Income Tax Bill 2025: No Changes to Existing Tax Rates
New Delhi: The Income Tax Department clarified on Tuesday that the Income Tax Bill, 2025, does not propose any changes to existing tax rates, including those related to long-term capital gains (LTCG). This statement comes in response to speculation that the bill, introduced earlier this year, aimed to alter tax structures.
“The Income Tax Bill, 2025 aims at language simplification and removal of redundant or obsolete provisions. It does not seek to change any rates of taxes,” the department stated in a post on X. They also assured that any ambiguity on the issue would be addressed during the bill’s passage in Parliament.
Parliamentary Panel Submits Report
The draft legislation, designed to replace the Income Tax Act of 1961, was introduced in the Lok Sabha in February and has since been referred to a Select Committee for a detailed examination. Chaired by BJP MP Baijayant Panda, the committee submitted its report on July 21, which included 285 recommendations.
Among these recommendations are the redrafting of key definitions such as “capital asset”, “parent company”, and “micro or small enterprise” to ensure they better reflect contemporary law. The panel has also proposed restoring certain deductions, including inter-corporate dividend exemptions, pre-construction interest on rented properties, and standard deductions for municipal taxes.
Relief for Small Taxpayers and Charities
To ease compliance, the committee has recommended penalty waivers for non-wilful non-compliance by small taxpayers, enhanced refund eligibility for late filers, and the restoration of the “deemed application” clause for charitable trusts. Additionally, the committee is pushing for the removal of residual references to the 1961 Act to make the new code more streamlined and resistant to litigation.
Implementation From FY26
The Finance Ministry is expected to incorporate most of the suggestions into the final version of the bill, which is likely to be passed during the ongoing Monsoon Session. Once enacted, the new law will come into effect from April 1, 2026, ushering in a modernized and simplified tax regime.
