New Income Tax Bill 2025: The Income Tax Bill, 2025 — introduced in the Lok Sabha on February 13 to replace the decades-old Income Tax Act, 1961 — has been formally withdrawn, according to a report by
Moneycontrol on August 8.
Citing official sources, Moneycontrol reported that the government will now introduce a revised version of the Income Tax Bill on Monday, August 11. This updated draft is expected to incorporate most of the recommendations put forth by the Select Committee chaired by BJP MP Baijayant Panda.
As per the Moneycontrol report, the decision to withdraw the original Bill was taken to avoid confusion from multiple versions and to ensure the House considers a single, updated document. The revised Bill will reflect all the changes and suggestions received so far, sources told the publication.
The new income tax bill, known as the ‘Income Tax Bill 2025’, is proposed to be implemented from April 1, 2026. The bill comprises 600 pages, 23 chapters, 16 schedules, and 536 clauses (to become Sections after the bill is passed), according to sources.
New Income Tax Bill To Become Effective From April 01, 2026
The bill proposes to replace the words ‘assessment year’ and ‘previous year’ with just one word ‘tax year’, the sources said. The tax year would define the 12-month financial period starting from April 1, 2026.
Importantly, no changes in short-term capital gains (STCG) tax duration and rate have been made. The STCG tenure remains 12 months and the rate at 20 per cent, according to the sources.
The existing Income Tax Act, 1961, has a total of 298 Sections. It has been increased to 536 Clauses in the latest I-T bill for better clarity in the language, said the sources.
As per the proposed law, clearer tax treatment on stock options (ESOPs) have been included for reduced tax disputes and includes judicial pronouncements of the last 60 years for more clarity.
Why a New Income Tax Bill?
The existing Income Tax Act, 1961, has undergone numerous amendments over the decades, making it complex and difficult for taxpayers to navigate. The new Income Tax Bill intends to:
– Simplify tax provisions with clearer language
– Reduce legal disputes by removing ambiguities
– Make compliance easier for individuals and businesses
– Promote a trust-based tax system, where scrutiny comes later.
During her Budget Speech 2025, Finance Minister Nirmala Sitharaman said the bill would embody the same philosophy of Nyaya that was at the heart of Bharatiya Nyaya Sanhita. The law had repealed the Indian Penal Code of 1860 from July 2024.
In the Budget Speech, she said, “I am happy to inform this August House and the country that the new income-tax bill will carry forward the same spirit of “Nyaya”. The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.”
