Summary of The Income-Tax Bill, 2025

Overview

- Purpose: To consolidate and amend the law relating to income-tax.

- Enactment: Introduced in Lok Sabha as Bill No. 24 of 2025.

- Applicability: Extends to the whole of India.

- Effective Date: Comes into force on April 1, 2026, unless otherwise specified.

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Key Definitions

| Term | Definition |

|-------------------------------|---------------------------------------------------------------------------------------------------|

| Assessee | A person liable to pay tax or whose income is assessed under this Act. |

| Resident | A person who qualifies as a resident in India under Section 6. |

| Capital Asset | Includes property of any kind held by an assessee, except certain exclusions. |

| Perquisite | Benefits or amenities provided by an employer to an employee, either free or at a concessional rate. |

| Short-term Capital Asset | A capital asset held for not more than 24 months (12 months for listed securities). |

| Long-term Capital Asset | Any capital asset that is not a short-term capital asset. |

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Structure of the Bill

The Bill is divided into chapters and clauses, covering various aspects of income-tax. Below is a high-level breakdown:

Preliminary

- Clauses 1–3: Defines the scope, applicability, and key terms like "tax year."

Basis of Charge

- Clauses 4–10: Outlines how income-tax is charged, including:

- Scope of total income.

- Rules for residency in India.

- Deemed income (e.g., income from capital assets received from specified entities).

Incomes Not Included in Total Income

- Clauses 11–12: Specifies incomes excluded from total income, such as:

- Agricultural income.

- Income of political parties and electoral trusts (subject to conditions).

Computation of Total Income

Income is classified under five heads:

1. Salaries

- Includes perquisites, profits in lieu of salary, and deductions (e.g., standard deduction, gratuity).

2. Income from House Property

- Annual value of property is taxable, with deductions for taxes paid.

3. Profits and Gains of Business or Profession

- Deductions allowed for expenses like rent, repairs, insurance, and employee welfare contributions.

4. Capital Gains

- Taxable on transfer of capital assets, with exemptions for reinvestment in certain cases.

5. Income from Other Sources

- Includes dividends, interest, and other residual incomes.

Special Provisions

- Clauses 96–105: Covers income of other persons included in the assessee's total income (e.g., spouse, minor child).

- Clauses 158–177: Includes provisions for double taxation relief, avoidance of tax through international transactions, and General Anti-Avoidance Rules (GAAR).

Assessment and Recovery

- Clauses 270–301: Details procedures for assessment, reassessment, and recovery of tax.

- Clauses 390–394: Discusses tax deduction at source (TDS) and collection at source (TCS).

Appeals and Dispute Resolution

- Clauses 365–389: Outlines mechanisms for appeals to higher authorities, including the High Court and Supreme Court.

- Includes provisions for advance rulings and dispute resolution committees.

Miscellaneous

- Clauses 499–536: Covers miscellaneous topics such as:

- Avoidance of repetitive appeals.

- Power to make rules and issue notifications.

- Repeal of old provisions and savings.

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Key Highlights

Exemptions and Deductions

- Exempt Incomes: Specified in Schedules II to VIII (e.g., agricultural income, income of charitable institutions).

- Deductions Allowed:

- Standard deduction for salaried individuals (₹75,000 or ₹50,000, depending on the case).

- Contributions to provident funds, gratuity funds, and pension schemes.

- Insurance premiums and repairs for business assets.

Taxation of Perquisites

- Includes benefits like rent-free accommodation, concessional loans, and stock options.

- Valuation methods prescribed for determining taxable perquisites.

Special Provisions for Certain Entities

- Political Parties and Electoral Trusts: Income exempt if conditions are met.

- Shipping Companies: Eligible for tonnage tax scheme.

- Non-Profit Organizations: Taxed on specific income streams (e.g., regular income, accumulated income).

Anti-Avoidance Measures

- General Anti-Avoidance Rule (GAAR): Applicable to impermissible avoidance arrangements.

- Transfer Pricing: Requires arm’s length pricing for international and specified domestic transactions.

Digital Assets

- Crypto-assets: Defined broadly to include digital representations of value, non-fungible tokens (NFTs), and other digital assets.

- Taxable under specific provisions.

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Important Dates

| Event | Date |

|------------------------------------|--------------------|

| Introduction in Lok Sabha | 2025 |

| Effective Date | April 1, 2026 |

| Deadline for Issuing Guidelines | April 1, 2028 |

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Schedules

The Bill includes multiple schedules that provide detailed rules and exemptions:

- Schedule II–VIII: Lists incomes exempt from tax and conditions for exemption.

- Schedule IX–XVI: Contains additional provisions, such as rates of depreciation and rules for specific entities.

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The Income-Tax Bill, 2025, aims to modernize and streamline India’s tax framework. It introduces new provisions for digital assets, strengthens anti-avoidance measures, and simplifies compliance for taxpayers. The structured approach ensures clarity and fairness in tax administration.

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