Income Tax Bill, 2025 to replace Income Tax Act, 1961: Key Changes

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Finance Minister Nirmala Sitharaman has presented the new Income Tax Bill 2025 in Parliament today, February 13, 2025. This presentation marks a significant step in reforming India’s direct tax system.

Key Features of the Bill

The Income Tax Bill 2025 is designed to replace to the six-decade old Income Tax Act, 1961, with the goal of making direct taxes simpler.

Simplification and Structural Overhaul:

The idea is to get rid of old, confusing parts of the law and make the language easier to understand. Currently, the tax law has 298 sections and 14 schedules, but the new bill aims to shorten this considerably. The new bill is a substantial document at 622 pages, but it’s expected to cut down the number of sections by about 25-30%. This should make it easier for taxpayers to understand the rules and follow them.

Introduction of ‘Tax Year’ Concept:

One key change is the introduction of the term “Tax Year,” replacing “Assessment Year” and “Previous Year.” This aligns India’s tax system with the financial year and international practices.

This change is aimed at simplifying tax compliance and reducing ambiguities in filing returns, aligning with best global practices.

No Change in Tax Rates and Slabs:

The bill does not propose changes to existing tax rates or slabs. The current categories of tax heads including salaries, house property, and capital gains remain unchanged.

Emphasis on Digital Transactions:

The bill strongly promotes digital transactions. It includes provisions for easier electronic record-keeping and tax filing, reflecting the global shift towards digital finance. Virtual Digital Assets (VDAs), such as cryptocurrencies, are now recognized and taxed like other assets.

Residency Criteria with clearer Guidelines:

Under Section 6 of the 1961 Act, an individual was considered a resident of India if they stayed in the country for 182 days in a financial year or 60 days in specific cases. However, Clause 6 of the Bill retains these broad parameters but has brought forth refined provisions for individuals with multiple citizenships or complex residency situations. This change provides greater transparency and eliminates loopholes that were often exploited in international tax planning.

Revised Heads of Income and Deductions

Traditionally, income has been classified into five heads – Salaries, House Property, Business/Profession, Capital Gains, and Other Sources, all of which remains in the new bill. However, Clauses 13 to 59 expand these categories to explicitly include income from virtual assets, digital businesses, and online earnings.

The revisions modernize income classifications while ensuring that new-age revenue streams are properly accounted for under tax laws.

Capital Gains and other deductions Overhaul

The 1961 Act offered various deductions and exemptions under Sections 10 and 80C to 80U, covering investments, donations, and other expenses.

The 2025 Bill, through Clauses 11 to 154, consolidates these deductions and introduces new provisions benefiting startups, digital businesses, and renewable energy investments. Additionally, the standard deduction for salaried individuals has been increased to ₹75,000, providing significant relief to middle-income taxpayers.

The taxation of capital gains, previously covered under Sections 45 to 55A, remains largely intact in the new bill but is dealt with key refinements. Clauses 67 to 91 introduce specific provisions for virtual digital assets (VDAs) and update holding period thresholds for certain asset classes.

Modern investment instruments such as cryptocurrencies and digital securities are also slated to be accommodated within the new provisions by means of these inclusions.

Automation and Faceless Assessments

.Previously, tax administration under Sections 139 to 158 relied heavily on manual processes for return filing, audits, and assessments. The new bill, in Clauses 263 to 389, mandates e-filing, faceless assessments, and automated taxpayer interactions, reducing human intervention and increasing transparency.

Business Thresholds for Presumptive Taxation:

For businesses, the threshold for the presumptive tax scheme is proposed to be increased. Businesses with a turnover of up to ₹3 crore can now opt for this scheme, up from the previous limit of ₹2 crore. The threshold for professionals has also been raised from ₹50 lakh to ₹75 lakh.

Tax Audits and Compliance:

Regarding tax audits, Chartered Accountants (CAs) will continue to be the primary professionals responsible. The bill does not include Company Secretaries (CSs) or Cost Accountants (CMAs) in this role. The emphasis on digital processes and reduced direct interaction aims to improve compliance and lessen the risk of harassment for taxpayers.

