New Income Tax Bill 2025 will simplify ‘tax year’ definition

This week, the new income tax bill will be introduced in Lok Sabha 2025, received the approval of the cabinet and is ready to make significant changes within India’s tax.

One of the main updates is the replacement of the term “assessment year” in “Taxation”, aims to simplify the taxpayer understanding.

According to the bill, the “Tax Year” will be set as a 12-month period, which starts on April 1. For the newly established business or new sources of income, the tax annivers will begin from the date of setting or the creation of income and ends on the further March 31.

This change is expected to provide clarity and revealing tax calculations for individuals and business.

The proposed legislation, 622 pages, seeks to replace the Old Tax Act of six decades of six decades in 1961. After passing it, it will be announced as a law on income tax, and 2025 is expected to come into force on April 1 2026. The bill aims to modernize the Indian tax system, making it more in line with modern economic realities.

Minister of Finance Nirala Sitarama announced the introduction of this bill at the July Budget session last year, emphasizing its importance to the simplification of tax compliance and promoting more taxpayers. The transfer is seen as a significant step towards India’s tax infrastructure, providing greater transparency and understanding for the taxpayers of the republic.

With these changes, the government aims to reduce complications and create a more effective tax regime, paving the way for a smooth financial ecosystem.