New Income Tax Bill 2025 Vs. Old Income Tax Act 1961

New Income Tax Bill 2025 Vs. Old Income Tax Act 1961

There are considerable changes in the New Income Tax Bill 2025 and the old Income Tax Act of 1961. Please read the following points to understand what exactly those changes are and how the new and old bills differ:

1. Tax Year

As per Clause 2, a new term has been added to the New Bill. i.e. Tax Year. Tax Year is defined as a ‘Financial year beginning on the 1st day of April and ending on the 31st day of March of the following year’. The newly added term replaces the old terms like ‘previous year’ or ‘assessment year’ that were mentioned in the old Income Tax Act of 1961.

2. Residential Status

According to Section 6 of the new bill, an expression concerning individuals who leave for employment purposes has been changed from ‘for the purpose of employment’ to ‘for employment outside India’. This has been done to increase clarity in statements.

3. Taxation Of NGOs/NPOs

A new and unified taxation system has been devised for Non-Profit Organisations (NPOs), and Non-Government Organisations (NGOs). The new taxation system comprises over 20 provisions that cover all the essential requirements ranging from application for registration to taxation of income.

Non-Profit Organisations (NPOs) replace the word ‘trusts’ used in the old act and the new taxation system is expected to prove to be effective for the taxation of NGOs/NPOs.

4. Salary Deductions

In the Old Act, entertainment allowance used to be deducted from the salaries of the govt employees but under the New Bill, this has been removed.

5. Business’s Income

In the Old Act, there were several different sections like Section 30 for deductions for revenue expenses of a business entity and Section 31 for deductions for repairs, and insurances of machinery, plant, or furniture. In the New Bill, these sections have been combined for fair deductions.

6. Capital Gains

As per the old Income Tax Act of 1961, Section 47 was dedicated to a list of transactions exempted from transfers of land for capital gain. However, in the New Bill, these clauses have been removed.

7. Income From Other Sources

In the Old Act, gifts received from lineal ascendants/descendants were free from taxation but there was no clarity regarding the relationships being maternal/paternal. The New Act has mentioned that lineal ascendants/descendants can be maternal or paternal.

8. Clubbing Of Income

Previously, in order to club spouse’s income, technical or professional qualifications were mandated but now, this rule has been removed.

9. Deductions & Relief

In the Old Act, deductions were not mentioned in an organised manner but the New Bill 2025 has proposed to merge the sections of deductions. i.e. Sections 80TTA and 80TTB in one category, Section 80C will now be in Schedule 15.

10. Tax Rates

Under the new system freedom has been valued and hence, domestic companies and resident cooperative societies are now allowed to choose the alternative tax regime. Also, the Central Board of Direct Taxes (CBDT) has been given the authority to oversee several functions.

11. TDS & TCS

The New Income Tax Bill has expanded the coverage limit of Tax Deducted at Source (TDS) and Tax Collected at Source (TDC).

12. Penalties & Prosecution

The New Income Tax Bill has removed the requirement of mandatory hearings for some kind of penalties. The bill also proposed that prosecution under clause 476 should be a non-cognisable offence.

13. Search & Seizure

In the Old Act, when it comes to search and seizure, the focus was limited to physical books and documents but now under the New Bill, the focus area has been expanded to digital media as well.