a corrigendum to fix a drafting error in Clause 425 of the new Income Tax Bill, bringing it in line with the current interest calculation under Section 234C of the 1961 Act.
Under the existing law, a delay in paying any of the first three advance tax instalments (due on June 15, September 15 and December 15) -- even by a day -- attracts interest of 3 per cent per quarter.
"The new Bill had proposed charging interest only for the actual period of delay, possibly reducing liability in some cases. The corrigendum restores the flat 3 per cent per quarter rule for the first three instalments, regardless of payment date," says Sumit Singhania, partner, Deloitte India.
A few negatives
The new Bill aims to simplify the structure and language to enhance readability and reduce litigation between taxpayers and the tax department.
While it largely aligns with this reform agenda, some areas may require refinement.
"For instance, 'tax year' replaces 'previous year', yet some references to the latter remain -- likely a drafting oversight.
Similarly, the Bill could better define the 'risk mitigation strategy' for tax scrutiny assessment, among others, to help deter frivolous disputes," says Singhania.
"While the new Income Tax Bill aims to simplify existing tax provisions, it offers no significant relaxations or benefits. Many salaried and middle-class taxpayers are likely to be disappointed," adds Mehta.
Ensuring continuity
The Bill retains the Rs 12 lakh annual basic exemption introduced in the 2025 Union Budget.
Tax slabs under the new tax regime, starting with Rs 4 lakh no-tax threshold and progressing through multiple rate bands (5, 10, 15, 20, 25 and 30 per cent), remain the same.
Rebate under Section 87A, which was enhanced to Rs 60,000 (or tax payable, whichever is lower), also remains unchanged.
"The retention of the existing structure will ensure continuity and avoid sudden disruptions for taxpayers," says Surana.
For individual taxpayers, rules largely mirror the existing 1961 Act.
"The select committee's review plugs gaps in cross-references and omissions -- for example, clarifying that the 30 per cent house property deduction applies after municipal taxes, in line with current practice," says Singhania.
Taxpayers will not have to make too many adjustments to their tax planning after the new Bill comes into force.
"The new Bill introduces no policy or rate changes, leaving financial planning strategies largely unaffected. The considerations for choosing between the old and new tax regimes remain essentially unchanged," says Sandeep Jhunjhunwala, partner, Nangia Andersen LLP.
Compliance risks of ignoring new rules
With increased digital surveillance, non-compliance is now more likely to be detected. Failure to adapt to procedural changes -- such as the introduction of revised forms -- can lead to serious consequences.
Finally, the new Income Tax Bill promises to simplify the reading and understanding of the provisions of the tax laws.
"An average salaried individual not having income from business or capital gains can aim to file their return of income with ease and with little or no professional help. However, in case of multiple sources of income, seeking professional help would be advisable," says Mehta.
Feature Presentation: Aslam Hunani/Rediff