Stricter Compliance

The General Anti-Avoidance Rules (GAAR) that had a limited scope under Sections 95 to 102 of the Income Tax Act, 1961 have been significantly strengthened in the new bill. Clauses 178 to 184 provide for broader GAAR coverage, stricter scrutiny of impermissible tax arrangements, transactions lacking commercial substance and enhanced measures against tax evasion.

Non-Profit Organizations

While Sections 11 to 13 of the Income Tax Act, 1961 Act provided tax exemptions for non-profit entities, they lacked detailed compliance measures. Clauses 332 to 355 in the new bill introduce a comprehensive regulatory framework that imposes stricter compliance and reporting requirements to prevent misuse of tax benefits.

Dispute Resolution Mechanism

Under the 1961 Act, taxpayers had access to a Dispute Resolution Panel (DRP ) under Section 144C, mainly for foreign companies. The 2025 Bill, through Clause 275, expands the DRP’s scope and introduces a Dispute Resolution Committee (DRC ) under Clause 379, catering specifically to small and medium taxpayers for quicker and more efficient dispute resolution.

Speedy Redressal

Clauses 268 to 296 of the new bill gives tax officers expanded powers to request asset and liability statements, introduces faceless scrutiny through Clause 273, and shortens reassessment timelines by means of Clauses 279 to 285.

The appellate process has also been streamlined, with first appeals now allowed at the Joint Commissioner level (Clause 356), while the ITAT and High Court procedures (Clauses 362-365) have been simplified for efficiency. A new Board for Advance Rulings has also been introduced through Clause 381 to improve tax predictability for businesses.

Implications for Taxpayers

The immense changes introduced through the Income Tax Bill, 2025 aims to streamline taxation, eliminate ambiguities, and promote compliance through automation, digital inclusion, and modernized tax rules.

The introduction of faceless assessments, expanded digital income classifications, and stricter anti-evasion measures paves the way for India’s tax system to navigate through the next phase of economic growth.

Process and Implementation

After it’s introduced, committees will review it. It will go to the Standing Committee on Finance for their suggestions, and then the cabinet will review it again before it goes back to Parliament for a final vote. The plan is for the new law to take effect on April 1, 2026, which is the beginning of the new financial year.

Major Reform

 This new bill is part of a bigger effort to update tax laws, lessen the amount of legal disputes over taxes, and make the tax rules clearer.

The introduction and later implementation of the 2025 Income Tax Bill is a major change to how taxes work in India. The goal is to make tax laws more transparent and simpler, while also adapting to the current economic situation.

Tax Audit Report due date extended to 07-October-2024

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Considering the difficulties faced by taxpayers in electronic filing of various audit reports under the Income Tax Act, the deadline is being extended from September 30 to October 7.
CBDT has extended the specified date of furnishing of Tax Audit Report under any provision of the Act for the Financial Year 2023-24, which was 30th September, 2024 to 07th October, 2024.
 
The reason behind the extension is because of difficulties faced by the taxpayers and other stakeholders in the electronic filing of various reports.
 
In its latest report, CBDT said, “On consideration of difficulties faced by the taxpayers and other stakeholders in electronic filing of various reports of audit under the provisions of the Income-tax Act,1961 (Act), the Central Board of Direct Taxes (CBDT), in the exercise of its powers under Section 119 of the Act, extends the specified date of furnishing of report of audit under any provision of the Act for the Previous Year 2023-24, which was 30th September, 2024 in the case of assessees referred in clause (a) of Explanation 2 to sub-section (1) of section 139 of the Act, to 071h October, 2024.”
 
Tax Audit involves an expression of the tax auditor’s opinion on the truth and correctness of certain factual details, furnished by the assessee to the Income Tax Authorities to enable correct assessment of total income considering all allowances, deductions, losses, adjustments, exemptions etc. and determination of tax thereon.
 
It is conducted to ensure proper maintenance and correctness of books of accounts by the taxpayer and certification of same by the CA. This is to discourage tax avoidance and evasion, the requirement of a tax audit that was introduced by inserting a new section 44AB in the Income Tax Act.
 
There are two types of forms for filing income tax audit reports namely 3CA-3CD and 3CB-3CD.
Form 3CA-3CD is applicable in case of a person who is required by or under any law to get their accounts audited; while Form 3CB-3CD is applicable in case of a person not being a person referred above i.e. where accounts are not required to be audited under any other law.
 
