New Income Tax Bill to be tabled today: Here’s what you can expect

The new Income Tax Bill is set to be tabled in Parliament today. If approved, it will replace the existing Income Tax Act of 1961 and is expected to come into effect on April 1, 2026. The bill aims to simplify tax laws, remove outdated provisions, and make compliance easier for taxpayers.

Tax experts believe that the new bill will not introduce new taxes or change tax rates. Instead, its focus is on making tax laws easier to understand and reducing disputes.

Munjal Almoula, Head of Tax at BDO India, said, “The objective of the new tax bill is to remove unnecessary provisions and simplify the language of the tax law to make it easier to understand. I do not expect any additional tax burden on taxpayers through the new tax bill.”

KEY CHANGES EXPECTED IN THE NEW TAX BILL

Shorter and simpler tax law

The current Income Tax Act has 52 chapters and 1,647 pages. The new bill is expected to be much shorter, with only 23 chapters and 622 pages. This will remove unnecessary sections and make it easier to understand.

Introduction of ‘Tax Year’

One of the major changes in the new bill is the introduction of the term ‘Tax Year’.

Currently, the financial year (April to March) is used to calculate income tax, while the assessment year is the year in which tax returns are assessed. The new bill will remove this confusion and introduce a single ‘Tax Year’ concept.

Rohinton Sidhwa, Partner, Deloitte India, said, “By replacing complex provisions with clearer provisions, it aims to reduce legal disputes and encourage voluntary tax compliance. A notable change introduced by the bill is the shift from the ‘Assessment Year’ to the ‘Tax Year.’

For businesses or professionals who start during the year, the tax year will begin from:

The date of setting up the business or profession, or
The date a new source of income begins

No change in residency rules

The rules that define whether a person is a resident, non-resident, or not ordinarily resident in India will remain the same. Tax expert CA Dr Suresh Surana explained, “There is no change in how residential status is determined. The new bill only rephrases existing provisions and replaces ‘previous year’ with ‘Tax Year’.”

New Tax Slabs

The bill proposes a new tax regime with the following tax rates:

Up to Rs 4,00,000: No tax
Rs 4,00,001 to Rs 8,00,000: 5%
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%

The Budget 2025-26 has also introduced a tax rebate for individuals earning up to Rs 12 lakh annually.

No change in Income Tax heads

The five heads under which income is classified for tax purposes will remain unchanged:

Salaries
Income from house property
Profits and gains from business or profession
Capital gains
Income from other sources

Changes in salary deductions

The bill proposes changes in deductions for salaried individuals:

Standard Deduction: Rs 50,000 or salary amount, whichever is lower
Employment Tax: Fully deductible
Gratuity Deduction:
Gratuity under the Payment of Gratuity Act, 1972: Fully deductible
Retiring gratuity for defence service members: Fully deductible
Death-cum-retirement gratuity: Fully deductible
Other gratuity on retirement/termination: Deduction up to Rs 75,000 or salary amount, whichever is lower

Pension and compensation

Pension commutation: Fully deductible for pensioners from government, defence, and civil services
Compensation on retrenchment: Deductible up to Rs 50,000 or as per Section 25F(b) of the Industrial Disputes Act, 1947
Voluntary retirement payments: Deductible up to Rs 5,00,000

No change in ITR filing deadlines

The government has not made any changes to tax return filing deadlines, tax slabs, or capital gains tax rules.