New Income Tax Bill vs Old: Increased sections, fewer pages, easier words

While the new Income Tax Bill does not appear to bring in major policy changes, it introduces several structural and linguistic adjustments aimed at simplifying tax laws

The new Income Tax Bill, expected to be introduced in the Lok Sabha on Thursday, seeks to replace the nearly 60-year-old Income Tax Act, of 1961. While it does not appear to bring in major policy changes, it introduces several structural and linguistic adjustments aimed at simplifying tax laws.

 

"At first blush, the code does not present any policy changes," said Gouri Puri, partner at Shardul Amarchand Mangaldas & Co. "However, as promised, the new tax law seems to focus primarily on simplification and consolidation, such as introducing the concept of 'tax year' in place of the assessment year in line with international parlance."

 

 

Taxpayers often find the multiple concepts of financial year, previous year and assessment year confusing. "A single concept of a tax year is easy to understand and in line with international practice, even though there may not have been any substantive change," said Puri.

 

Key changes in the new bill

 

Ritika Nayyar, partner at Singhania & Co, outlined some of the key changes:

 

< The term "assessment year" is replaced with "tax year," which aligns with the financial year (April 1 to March 31).

< "Previous year" has been replaced with "financial year."

< The language is simpler, with fewer complex explanations and provisos.

< The act is shorter in length, with fewer pages.

< While the number of chapters remains the same, the number of sections has increased, suggesting complex provisions have been broken down for clarity.

< The number of schedules has increased.

 

"The bill also introduces clearer provisions for taxing virtual digital assets, such as cryptocurrencies. It includes new sections covering revenue recognition for service contracts and inventory valuation. Deductions from salaries, such as standard deduction, gratuity, and leave encashment, have been consolidated into one section. The tax slabs under the new tax regime remain unchanged from the last budget. The presumptive taxation limit under section 44AD has been increased for businesses and professionals," said Nayyar.

 

For instance, the existing Income Tax Act, 1961 (Section 80D), requires taxpayers to refer to multiple clauses to determine deductions. The new bill presents these limits more clearly by breaking them down into:

 

< Health insurance premiums for self, family, and parents

< Medical expenses for self, family, and parents

< Special rules for senior citizens

 

Taxpayers will no longer need to interpret legal language with multiple cross-references.

 

Income tax slabs: New vs. old

 

Standard deduction for salaried employees

 

Existing law: Rs 50,000 standard deduction for all salaried employees.

Proposed change:

< Rs 50,000 standard deduction remains for those in the old regime.

< Rs 75,000 standard deduction for those opting for the new tax regime.

 

New income tax slabs (Section 202)

 

Existing law (old regime with deductions):

< Up to Rs 2.5 lakh – No tax

< Rs 2.5 lakh to Rs 5 lakh – 5%

< Rs 5 lakh to Rs 10 lakh – 20%

< Above Rs 10 lakh – 30%

< Rebate available for income up to Rs 5 lakh under Section 87A

 

Existing law (new regime – optional since 2020, without deductions):

< Up to Rs 2.5 lakh – No tax

< Rs 2.5 lakh to Rs 5 lakh – 5%

< Rs 5 lakh to Rs 7.5 lakh – 10%

< Rs 7.5 lakh to Rs 10 lakh – 15%

< Rs 10 lakh to Rs 12.5 lakh – 20%

< Rs 12.5 lakh to Rs 15 lakh – 25%

< Above Rs 15 lakh – 30%

 

Proposed tax slabs (Income Tax Bill, 2025) (for individuals, HUFs, and other entities under the new regime):

< Up to Rs 4,00,000 – No tax (increased from Rs 2.5 lakh)

< Rs 4,00,001 to Rs 8,00,000 – 5% (broader range compared to previous 5% slab)

< Rs 8,00,001 to Rs 12,00,000 – 10%

< Rs 12,00,001 to Rs 16,00,000 – 15%

< Rs 16,00,001 to Rs 20,00,000 – 20%

< Rs 20,00,001 to Rs 24,00,000 – 25%

< Above Rs 24,00,000 – 30% (previously 30% applied above Rs 15 lakh)