GUWAHATI: Union Finance Minister Nirmala Sitharaman introduced the Income Tax Bill 2025 in the Lok Sabha on Thursday, February 13. The bill was initially announced during her Budget speech on February 1 and subsequently approved by the Cabinet on February 7 to replace the Income Tax Act of 1961.
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Spanning 622 pages, the proposed legislation introduces several key changes, including the replacement of the term ‘previous year’ with ‘tax year’ and the removal of the ‘assessment year’ concept. The government has emphasised that the bill is designed to simplify tax provisions, making them more comprehensible for taxpayers while reducing the number of sections by 25-30 per cent.
Once passed by the Lok Sabha, the bill will be referred to the Parliament’s Standing Committee on Finance for further scrutiny and consultations before being presented again in both Houses of Parliament. If enacted, the new law is expected to take effect from April 2026.
One of the major highlights of the bill is the revised tax slabs, which provide relief to the middle class by raising the exemption limit. Under the proposed structure, income up to ₹4 lakh will remain tax-free, while those earning between ₹4-8 lakh will be taxed at 5 per cent. The tax rate gradually increases across different slabs, with income exceeding ₹24 lakh being taxed at 30 per cent. Additionally, salaried employees will benefit from a nil tax limit of ₹12.75 lakh per annum after accounting for a standard deduction of ₹75,000.
Finance Minister Sitharaman underscored the government’s commitment to tax reforms. She noted that measures such as faceless assessment, the taxpayers’ charter, faster return processing, and the Vivad se Vishwas dispute resolution scheme have significantly improved tax administration.
"Over the last ten years, our government has introduced multiple reforms to make taxation more efficient and taxpayer-friendly. These include faceless assessment, a taxpayers’ charter, quicker return processing, and the fact that almost 99 per cent of returns are now filed on a self-assessment basis. The Income Tax Act was originally enacted in 1961 and come into effect in 1962. At that time, they had only 298 sections…But as time went by…many more sections were added. As it stands today, there are 819 sections,” Sitharaman said. “From that 819, we're bringing it down to 536. So he should look at what it is today,” she added.