Meanwhile, rule 6G prescribes the manner of reporting and furnishing of Report of Audit of accounts to be furnished under section 44AB, which is meant for the audit of accounts of certain persons carrying on business or profession.
 

CBDT Circular -10-2024

 

CBDT Extends Due Date for Filing Form 10 A/10 AB

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CBDT extends due date for filing Form 10A/10AB upto 30th June, 2024.
The CBDT), has issued Circular No. 07/2024 dated 25.04.2024 further extending the due date for filing Form 10A/ Form 10AB under the Income-tax Act, 1961 (the ‘Act’) upto 30 th June, 2024.

Considering the representations received by CBDT requesting for further extension of the due date for filing such Forms, the CBDT has extended the due date of filing Form 10A/ Form 10AB until 30th June, 2024

Form 10 A – Form 10 AB –

The Central Board of Direct Taxes ( CBDT ), has issued Circular No. 07/2024 dated 25.04.2024 further extending the due date for filing Form 10A/ Form 10AB under the Income-tax Act, 1961 ( the ‘Act’ ) upto 30th June, 2024.

CBDT had earlier extended the due date for filing Form 10A/ Form 10AB by trusts, institutions and funds multiple times to mitigate genuine hardships of the taxpayers.

The last such extension was made by Circular No. 06/2023 extending the date to 30.09.2023.

Considering the representations received by CBDT requesting for further extension of due date for filing of such Forms beyond the last extended date of 30.09.2023, and to avoid genuine hardships to taxpayers,

CBDT has extended the due date of filing Form 10A/ Form 10AB up to 30th June, 2024, in respect of certain provisions of section 10(23C)/ section 12A/ section 80G/ and section 35 of the Act.

Form 10B enables a taxpayer to file an audit report if the taxpayer has applied for or is already registered as charitable or religious trust/institution by filing Form 10A. Form 10B is accessed by the CA added by the taxpayer under the My CA service and is assigned the relevant form.

It was further clarified by CBDT that, if any such existing trust, institution or fund had failed to file Form 10A for AY 2022-23 within the extended due date, and subsequently, applied for provisional registration as a new entity and received Form 10AC, can also now avail this opportunity to surrender the said Form 10AC and apply for registration for AY 2022-23 as an existing trust, institution or fund, in Form 10A till 30th June 2024.

It was also clarified that those trusts, institutions or funds whose applications for re-registration were rejected solely on the grounds of late filing or filing under the wrong section code, may also submit fresh applications in Form 10AB within the aforesaid extended deadline of 30th June 2024.

The applications as per Form 10A/ Form 10AB shall be filed electronically through the e-filing portal of the Income Tax Department.

Source: CBDT Circular No. 7/2024 dated 25th April 2024

Income Tax Advisory for Trusts / Institutions

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                                                                  ATTENTION TRUSTS/ INSTITUTIONS                         08-Mar-2024

Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 (hereinafter referred to as trust or institution under the first regime) of the Income-tax Act, 1961 (hereinafter referred to as the Act) or any trust or institution registered under section 12AA or section 12AB of the Act (hereinafter referred to as trust or institution under the second regime) is exempt subject to fulfilment of certain conditions specified under various sections of the Act.

One of the conditions required to be fulfilled by the trust or institution in order to be eligible to claim exemption under the first regime, is laid down in clause (b) of the tenth proviso to clause (23C) of section 10 of the Act. This states that in case the total income of the trust or institution, as computed under the Act without giving effect to the provisions of exemption under the first regime, exceeds the maximum amount which is not chargeable to income-tax in any previous year, the trust or institution is required to get its accounts audited and furnish the audit report in the prescribed Form before the specified date.

A similar condition is in place for trust or institution under the second regime in subclause (ii) of clause (b) of sub-section (1 ) of section 12A of the Act.

Rule 16CC and 17B of the Income-tax Rules, 1962 (hereinafter referred to as the Rules) prescribe the form of audit report for trust or institution under the first and second regime respectively. They provide that the report of audit of the accounts of a trust or institution, shall be furnished in –

(a) Form No. l0B where,

(i) the total income of trust or institution, exceeds rupees five crores during the previous year; or

(ii) such trust or institution has received any foreign contribution during the previous year; or

(iii)such trust or institution has applied any part of its income outside India during the previous year;

(b) Form No. 10BB in other cases.

