In a historic move to simplify and modernize the taxation system, the government has introduced the Income Tax Bill 2025 in Parliament. The new bill is set to replace the existing 60-year-old Income Tax Act, making the tax structure more streamlined and comprehensible. Experts believe that the new bill is written in much simpler language compared to the current law, ensuring better understanding and compliance.
Key Highlights of the Income Tax Bill 2025
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Simplification of Tax Structure
The Income Tax Bill 2025 aims to cut down the complexity of the taxation system by reducing the number of clauses by 50%. Instead of the traditional terms ‘Assessment Year’ and ‘Previous Year’, the new bill introduces a unified term, ‘Tax Year’, to make the process more transparent.
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Increased Tax Exemptions
To benefit taxpayers, the government has proposed significant increases in tax exemption limits on National Pension System (NPS) and Employees’ Provident Fund (EPF). Additionally, there will be greater tax deductions on investments in retirement funds, mutual funds, and insurance schemes.
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Extended Income Tax Return Deadline
One of the most significant changes is the proposal to extend the income tax return filing deadline from two years to four years. This extension will give taxpayers more flexibility in managing their financial records and meeting tax obligations.
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Business-Friendly Taxation
For new businesses, the tax year will begin from the date of commencement and conclude at the end of the same financial year. This change aims to provide a more structured tax framework for startups and new ventures.
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Stricter Penalties for Tax Evasion
To curb tax evasion, the new bill introduces higher penalties, interest rates, and even property confiscation for non-compliant taxpayers. This measure is designed to ensure a fair and transparent tax environment.
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Tax-Free for Political Entities & Agricultural Sector
Under the new bill, political parties and electoral trusts will enjoy tax-free income, while agricultural income will remain exempt from taxation under certain conditions.
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Clear Guidelines for Digital Assets
A significant inclusion in the new tax framework is a well-defined set of rules for digital assets, covered under Sections 67 to 91. These guidelines aim to regulate taxation on cryptocurrencies, NFTs, and other digital investments.
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Tax Benefits on Charitable Donations
Donations to religious trusts and social welfare institutions will be eligible for tax exemptions, encouraging charitable contributions for societal development.
Implementation Timeline
The Income Tax Bill 2025 is expected to come into effect from April 1, 2026. The government will issue official notifications regarding the exact enforcement date of various provisions.
What’s Next?
With these sweeping reforms, the government aims to create a more transparent, efficient, and taxpayer-friendly system. While the bill brings many benefits, its impact will largely depend on its implementation and acceptance by the taxpayers and businesses.
Stay tuned for more updates as the bill progresses through Parliament!
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