Priyanka Tiwari
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Finance Minister Nirmala Sitharaman introduced the much-awaited Income Tax Bill 2025 in the Lok Sabha today (Thursday). This new bill aims to simplify tax laws, replacing the outdated Income Tax Act of 1961, which has become overly complex due to frequent amendments.
What Changes Can Taxpayers Expect?
With the new bill, taxpayers should be prepared for several changes. However, before it becomes law, the bill will first be reviewed by a select committee. The government has stated that this committee will submit its report on the first day of the next session.
Key Update: Section 80C Moves to Clause 123
If you're familiar with Section 80C, you know it's a crucial part of tax planning. This section covers deductions for investments in schemes like:
- Equity-Linked Saving Scheme (ELSS)
- Public Provident Fund (PPF)
- Life Insurance Premiums
- National Pension System (NPS)
- Other tax-saving deposits
Currently, under Section 80C, taxpayers can claim a deduction of up to ₹1.5 lakh per year. In the new bill, this provision has been moved to Clause 123.
According to the bill, individuals and Hindu Undivided Families (HUFs) can still claim deductions up to ₹1.5 lakh, similar to the current law. Mayank Mohanka, founder-director of tax consultancy firm TaxAaram.com, confirmed that Clause 123 in the new bill will function just like Section 80C and should be read alongside Schedule XV, which details the available tax exemptions.
When Will the New Law Be Implemented?
The Income Tax Bill 2025 brings a significant reduction in complexity:
Sections reduced from 819 to 536
Unnecessary exemptions removed
Total word count cut from 5 lakh to 2.5 lakh words
One major change is replacing 'Assessment Year' with 'Tax Year' to simplify terminology.
The new tax law is expected to come into effect on April 1, 2026.
No Change in Tax Slabs, Just a More Modern Approach
After being presented in Lok Sabha, the bill will now go to the Parliamentary Standing Committee on Finance for further discussions. The government has clarified that the existing tax slabs and exemptions will remain unchanged. The goal is to modernize the six-decade-old tax law and make it more relevant to today's financial landscape.
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