The new forms, Form No. l0B/ Form No. l0BB, were notified vide Notification No. 7 of 2023 dated 21st February, 2023. The above prescription was put in place w.e.f. 01.04.2023, vide the Income-tax (Third Amendment) Rules, 2023, and is therefore, effective for assessment year 2023-24 and subsequent assessment years. The due date for furnishing such audit reports for the A.Y. 2023-24 was 31st October, 2023.

It has come to the attention of the Board that in a number of cases trusts/ institutions have furnished audit report in Form No. l0B, where Form No. 10BB was required to be furnished for the A.Y. 2023-24. Similarly, in a number of cases trusts/ institutions have furnished audit report in Form No. 10BB, where Form No. l0B was required to be furnished for the A.Y. 2023-24. As noted above, non-furnishing of audit report in the prescribed form would result in denial of exemption in such cases as it is one of the conditions which is required to be satisfied for claim of exemption.

In view of the above, the Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act has allowed those trusts/ institutions which have furnished audit report on or before 31st October, 2023 in Form No. l0B where Form No. 10BB was applicable and vice-versa, to furnish the audit report under clause (b) of the tenth proviso to clause (23C) of section 10 and sub-clause (ii) of clause (b) of sub-section (1) of section l2A of the Income-tax Act, 1961, in the applicable Form No. l0B/ 10BB for the assessment year 2023-24, on or before 31st March, 2024. Please refer to CBDT Circular 2/2024 dated: 05th March 2024. Please furnish audit report in correct prescribed form for AY 2023-24 on or before 31st March 2024 to claim exemption.

Source: Central Board of Direct Taxes Circular

CBDT extends deadline for filing ITR return and submitting audit report.

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The government extended the date for filing income tax returns for companies by one month to November 30.

Income Tax Department has extended the deadline for ITR filing for certain categories of taxpayers. This has brought great relief to the taxpayers/institutions falling in these categories and they have also been saved from paying heavy penalties due to delay.

According to the Income Tax Department, till September 5, about 6.98 crore individual taxpayers have filed ITR.

The Income Tax Department has extended the deadline for filing income tax returns for charitable trusts, religious institutions and professional bodies by one month to November 30. The Income Tax Department said in a statement that the due date for filing income tax return in Form ITR-7 for the assessment year 2023-24, which is 31 October 2023, has been extended to 30 November 2023.

Also, the due date for submission of audit report for 2022-23 by any fund, trust, institution or any university or educational institution or medical institution in Form 10B/10BB has been extended by one month to 31 October 2023. Earlier the last date for submission of audit report was 30 September.

ITR-7 is filed by institutions involved in charitable and religious activities, research institutes, professional bodies, political parties and electoral trusts also file tax returns through ITR-7.

The Finance Ministry said in a statement on Monday, the deadline for filing income tax return in Form ITR-7 for the assessment year 2023-24 has been extended from October 31, 2023 to November 30, 2023.

In the current financial year, till mid-September, net direct tax collection has increased by 23.51% to Rs 8.65 lakh crore. The Finance Ministry said that there has been a huge increase in direct tax collection due to more advance tax payment by the companies. During this period, advance tax payment has increased by 21%.

According to the data, net tax collection has been 47.45% of the budget estimate of Rs 18.23 lakh crore for the current financial year. In the last financial year 2022-23, direct tax collection was Rs 16.61 lakh crore.

CBDT Circular: https://incometaxindia.gov.in/pages/communications/index.aspx

CBDT extends due date for filing Income Tax Return for AY 2022-23 to Nov 7

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Providing a relaxation to the tax payer, the Central Board of Direct Taxes has extended the deadline for filing income tax return for the assessment year of 2022-23 till November 7, 2022. The decision was taken on Wednesday. It is to be noted that the last date to file ITR for FY23 was October 31.

The Central Board of Direct Taxes (CBDT) said in a notification that the ITR filing due date has been extended as it had last month extended the deadline for filing audit reports.

