The Income Tax Bill 2025 marks one of the most transformative updates to India’s taxation framework. It replaces the Income Tax Act of 1961, which has been in force for more than six decades. The goal is to simplify tax rules, remove unnecessary complexities, and offer substantial relief to individuals and small businesses.
One of the most talked-about changes is the proposed ₹12 lakh annual income exemption, which could drastically reduce the tax burden for middle-class families.
Key Highlights of the Income Tax Bill 2025
1. Complete Overhaul of the 1961 Tax Law
The Bill has been introduced to modernize India’s tax structure.
-
Passed in the Lok Sabha but returned by the Rajya Sabha for further changes.
-
A Select Committee will review and suggest final amendments.
-
Aims to create a transparent, simplified, and taxpayer-friendly system.
2. Proposed ₹12 Lakh Income Exemption
One of the most significant proposals:
-
Individuals with an annual income of up to ₹12 lakh could be exempt from paying income tax.
-
Section 87A rebate extended to cover more salaried taxpayers.
-
Expected to boost disposable income for millions of households.
3. Fewer Sections for Better Understanding
The old Act had over 700 sections. The new Bill reduces them to 536, making the law easier to navigate.
-
Simplified language.
-
Easier compliance for both individuals and businesses.
4. Strengthened Digital Assessment
The faceless assessment system gets a major push:
-
All income tax assessments will be online.
-
No in-person meetings with officers.
Designed to reduce corruption and speed up resolutions.
Economic Context – April to August 2025
- Net direct tax collections fell by 4% year-on-year.
- Tax refunds increased by 10%, reflecting faster processing and higher claims from middle-income groups.
Income Tax Collection Status – April to August 2025
The New Income Tax Law India is being introduced amid notable revenue trends:
-
Net direct tax collections have fallen by 4% year-on-year.
-
Tax refunds have increased by 10%, indicating faster processing and more claims from middle-income groups.
Benefits for Small and Medium Enterprises (SMEs)
The Income Tax Bill 2025 provides multiple benefits to small businesses:
-
Reduced compliance burden through simplified documentation.
-
Clearer classification of business types for tax purposes.
-
Encouragement for MSMEs to expand by lowering their tax liabilities.
These Income Tax Changes 2025 are expected to foster growth in the SME sector.
Due Date for Income Tax Return Filing FY 2024-25
The last date to file ITR (non-audit cases) is 15 September 2025. Avoid delays—gather your documents early.
Start early and file accurately to avoid penalties and processing delays. To learn more or get expert help, visit: 
Income Tax Return Filing
Frequently Asked Questions (FAQs)
1. What is the Income Tax Bill 2025?
The Income Tax Bill 2025 is a major tax reform aimed at replacing the Income Tax Act, 1961. It introduces simplified rules, reduced sections, and updated provisions under the New Income Tax Law India.
2. What is the new Income Tax Exemption ₹12 Lakh rule?
Under the Income Tax Changes 2025, individuals earning up to ₹12 lakh annually may qualify for a full tax exemption through an updated Section 87A rebate.
3. How has the New Income Tax Law India simplified tax rules?
The number of sections has been reduced from over 700 to 536 in the Income Tax Bill 2025, making the law easier to understand and comply with.
4. What is the faceless assessment system in the Income Tax Changes 2025?
It is a fully online process for tax assessments, eliminating in-person meetings to reduce corruption and increase transparency.
5. How will the New Income Tax Law India benefit small businesses?
The Income Tax Bill 2025 simplifies compliance, reduces documentation, and provides clearer tax classifications, helping SMEs save time and reduce costs.
