Income-tax Act, 2025
| Income-tax Act, 2025 | |
|---|---|
 | |
| Parliament of India | |
| |
| Territorial extent | India |
| Considered by | Parliament of India |
| Passed | 11 August 2025 (Lok Sabha) 12 August 2025 (Rajya Sabha) |
| Legislative history | |
| Bill title | Income-tax (No. 2) Bill, 2025 |
| Bill citation | Bill No. 104 of 2025 |
| Introduced by | Nirmala Sitharaman Minister of Finance, Minister of Corporate Affairs |
| Introduced | 11 August 2025 |
| Status: Pending assent | |
The Income-tax Act, 2025 is the charging statute of income tax in India. It contains 536 sections across 23 chapters and 16 schedules, aiming to modernise the country’s direct tax system, simplify compliance, and reduce litigation.[1]
The revised bill was tabled on 11 August 2025 following the withdrawal of an earlier version introduced in February 2025, and will become law upon receiving Presidential assent on TBD.
Background and timeline
The Ministry of Finance announced a comprehensive overhaul of the Income-tax Act, 1961, citing the need for simplification after over six decades of amendments.[2]
The original Income-tax Bill, 2025 was introduced in the Lok Sabha on 13 February 2025 and referred to a Select Committee chaired by MP Baijayant Panda.[3] The committee submitted over 285 recommendations, of which 32 were considered significant. Based on this feedback, the government withdrew the bill on 8 August 2025 and introduced a revised version three days later.
Timeline
- 13 February 2025, Income-tax bill, 2025 was introduced in Lok Sabha, the lower house of the Parliament of India and was sent to select committee.
- 21 July 2025: The select committee has submitted its report to the parliament.
- 8 August 2025: the Income-tax bill, 2025 was withdrawn in Lok Sabha.
- 11 August 2025: the Income-tax (No.2) bill, 2025, was introduced and passed by Lok Sabha.[4]
- 12 August 2025: the Income-tax (No.2) bill, 2025, was introduced and passed by Rajya Sabha.
Key provisions
Major features of the Act include:
- Streamlining the tax process by replacing the complicated distinction between the “Assessment Year” and “Previous Year” with a single, unified “Tax Year” concept.[5]
- Retention of a ₹12 lakh annual basic exemption limit with revised tax slabs to benefit middle-income groups.[6]
- Reduction of total sections from over 800 in the 1961 Act to 536.
- Digital-first, faceless assessment procedures to reduce human interface and curb corruption.
- Clarification on standard deduction for house property and pre-construction interest for home loan borrowers.
- Full deduction of commuted lump-sum pension from specified pension schemes.
- Provision for faster refunds post income-tax return deadlines, and requirement for prior notice before enforcement.
- Restrictions on anonymous donations to certain religious trusts.
- The Act expands the definition of "undisclosed income", which included money, bullion, jewellery, or other valuable articles, to include virtual digital assets.
Structure overview
The Act is divided into 23 chapters covering topics from preliminary definitions to miscellaneous provisions, and includes 16 schedules on exemptions, deductions, and procedural rules.
See also
References
- ^ "The Income-tax (No. 2) Bill, 2025" (PDF). Parliament of India. Retrieved 2025-08-11.
- ^ "FM Nirmala Sitharaman tables revised Income Tax Bill in Lok Sabha". The Financial Express. 2025-08-11. Retrieved 2025-08-11.
- ^ "New Income Tax Bill 2025: Key changes you need to know". The Times of India. 2025-02-19. Retrieved 2025-08-11.
- ^ "FM Nirmala Sitharaman tables revised Income Tax Bill, 2025 in Lok Sabha – Key updates you need to know". The Financial Express. 2025-08-11. Retrieved 2025-08-11.
- ^ "Why the Income Tax Bill 2025 replaces Assessment Year with Tax Year". Financial Express. 2025-02-17. Retrieved 2025-08-11.
- ^ "Income Tax Bill 2025: What changes for you". The Economic Times. 2025-08-12. Retrieved 2025-08-11.