<\/span><\/h2>\n\n\n\nThe key changes enacted to transform changes through the Income Tax Bill 2025 represent a significant shift towards a more streamlined, tech-driven, and tax-friendly ecosystem. Have a look over some of the major changes that replaced the complex provisions, as explained below:<\/p>\n\n\n\n
The shift from Assessment Year to Tax Year<\/h3>\n\n\n\n
The Income Tax Bill, 2025 (i.e., ITB) proposes replacing the existing system of Assessment Year (AY) and Financial Year (FY) with a single Tax Year that aligns directly with the financial year. Under the new framework, the tax year covers a period of 12 months, starting from April 1st and ending on March 31st of the following year. In the case of new businesses or new sources of income, the tax year begins from the date of business existence or income generation and ends on March 31st of that financial year.<\/p>\n\n\n\n
Interpretation of Certain Terms in Tax Treaty<\/h3>\n\n\n\n
The Income Tax Bill, 2025, proposed the manner of interpreting India\u2019s tax treaties. It clarifies that the term \u2018business connection in India\u2019 will include any business activities conducted within the country. Additionally, the bill proposes replacing the phrase \u2018for the purpose of employment outside India\u2019 under Section 6 with a more concise term, \u2018for employment outside India\u2019.<\/p>\n\n\n\n
Taxation of NPOs\/ Trusts\/ NGOs<\/h3>\n\n\n\n
The Income Tax Bill, 2025 established a detailed framework for non-profit organizations (NPOs), replacing the existing provisions applicable to trusts. However, the IBO contains more than 20 provisions covering the application for registration, computation and taxation of income of registered NPOs.<\/p>\n\n\n\n
Revised Income Tax Slabs<\/h3>\n\n\n\n
According to the proposed provisions of the ITB, income up to Rs. 12 lakhs is now exempted from taxation, with a standard deduction of Rs. 75000, effectively making income up to Rs. 12.75 lakh tax-free for salaried individuals. However, the proposal of revising the income tax slabs and higher exemption limits mainly provides for securing middle-class money, potentially boosting consumers’ spending and saving options.<\/p>\n\n\n\n
Simplifies TDS\/ TCS Applicability<\/h3>\n\n\n\n
The Income Tax Bill, 2025 further aimed at simplifying the structure of Tax Deducted at Source (i.e., TDS) and Tax Collected at Source (i.e., TCS). The bill now consolidated all 13 sections under the sections 393 and 394 of the Bill. However, the TDS rates for interest, income, rent, etc., remain the same as mentioned under the previous Act of 1961.<\/p>\n\n\n\n
Substituted Term Beneficially Held by Beneficial Owner<\/h3>\n\n\n\n
The Income Tax Bill, 2025 proposed to replace the yardstick of \u2018shares beneficially held\u2019 as appearing in few provisions of ITA 1961 with the phrase\u2019 beneficial owner\u2019 of shares in the corresponding provisions of ITB 2025 as a measure of simplification of language.<\/p>\n\n\n\n
Integrated Virtual Digital Assets and Cryptocurrency Transactions<\/h3>\n\n\n\n
According to the Income Tax Bill, 2025 virtual digital assets, including cryptocurrencies are now classified as assets under clauses 67 to 91 of the new tax regime. This simply means that they are taxed similar to other assets like property, jewellery, and shares. The bill also defined the term virtual digital assets and electronic mode, reflecting the growing importance of digital transactions and cryptocurrencies in the modern financial landscape.<\/p>\n\n\n\n
Provision for Startups<\/h3>\n\n\n\n
The Income Tax Bill under clauses 11 to 154 proposed to introduce specific provisions to support startups, digital business, and renewable energy investments. The bill further contributed and explored a deep tech fund of funds supporting next-generation start-ups, with a window to claim tax holidays until 31st March 2030.<\/p>\n\n\n\n
New Regulation on Business Income Deductions<\/h3>\n\n\n\n
The investments and expenditures eligible for deduction as outlined under Sections 80C of the ITA are now proposed in Schedule XV of the Income Tax Bill, 2025. However, the bill further proposed to consolidate salary deductions including standard deduction, gratuity in a single section, rather than multiple sections. Also, the ITB ceases deduction for inter-corporate dividend, in case the company has opted for the tax rate of 22%.<\/p>\n\n\n\n
Claim for Capital Gains<\/h3>\n\n\n\n
The Income Tax Bill, 2025, proposed to remove the redundant clause 47 of the ITA. The amendment proposed for transfer of land of an industrially sick company and transfer in the course of demutualization or corporatisation of a recognized stock exchange. However, the bill introduced specific provisions for calculating capital gains on market-linked debentures.<\/p>\n\n\n\n
Amendments to Indirect Transfer Provisions<\/h3>\n\n\n\n
The Income Tax Bill, 2025 now provides that income arising both \u2018from\u2019 or \u2018through\u2019 the transfer of capital assets situated in India is to be deemed to accrue or arise in India. The provisions for capital assets situated in India and attribution of Income are amended<\/p>\n\n\n\n
Revised Assessment, Reassessment, and Tax Compliance<\/h3>\n\n\n\n
The Income Tax Bill, 2025 revised the assessment, reassessment, and tax compliance farmwork where the officer received directions from the Approving Panel declaring the arrangement as an impermissible avoidance arrangement. The bill further proposed to receive findings or direction contained in an order passed by any authority by way of appeal, reference, or revision by a court in any proceeding under other law.<\/p>\n\n\n\n
Broad Access to Taxpayers\u2019 Devices & Social Media Accounts<\/h3>\n\n\n\n
The new Income Tax Bill proposed sweeping powers and authorities to access taxpayers\u2019 email servers, online investment information, digital application servers, trading, banking, and social media accounts in searches. Moreover, the taxpayer on whom the search is being conducted must provide access to their electronic records and virtual digital space, a concept not covered under a decades-old tax regime.<\/p>\n\n\n\n
Other Miscellaneous Changes<\/h3>\n\n\n\n
The other miscellaneous changes as proposed under the Income Tax Bill, 2025 are as outlined below:<\/p>\n\n\n\n
\n- Removed the mandatory requirement of giving the opportunity to be heard.<\/li>\n\n\n\n
- The proposed inclusion of points of determination, decision, reasons thereof, in the DRP principles.<\/li>\n\n\n\n
- Introduced formulas and an additional 39 tables covering information on salary perquisites, presumptive taxation, tax deduction\/ collection at source rates, threshold, etc.<\/li>\n\n\n\n
- Simplified cross-referencing between different provisions such as section 133(1)(b)(ii).<\/li>\n\n\n\n
- Removed outdated sections that are no longer applicable, such as investment allowance on new plant and machinery, fringe benefits, pre-emptive purchase of immovable property by the government, etc.<\/li>\n\n\n\n
- Introduced provision to clarify that GST paid on cost of assets, credit of which is allowed and claimed under the applicable law, shall not be considered in computing the actual cost of assets.<\/li>\n\n\n\n
- Expanded the scope of export incentives for taxation under profits and gains of business or profession (PGBP).<\/li>\n\n\n\n
- No exemption from minimum alternate tax on fair valuation gains of units of business trusts in hands of the sponsor.<\/li>\n<\/ul>\n\n\n\n