Providing a relaxation to the tax payer, the Central Board of Direct Taxes has extended the deadline for filing income tax return for the assessment year of 2022-23 till November 7, 2022. The decision was taken on Wednesday. It is to be noted that the last date to file ITR for FY23 was October 31.

CBDT extends the due date for furnishing Income Tax Return for AY 2022-23 to 7th November, 2022 for certain categories of assessees in consequence of extension of due dates for filing various reports of audit. Circular No. 20/2022 dated 26.10.2022 issued.

CBDT’s extension of due date for filing of Income Tax Return (ITR) for Assessment Year 2022-23 from 31/10/2022 to 07/11/2022 applies to the following assesses:

a) Companies
b) Persons subject to Tax Audit or Audit under any other law
c) Partner of Firm which is subject to Tax Audit
d) Other specified persons whose due date of filing the return of income is 31/10/2022.

Source: CBDT Circular

CBDT extends the timeline for filing Income Tax Returns and various Tax Audit Reports for Asst Year 2021-22

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CBDT has decided to further extend the due dates for filing of Income Tax Returns and various reports of audit for the Assessment Year 2021-22.
The Central Board of Direct Taxes, via Circular No. 01/2022 issued on 11th January 2021, has extended the timeline for filing of Income Tax Returns and various Reports of Audit for the Assessment Year 2021-22.
 
This has been done following the adverse impact of the 3rd wave of the COVID-19 pandemic and difficulties faced by taxpayers and professionals.
 

Announcement from CBDT earlier today on extension of timelines for filing of tax returns and certain audit reports to 15 March and 15 February is a major relief considering the challenges faced by both the taxpayers and their advisors due to newer variant of virus and the glitches in the online portal. Timing of the announcement in particular avoids anxiety for all concerned.

Here is the list of  various ITR deadline for AY 2021-22 that have been extended

  1. The due date of furnishing of Report of Audit under any provision of the Act for the Previous Year 2020-21, which was 30thSeptember 2021, in the case of assessees referred in clause (a) of Explanation 2 to sub-section (1) of section 139 of the Act, as extended to 31st October 2021 and 15th January 2022 by Circular No.9/2021 dated 20.05.2021 and Circular No.17/2021 dated 09.09.2021 respectively, is hereby further extended to 15th February, 2022;
  2. The due date of furnishing of Report of Audit under any provision of the Act for the Previous Year 2020-21, which was 31stOctober, 2021, in the case of assessees referred in clause (aa) of Explanation 2 to sub-section (1) of section 139 of the Act, is hereby extended to 15th February, 2022;
  3. The due date of furnishing of Report from an Accountant by persons entering into international transaction or specified domestic transaction under section 92E of the Act for the Previous Year 2020-21, which was 31stOctober 2021, as extended to 30th November 2021 and 31st January 2022 by Circular No.9/2021 dated 20.05.2021 and Circular No.17/2021 dated 09.09.2021 respectively, is hereby further extended to 15th February, 2022;
  4. The due date of furnishing of Return of Income for the Assessment Year 2021-22, which was 31stOctober 2021 under sub-section (1) of section 139 of the Act, as extended to 30th November 2021 and 15th February 2022 by Circular No.9/2021 dated 20.05.2021 and Circular No.17/2021 dated 09.09.2021 respectively, is hereby further extended to 15th March, 2022;
  5. The due date of furnishing of Return of Income for the Assessment Year 2021-22, which was 30thNovember 2021 under sub-section (1) of section 139 of the Act, as extended to 31st December 2021 and 28th February 2022 by Circular No.9/2021 dated 20.05.2021 and Circular No.17/2021 dated 09.09.2021 respectively, is hereby further extended to 15th March, 2022.

Clarification 1: It is clarified that this extension shall not apply to Explanation 1 to section 234A of the Act, in cases where the amount of tax on the total income as reduced by the amount as specified in clauses (i) to (vi) of sub-section (1) of that section exceeds one lakh rupees.

Clarification 2: For the purpose of Clarification 1, in case of an individual resident in India referred to in sub-section (2) of section 207 of the Act, the tax paid by him under section 140A of the Act within the due date (without extension under Circular No.9/2021, Circular No.17/2021 and this Circular) provided in that Act, shall be deemed to be the advance tax.

Source: CBDT Circular