With an aim to simplify the tax process and provide relief to taxpayers, the Government of India has brought major changes in the Income Tax Act for the financial year 2025–26 (Assessment Year 2026–27). The Income Tax Bill 2025, which replaced the old Income Tax Act of 1961, has included some reforms. Let's see what they are

Revised Income Tax Slabs under the New Tax Regime

Revised Slabs :

• Up to ₹4,00,000: None
• ₹4,00,001 to ₹8,00,000: 5%
• ₹8,00,001 to ₹12,00,000: 10%
• ₹12,00,001 to ₹16,00,000: 15%
• ₹16,00,001 to ₹20,00,000: 20%
• ₹20,00,001 to ₹24,00,000: 25%
• Above ₹24,00,000: 30%

These changes are aimed at increasing the disposable income of the people and stimulating economic growth.

Basic deduction limit increased

The basic deduction limit under the new tax regime has been increased from ₹3 lakh to ₹4 lakh, providing relief to low-income earners by exempting them from tax.

Enhanced standard deduction

Salaried individuals and pensioners can now claim a standard deduction of ₹75,000 under the new tax regime. Earlier, it was ₹50,000.

Rebate under Section 87A increased

The rebate under Section 87A for taxpayers with income up to Rs 7 lakh has been increased from ₹25,000 to ₹60,000, effectively making their tax liability zero.

New tax regime made default

The new tax regime will now be the default option for taxpayers. However, individuals can opt for the old tax regime if they wish.

Simplification of tax laws

The Income Tax Bill, 2025 seeks to simplify tax laws by reducing the number of chapters from 52 to 23 and the number of pages from 823 to 622. This makes the law more concise and easier to understand.

Sections 206AB and 206CCA deleted

In order to reduce the compliance burden on tax deductors and collectors, sections 206AB and 206CCA, which mandated higher TDS and TCS rates for non-filers, have been deleted.

Simplified residential status rules

The Direct Taxes Code, 2025 simplifies the rules for determining the residential status of an individual and reduces ambiguity and litigation.

Uniform Corporate Tax Rates

The new code proposes uniform tax rates aimed at simplifying the corporate tax structure and making it easier to do business.

Elimination of concepts of 'assessment year' and 'previous year'

The traditional concepts of 'assessment year' and 'previous year' have been removed to simplify tax calculations and filings.

Capital Gains Tax Revised

The Direct Tax Code 2025 introduces new methods for calculating capital gains with an aim to streamline and modernize taxation of investments.

Improved access to digital records

Tax authorities have been given broad powers to access taxpayers' digital records, including emails, social media and cloud storage, during investigations.

PAN-Aadhaar linking mandatory

Failure to link PAN with Aadhaar will result in suspension of dividend payouts. Therefore, it emphasizes the importance of complying with this law.

Removal of obsolete provisions

The new tax bill has removed unnecessary and obsolete provisions of the previous law with the aim of reducing litigation and increasing clarity.

Focus on digital compliance

The reforms promote digital compliance, focusing on online filings and communications to streamline processes and reduce paperwork.

The Income Tax Bill 2025 is a major change towards a more efficient and taxpayer-friendly system. Its significance is that by simplifying tax rules, adjusting slabs, and increasing digital compliance, it will make tax filing more accessible and easier for individuals and businesses alike.