On February 12, 2025, Finance Minister Nirmala Sitharaman circulated the new Income Tax Bill, 2025, which is to be introduced in parliament on February 13, 2025,
Income Tax Bill, 2025, to replace the six-decade-old Income Tax Act of 1961.
Key Highlights of the Income Tax Bill, 2025:
1. Change Name of Act:
The Name of Income Tax Act, 1961 will change to Income Tax Act, 2025. Previously it was like to Introduce Direct Tax Code, but it changed the name of Act.
2. Effective Date:
The proposed bill once passed in Parliament and receive assent of President of India, will be effective from April 01, 2026
3. Simplification of Tax Laws:
The bill reduces the existing law from over 800 pages to 622 pages having section 533.
4. Introduction of ‘Tax Year’ Concept:
Replaces the term ‘previous year’ with ‘tax year’ to simplify understanding and compliance.
5. Revised Income Tax Slabs:
No income tax for individuals earning up to ₹12 lakh per annum.
For salaried taxpayers, after accounting for a standard deduction of ₹75,000, income up to ₹12.75 lakh will be tax-exempt.
New tax rates for incomes above ₹12.75 lakh are structured as follows:
₹12.75 lakh to ₹16 lakh: 15%
₹16 lakh to ₹20 lakh: 20%
₹20 lakh to ₹24 lakh: 25%
Above ₹24 lakh: 30%
6. Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) Rationalization:
The limit for TDS on interest for senior citizens has been increased from ₹50,000 to ₹1 lakh.
The annual limit for TDS on rent has been raised from ₹2.4 lakh to ₹6 lakh.
7. Extension of Time-Limit to File Updated Income Tax Returns:
The deadline to file updated returns has been extended from two to four years, providing taxpayers with more flexibility.
8. Tax Exemption for National Savings Scheme Withdrawals:
Withdrawals made from the National Savings Scheme by individuals on or after August 29, 2024, will be exempt from tax.
9. Eligibility of Tax Auditor
Previously it was said that CS and CMA would also be authorized to do Tax Audit, however the proposed bill says
The person who is Accountant shall conduct a Tax Audit.
The Definition of Accountant has been given in Sec. 515(3)(b) which says that Accountant means CA in Practice.
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