Aiming to streamline the legislation, Finance Minister Nirmala Sitharaman presented the Income Tax Bill 2025 in the Lok Sabha. This new law will replace the outdated and complicated Income Tax Act of 1961. The government wants the new law to make it simpler for taxpayers to follow the guidelines and grasp the policies, therefore bringing efficiency and openness to the tax system.
Though it takes time to become law, taxpayers must be ready for the changes once the new tax bill is adopted. Forming a select committee on this measure, the administration has agreed to have its report turned in on the first day of the following session. The select committee has received the measure. Consequently, taxpayers must wait patiently for the revisions and monitor further developments.
Section 80C of the Income Tax is not something any taxpayer may be ignorant of nowadays, as shown in paragraph 123. Under this area are equity-linked saving schemes (ELSS), public provident funds (PPF), life insurance premiums, the National Pension System (NPS), and other tax-saving deposits. Exemption of up to Rs 1.5 lakh is thus possible.
The revised bill grants this exception under Section 123. The new bill provides such deductions under section 123. The measure states, “Any individual or a Hindu Undivided Family (HUF) shall be entitled to get a deduction of the entire amount paid or deposited in that tax year.” However, this sum will be limited to Rs 150,000.
Section 123 included in the new income tax bill will be identical to Section 80C of the current Income Tax Act, 1961, said Mayank Mohanka, founder-director of tax consultation company TaxAaram.com. It should be read in line with Schedule XV, which provides comprehensive details on the tax exemption granted under section 80C.
The new Income Tax Bill 2025, which aims to streamline the tax system, will take effect on April 1, 2026. The measure eliminates needless exemptions and lowers the eight thousand tax sections from 819 to five hundred six. The bill’s word count has also dropped from 5 lakhs to 2.5 lakhs, simplifying understanding. “Tax Year” will take centre stage instead of “Assessment Year.”. April 1, 2026, will see the new law take effect. Its goals are to simplify and maximize the tax code.
Following the Lok Sabha introduction, the Parliamentary Standing Committee on Finance will discuss the new law further. The measure will not alter the current tax slabs or lower the tax exemptions given. Rather, the new law seeks to make the six-decade-old legislation fit for the present.
