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Income-Tax Bill, 2025: New ‘Tax Year’ Concept and Simplified Rules
The upcoming Income-Tax Bill, 2025, set to be introduced in Parliament, brings a major shift in how income tax is reported and assessed in India. The key highlight is the introduction of a new ‘tax year’ concept, replacing the existing assessment year system.
2/12/20251 min read
New ‘Tax Year’ Concept:
The tax year will now be a 12-month period starting April 1.
For new businesses or professions, the tax year will begin from the date of establishment and end with that financial year.
Income tax will now be based on actual economic activity in a tax year.
Simplified Tax Law:
The Bill uses crisper language, reducing its length from 823 pages to 622 pages.
Confusing provisos and explanations have been removed.
Income not forming part of taxable income has been moved to schedules for better clarity.
Salary deductions (like standard deduction, gratuity, and leave encashment) are now grouped together.
Stronger Rules for Digital Assets:
Virtual digital assets (like crypto) will now be included in tax searches as undisclosed income along with cash, bullion, and jewelry.
Updated Tax Reporting:
Terms like ‘financial year’ and ‘tax year’ will replace the assessment year system.
New rules for revenue recognition in service contracts and inventory valuation are included.
Next Steps
The Income-Tax Bill, 2025 has been cleared by the Cabinet and will be presented in Lok Sabha. It will go through a parliamentary committee before final approval.
The new Bill is part of an ongoing effort to simplify tax laws, reduce litigation, and make compliance easier for businesses and individuals.
Stay tuned for updates on how these changes might affect your tax filings