By CA Hatim Rampurawala | Published: Jan 11, 2026
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Income-tax Bill, 2025 – Detailed Summary of FAQs
The Income-tax Bill, 2025 is primarily a simplification and consolidation exercise rather than a policy reform. The Government has clarified through multiple FAQs that the objective of the Bill is to make the income-tax law easier to read, easier to comply with, and less litigation-prone, while retaining the same tax principles, rates, and incidence as under the Income-tax Act, 1961 (as amended by Finance Act, 2025).
1. Structural Simplification and Key Concepts
Introduction of “Tax Year”
The Bill introduces the concept of a “tax year”, replacing the term “previous year” and eliminating the concept of “assessment year”.
- A tax year is a 12-month period aligned with the financial year.
- All references to income computation, tax rates, and assessment now relate to the same tax year.
- This removes confusion caused by the coexistence of two different years under the earlier law.
A tax year may be shorter than a financial year in cases such as:
- Newly set-up businesses
- New sources of income arising during the year
Why “Financial Year” Continues
The term financial year continues for procedural and compliance-related purposes such as due dates, time limits, and administrative actions. It is defined under the General Clauses Act, 1897.
2. Charging of Income-tax
There is no change in the charging principle.
Earlier, tax was charged on the total income of the previous year for the assessment year. Under the new Bill, tax is charged on the total income of the tax year itself.
The charging section has been rewritten into shorter and clearer sub-sections to improve readability.
3. Exemptions (Earlier Section 10)
Major Restructuring
Section 10 of the Income-tax Act, 1961 had nearly 140 clauses along with numerous provisos and explanations, making it difficult to comprehend.
Under the new Bill:
- All exemption provisions are moved to six separate Schedules
- Each Schedule is category-specific
- Exemptions are presented in a tabular format showing income, eligible persons, and conditions
Impact
- Over 90 explanations and 134 provisos removed
- Word count reduced from approximately 30,000 to 13,500
- Sunset clauses omitted
- Past exemptions protected through saving clauses
4. Salary and Income from House Property
Salary
The salary chapter has been drafted so that a salaried taxpayer can understand and comply without professional help.
- All salary-related provisions consolidated
- Clear explanation of perquisites, profits in lieu of salary, and standard deduction
- Legal jargon minimized
- Redundant provisions removed
House Property
Minimal changes have been made as the existing provisions were already simple and widely understood. The restructuring focuses mainly on clarity and presentation.
5. Profits and Gains of Business or Profession (PGBP)
This chapter has undergone extensive restructuring without altering tax policy.
- Sections reduced from 65 to 41
- Word count reduced by more than 50%
- Logical sequencing of provisions
- Similar provisions merged
- Tables and formulas introduced for complex concepts
Key areas clarified include depreciation, actual cost, written-down value, bad debts, scientific research expenditure, deferred expenditure, and presumptive taxation.
No change has been made to rates, eligibility, or timing of deductions.
6. Clubbing of Income
There is no change in the incidence or scope of clubbing provisions.
However, language has been simplified, redundancies removed, and formulas introduced to bring certainty and ease of computation.
7. Deeming Provisions (Unexplained Income)
Provisions relating to unexplained income have been reorganized and simplified.
The term “cash credits” has been replaced with “unexplained credits” to reflect the true nature of the provision.
Applicable tax rates have been specified within the chapter itself to reduce disputes.
8. Set-off and Carry-forward of Losses
Obsolete and transitional provisions have been removed. Budget 2025 amendments have been incorporated without affecting taxpayer rights.
9. Chapter VIA Deductions
Deductions such as 80C, 80D, 80TTA/80TTB, 80G, startup incentives, and IFSC benefits continue unchanged.
Provisos and explanations have been merged into main sections, while detailed lists are placed in Schedules for better readability.
10. Advance Tax, Refunds, and Interest
No policy changes have been made.
- Separate sections for voluntary payment and AO-directed payment
- Clear formulas for interest computation
- Tables specifying start date, end date, and base amount
11. Special Rate Taxation and New Tax Regime
Taxpayers who have already opted for the new tax regime need not opt again.
Budget 2025 slab changes are incorporated. No change has been made to rates or eligibility conditions.
12. Double Taxation Avoidance Agreements (DTAA)
The Bill clarifies the interpretation of undefined treaty terms through a clear hierarchy:
- Treaty definition
- Definition under the Act
- Government notification
- Other central tax laws
This provides certainty and aligns with international tax practices.
13. Tonnage Tax
No substantive changes have been made. Provisions have been reorganized for clarity and Budget 2025 changes included.
14. Tax Administration
Roles of tax authorities have been clearly defined. Chapters have been merged to reduce duplication, and faceless procedures continue.
15. Offences and Prosecution
There is no increase in punishment and no new offences have been introduced.
16. Assessment and Reassessment
Time limits and procedures have been converted into tables. Faceless assessment provisions have been simplified. No major policy changes have been made.
17. Return of Income
All categories of assessees required to file returns are listed in one place. Due dates remain unchanged, and provisions for belated, revised, and updated returns continue.
18. TDS and TCS
One of the most significant simplifications under the Bill.
- 69 sections consolidated into 2 main sections
- Rates, thresholds, and conditions presented in tables
- Separate sections for certificates, compliance, defaults, and processing
There is no change in TDS/TCS rates or threshold limits.
Conclusion
The Income-tax Bill, 2025 is a comprehensive simplification initiative rather than a tax reform. It preserves existing tax policy while improving clarity, structure, and ease of compliance, making the law more accessible for taxpayers.
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