Finance Minister Nirmala Sitharaman tabled the new Income Tax Bill, 2025, in Parliament on February 13, 2025. It aims to overhaul and modernize the existing framework of the 1961 Act by reducing complexity, removing outdated provisions, and streamlining compliance.

Structural Changes

Particulars	1961 Act	2025 Bill
Number of Sections	More than 700	536
Number of Chapters	23	23
Number of Schedules	14	16
Content (in terms of pages)	823	622
Effective Date	Currently applicable	From 01st April, 2026

Removal of Redundant Provisions

• The government has eliminated or merged over 1,200 Provisos and 900+ Explanations into simpler clauses.
• The Bill eliminates the concept of separate “previous year” and “assessment year,” favoring a single tax year for clarity.

Modern Instruments & Income

• Clarifies the taxation of digital assets (e.g., cryptocurrency, NFTs).
• Streamlines the approach to new business models (e.g., e‑commerce) and addresses changing investment landscapes.

Definition of Accountant for Tax Audit

A key update in the new Bill is the redefinition of the term “accountant” for purposes of tax audit. Under the new provisions, only Chartered Accountants (CAs) are authorized to conduct tax audits. The roles of Company Management Accountants (CMAs) and Company Secretaries (CSs) are specifically excluded from performing tax audit functions. This change is intended to ensure that tax audits are conducted by professionals with the requisite expertise and training, thereby enhancing the quality and reliability of audit reports.

Comparison by Major Income Heads

Below is a summarized table contrasting the old law (1961–2024) with the new law (2025), along with notable key differences.

Source of Income	Old Law (1961–2024)	New Law (2025)	Key Differences
Salary Income	• Standard deduction ₹50,000 (typical). • Several allowances, perquisite rules scattered in the Act.	• Consolidated salary structure with clearer definitions for allowances and perquisites. • More focus on ESOPs, stock‑based compensation, and flexible benefits.	• Simplified tax treatment of various perks and allowances. • Reduced scope for confusion or overlapping rules.
Income from House Property	• Based on annual value, with allowances for municipal taxes, interest on borrowed capital, etc.	• Similar structure but more streamlined computation. • Clearer rules for co‑owned property and standard repairs deduction.	• More unified set of guidelines for computing notional rent and allowable deductions.
Profits & Gains of Business/Profession (PGBP)	• Dispersed provisions for depreciation, expenses, presumptive taxation, etc.	• Expanded scope for digital businesses (e‑commerce, gig workers). • Additional deductions for R&D expenditure and certain start‑up costs.	• Special taxation for freelancers and gig workers. • Clear rules on R&D incentives and modern business models.
Capital Gains	• Categorized as Short‑Term (STCG) vs. Long‑Term (LTCG). • Indexation benefits for certain assets.	• Market‑linked debentures and new financial instruments addressed specifically. • Crypto and digital assets recognized with clearer tax provisions.	• No indexation for certain classes (e.g., digital assets). • Modern instruments (like slump sales, MLDs) get separate treatment.
Income from Other Sources	• Includes dividends, lottery winnings, etc. with varying rates and TDS norms.	• Broader scope now includes cryptocurrency, NFTs, and online gaming winnings under a stricter regime. • Updated rates for lottery and gaming.	• More stringent compliance for digital winnings and gifts. • Clearer classification and reporting requirements.

Presumptive Taxation (Section 44AD Limit):

The new Income Tax Bill, 2025, revises the presumptive taxation scheme for eligible small businesses.

Previously, the scheme applied to businesses with a turnover or gross receipts of up to ₹2 crore. However, the new Bill increases the limit to ₹3 crore, provided that the aggregate cash receipts during the previous year do not exceed five per cent of the total turnover. This change aims to promote digital transactions and reduce the reliance on cash, aligning the scheme with modern business practices.

Agriculture‑Related & Other Specific Provisions

Below are additional highlights from the tables focusing on agricultural income and related areas:

Category	Old Law (1961–2024)	New Law (2025)	Key Differences
Cultivation of Land	Income from crops fully exempt.	Still exempt, but stricter documentation may be required to prove genuine farming activities.	More stringent proof of farming activities to claim exemptions.
Rent or Revenue from Agricultural Land	Income from leasing agricultural land was fully exempt.	Taxable if the land is located in an urban area.	Urban land leasing no longer qualifies as purely agricultural income.
Processing of Agricultural Produce	Exempt if only basic processes are employed to make produce marketable.	Taxable if additional value‑adding steps are undertaken (e.g., packaging, branding).	Focus on how much value is added beyond primary processing.
Income from Nursery Operations	Only traditional nursery activities exempt; minimal clarifications.	Large‑scale nursery operations or commercial nurseries taxed.	Stricter criteria for commercial nursery income.
Income from Dairy Farming	Considered agricultural income under certain conditions.	Now primarily considered business income if run at scale, fully taxable.	Dairy production at scale is reclassified, removing prior broad exemption.
Agro‑based Industries	Many incentives were available; interpretations varied.	Only small‑scale operations remain incentivized; large units subject to standard business taxation.	High‑capacity agro industries lose broad‑based tax incentives; small operations still receive some benefits.

Conclusion

The Income Tax Bill, 2025 seeks to transform India’s tax framework by:

• Simplifying compliance through fewer chapters, digital processes, and consolidated provisions.
• Clarifying the computation and taxation of different heads of income—Salary, House Property, PGBP, Capital Gains, and Other Sources.
• Updating agricultural income rules, especially when urbanization affects land or value-added processes apply.
• Recognizing and taxing modern business models and digital assets (like cryptocurrency and NFTs) with dedicated provisions.
• Reducing the overall size of the statute by nearly half, thanks to the removal of redundant provisos and explanations.

In contrast, the Income Tax Act, 1961 (amended by the Finance Act, 2024), has evolved over decades, making it more extensive, complex, and scattered. By merging, streamlining, and modernizing provisions, the new Bill aims to deliver a transparent, efficient, and future‑ready tax system for India.

For the complete details and all provisions of the new Income Tax Bill, 2025, click here to read the full bill.