New Delhi: The New Income-Tax Bill 2025 marks a major step in the Centre’s ongoing effort to simplify and modernise India’s tax system. Building on a decade of reforms since 2014, the new law seeks to make tax compliance easier, fairer and more transparent for individuals, businesses and non-profit organisations alike. It reflects lessons learned from past experience, incorporates feedback from the Select Committee as well as stakeholders and addresses not only structural and policy-level changes but also small drafting improvements to make the law clearer and more consistent.Replacing the Income-tax Act of 1961 from April 1, 2026, the Bill brings together various reforms — ranging from corporate and personal income-tax changes to streamlined dispute resolution and more taxpayer-friendly procedures. It preserves the intent of earlier provisions where necessary but presents them in simpler, better-organised language. The aim is to create a tax law that supports voluntary compliance, reduces unnecessary litigation, and keeps pace with the needs of a modern economy, while ensuring fairness and clarity for all taxpayers.Official known to the matter told ETV Bharat that the Income-tax Bill, 2025, passed by the Lok Sabha, introduces a host of changes aimed at making the law simpler, fairer, and easier to navigate. Companies that opt for the new tax regime will now also be entitled to claim deductions under what was earlier Section 80M of the 1961 Act.Families will benefit from fresh provisions allowing deductions for commuted pension and gratuity. The Bill also brings clarity to the rules on Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) by separating them into distinct parts. Importantly, AMT will now apply only to non-corporate taxpayers who claim deductions, with LLPs that earn only capital gains income spared if they make no such claims. Professionals with annual receipts exceeding 50 crore Rupees will also be able to use prescribed electronic payment modes, aligning tax rules with modern business practices.
He also added that several changes are designed to give taxpayers greater flexibility and ease of compliance. For example, refund claims will now be possible even when returns are filed after the due date, thanks to the removal of earlier restrictions. The rules on carrying forward and setting off losses have been reworded for better understanding, without altering their intent. In a shift towards consistency, the concept of receipt has been replaced with income, as it was under the earlier Income-tax Act of 1961.According to the senior income tax official the Bill also carries significant updates for the non-profit sector. For registered organisations, reinvesting capital gains in new assets will continue to be treated as application of income, and if the 85% application requirement is not met due to late or non-receipt of income, that income can now be counted in the year it is actually received. Tax rules for anonymous donations have been brought in line with earlier provisions, and exemptions have been extended to mixed-object non-profits, which are now clearly defined in the law. The earlier requirement to invest 15% of accumulated income in specified modes has been done away with, offering more flexibility in managing funds.In addition, compliance processes have been made more efficient. The window for filing TDS correction statements has been reduced from six years to two, which is expected to help resolve deductees’ grievances faster. The Bill also consolidates the changes introduced through the Finance Act, 2025, and the Taxation Laws (Amendment) Bill, 2025, ensuring that all recent policy updates are embedded within the new law. From April 1, 2026, the Income-tax Bill, 2025, will replace the Income-tax Act, 1961—marking the beginning of a more streamlined and modern tax regime, the official added.In addition, suggestions have been received from stakeholders about changes that would convey the proposed legal meaning more accurately. There are corrections in the nature of drafting, alignment of phrases, consequential changes and cross-referencing. Therefore, a decision has been taken by the Government to withdraw the Income-tax Bill, 2025 as reported by the Select Committee. Consequently, Income-tax (No. 2) Bill, 2025 was introduced and passed in the Lok Sabha on August 11, 2025. This Bill will replace the Income-tax Act, 1961 from April 1, 2026.