New Income Tax Bill 2025: Select Committee Reviews Key Changes in Parliament
The Select Committee of the Lok Sabha, chaired by BJP MP Baijayant Panda, met on Wednesday at the Parliament House Annexe to examine the Income Tax Bill 2025.
The 31-member committee, comprising Lok Sabha MPs, is reviewing the bill, which seeks to modernize and simplify India’s tax laws, introduce clearer definitions, and align tax policies with the current economic landscape.
Introduced in Lok Sabha on February 13 by Union Finance Minister Nirmala Sitharaman, the Income Tax Bill 2025 aims to replace the Income Tax Act, 1961, bringing significant changes for individuals, businesses, and non-profit organizations.
Following its introduction, the Finance Minister requested the Lok Sabha Speaker to nominate members for a standing committee to further review and refine the bill.
Key Changes in the Income Tax Bill 2025
The proposed Income Tax Bill 2025 brings several major revisions, including simplified language, modern definitions, and new tax clarifications.
📌 Key Updates in the New Bill:
✔️ Introduction of modern terminology – Replacing outdated tax terms.
✔️ Clarity on global income taxation – Updated rules for residents and non-residents.
✔️ Taxation framework for digital assets – Clearer tax rules for cryptocurrency and virtual digital assets.
✔️ Encouraging digital and startup investments – Tax benefits for new-age businesses.
✔️ Updated capital gains tax provisions – More transparent rules on short-term and long-term gains.
✔️ Stricter compliance framework for non-profits – Clearer tax exemptions and rules for charitable organizations.
💡 Key takeaway: The bill is designed to modernize tax policies, simplify compliance, and align India’s tax system with global financial trends.
1. Simplified Tax Language & Modern Terminology
One of the biggest changes in the Income Tax Bill 2025 is the introduction of simpler, more modern terminology, making tax laws easier to understand.
🔹 Key updates in terminology:
✔️ “Tax Year” replaces “Financial Year” and “Assessment Year”.
✔️ New definitions for “Virtual Digital Assets” and “Electronic Mode” – Covering digital payments and cryptocurrency transactions.
✔️ Explicit definition of “deemed income” – Providing more clarity on taxable income sources.
💡 Why it matters: These updates ensure that tax laws are more relevant to today’s economy and reduce confusion for taxpayers.
2. Clarity on Global Income Taxation
📌 Existing rule (Income Tax Act, 1961):
✔️ Indian residents are taxed on global income.
✔️ Non-residents are taxed only on income earned in India.
📌 New rule (Income Tax Bill 2025):
✔️ Clauses 5 and 9 retain the same global income taxation rule but introduce a clearer definition of deemed income, helping non-residents understand their tax obligations better.
💡 Why it matters: This update ensures greater transparency in taxation, reducing disputes and misinterpretations for individuals and businesses operating internationally.
3. Capital Gains Tax: Digital Assets Now Included
📌 Existing rule (Income Tax Act, 1961):
✔️ Sections 45 to 55A categorized capital gains as short-term or long-term, based on holding periods.
✔️ Special tax rates applied to securities and investments.
📌 New rule (Income Tax Bill 2025):
✔️ Clauses 67 to 91 retain the same short-term and long-term categorization.
✔️ Explicit tax provisions for virtual digital assets (VDAs), including cryptocurrency.
✔️ Updated beneficial tax rates for digital transactions and modern investments.
💡 Why it matters: With cryptocurrency and digital assets growing in importance, this ensures they are properly regulated under India’s tax laws.
4. Supporting Startups, Digital Businesses & Renewable Energy Investments
The Income Tax Bill 2025 introduces updated tax deductions to encourage investments in startups and digital businesses.
📌 Key updates:
✔️ Clauses 11 to 154 consolidate tax deductions, making it easier for businesses to claim benefits.
✔️ New provisions to support renewable energy investments, helping India transition to green energy solutions.
💡 Why it matters: These changes help boost innovation and sustainability, ensuring favorable tax conditions for new-age businesses.
5. Stricter Compliance & Tax Framework for Non-Profit Organizations
📌 Existing rule (Income Tax Act, 1961):
✔️ Sections 11 to 13 allowed tax exemptions for charitable organizations, but compliance guidelines were vague.
📌 New rule (Income Tax Bill 2025):
✔️ Clauses 332 to 355 introduce a detailed framework for non-profits, including:
✔️ Clear definitions of taxable income.
✔️ Updated compliance rules for charities.
✔️ Restrictions on commercial activities to prevent misuse of exemptions.
💡 Why it matters: These updates increase transparency and accountability in the non-profit sector while ensuring that genuine charities receive tax benefits.
6. Aiming for a Fair & Transparent Tax System
The Income Tax Bill 2025 is part of the government’s broader effort to:
✔️ Simplify tax compliance for individuals and businesses.
✔️ Make tax policies clearer and more modern.
✔️ Ensure fair taxation in digital, startup, and non-profit sectors.
📌 Government’s View:
The Finance Ministry believes these updates will make taxation easier for businesses, individuals, and organizations, creating a more predictable and investor-friendly environment.
💬 Finance Minister Nirmala Sitharaman’s vision:
“The new Income Tax Bill aims to modernize tax laws, provide clarity, and support India’s evolving economic landscape.”
Final Thoughts: A New Era for India’s Tax System?
With the Select Committee actively reviewing the Income Tax Bill 2025, key tax changes are on the horizon. The bill brings:
✔️ Modernized tax language for easier understanding.
✔️ Clearer global income taxation rules for residents and non-residents.
✔️ Updated capital gains tax provisions, including digital assets.
✔️ Better tax benefits for startups, digital businesses, and renewable energy.
✔️ Stronger compliance rules for non-profits to prevent misuse.
🚀 Will the new Income Tax Bill 2025 make taxation easier and fairer for all? Share your thoughts! 💭
