The Income-Tax Bill 2025, set to replace the Income-Tax Act of 1961, has been introduced in the Lok Sabha with a focus on simplification, compliance enhancement, and digital transformation of tax administration in India. The bill introduces significant changes in taxation laws, affecting individuals, businesses, and digital asset holders.
Key highlights of the Income-Tax Bill 2025
1. Introduction of a new ‘Tax Year’ concept
A crucial change in the bill is the introduction of the ‘Tax Year’, which aims to streamline tax reporting and compliance, making it uniform across taxpayers. This will replace the existing financial year system and provide clarity in tax assessments.
2. Revised Income Computation and Deductions
The bill proposes a reclassification of income categories, aiming to improve transparency. Major deductions and tax treatments will also be revised for businesses and individuals. The government has introduced provisions to prevent tax avoidance through stock or capital asset transfers within corporate structures.
3. Capital Gains Tax Rationalization
The bill provides a restructured capital gains tax framework, specifically affecting:
- Equity shares and real estate: Specific provisions have been introduced for clarity on tax liabilities.
- Long-term capital gains: A concessional tax rate will be applicable to certain asset classes to encourage investment.
- Corporate tax rates: Special rates will be introduced for startups and manufacturing companies, provided they meet the prescribed conditions.
4. Taxation on Digital Assets and Cryptocurrencies
The bill introduces specific taxation rules for crypto-assets and other virtual digital assets, making reporting of crypto transactions mandatory. Key provisions include:
- Special tax rates on earnings from cryptocurrencies.
- Stricter compliance norms for crypto exchanges and investors.
5. Strengthened Anti-Tax Avoidance Measures
With tax evasion becoming a global concern, the General Anti-Avoidance Rule (GAAR) has been further strengthened. This includes:
- Taxation of unexplained credits and investments to ensure financial transparency.
- Stricter scrutiny of offshore transactions to prevent income shifting for tax benefits.
6. Political Party and Trust Exemptions Under New Compliance Norms
The bill continues tax exemptions for political parties and electoral trusts, but with tighter compliance norms to ensure transparency. Similarly, tax provisions for non-profit and charitable organizations have been updated, ensuring tax benefits apply only to legitimate charitable activities.
7. Mandatory Digital Tax Filing and Faceless Assessments
The bill moves further into digital tax administration, introducing:
- Faceless tax assessments to reduce human intervention in scrutiny cases.
- Mandatory e-filing for specific taxpayer categories to enhance transparency.
- Higher penalties for non-compliance in tax filings.
8. Strengthening of Taxation on Foreign Income
Global investors and expatriates will be impacted by enhanced tax provisions, including:
- Taxation on foreign investments and offshore transactions.
- Special provisions for non-resident Indians (NRIs) and expatriates.
- Stronger international tax treaty coordination to prevent double taxation.
The Income-Tax Bill 2025, once enacted, will bring one of the biggest tax reforms in decades, focusing on simplification, digital enforcement, and revenue transparency. Businesses, investors, and taxpayers will need to adapt to the new tax structure before its implementation on April 1, 2026.
