On August 12, 2025, the Indian Parliament introduced the new Income Tax Bill as one of the largest taxation reforms in the history of the country since the 60s. This revolutionary piece of legislation will take effect beginning the 1st April 2026, and it will occupy the place of the Income Tax Act of 1961.
So, what changed under the new income tax bill? The headline updates you need to be aware of as a taxpayer in India are as follows.
1. Simplification of Tax Laws with Fewer Sections
The proposed bill also cuts the legal provisions down to 536 sections as opposed to more than 800 sections previously. This implies a less clouded, less complex legal model that becomes easier to comprehend for individuals and businesses.
2. Introduction of a Single Tax Year
The ambiguous separation of the “Previous Year” and the Assessment Year is eliminated. The income reporting period will also be covered by a single Tax Year, making it easier to file and calculate the taxes.
3. Basic Exemption Limit Remains at ₹12 Lakh
The income threshold of exemption for individuals remains 12 lakh rupees, and therefore, a lot of salaried taxpayers have no need to forego their first 12 lakh rupees due to taxation.
4. Increased Tax Rebate Under Section 87A
It has raised the rebate to 60,000 rupees for taxpayers with an income up to 12 lakh rupees. This provides a huge relief on taxation bills to the middle-income earners.
5. Fully Faceless and Digital Tax Assessment
Physical interface will not be involved in all tax assessments and notices to be conducted online. This is a faceless procedure to bring down corruption and enhance transparency.
6. Extended Time to File Revised Returns
The time taken by taxpayers to make amended tax returns has now been increased to 4 years as opposed to the previous 2 years, hence giving one more time to rectify errors or claim some unclaimed deductions.
7. Clear Tax Rules for Virtual Digital Assets
The new taxation laws also include cryptocurrencies, NFTs, and other digital assets expressly, and consequently, levying taxes on the income proceeds of such resources becomes simpler and enforceable.
8. Penalty Relief for Genuine Errors
The bill offers a rationalisation to the taxpayers who make genuine mistakes, and they will not be obliged to automatic penalties due to unreasonable errors.
9. Higher Thresholds for Tax Deducted at Source (TDS)
The TDS threshold of interest income of the senior citizen is increased by half a lakh to 1 lakh.
The minimum tax on rental income is increased to 6 lakh annually as opposed to 2.4 lakh.
10. No Change in Tax Rates or Slabs
With all these changes, income tax slabs and rates are not, however, altered, hence providing taxpayers with certain stability and predictability.
What Does This Mean for Taxpayers?
Such modifications will ease the process of filing taxes, make it more visible & fair to all, including salaried workers, small enterprises, real estate owners and crypto investors. There will also be a quicker refund and less painful experience, as it is moving to a digital and faceless type of assessment.
When Will the New Bill Take Effect?
This new Income Tax Bill, 2025, will become effective on the first financial year ahead (that begins on April 1, 2026; that is, FY 2026-27). The change should not be implemented suddenly, and so taxpayers are advised to prepare to handle the change in advance.
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