FAQ ON NEW INCOME-TAX BILL – 2025
I. Preliminary Chapter
Answers to Frequently Asked Questions
QI.1 What simplification has been carried out in section 2 pertaining to ‘definitions’ in the new Bill?
Ans: Following simplifications have been carried out:
i. The language has been simplified wherever possible, without disturbing the meaning;
ii. All definitions continue to be in alphabetical order;
iii. Terms which have been defined at a number of places in the Income-tax Act, 1961 in the same manner have now been placed in section 2 itself. For example, the definition of ‘senior citizen’, which was appearing at six places in the 1961 Act, has been now placed in section 2;
QI.2 What is a ‘tax year’? What does it replace? What was the need for introducing it? Why was the term ‘financial year’ not used in place of the term ‘tax year’?
Ans: A ‘tax year’ is a period of twelve months contained in a financial year. It replaces the term ‘previous year’ used in the Income-tax Act, 1961. Further, with the discontinuance of the use of the term ‘assessment year’ in the Income-tax Bill, now the term ‘tax year’ will now be used in relation to the rate or rates of income-tax also. In addition, any assessment of the income or total income will also be done for a ‘tax year’.
Use of the terms ‘previous year’ and ‘assessment year’ were creating confusion in the minds of the taxpayers as they represented two different financial years. The rationale for the use of two terms is no longer valid in view of alignment of ‘previous year’ with the financial year or part of the financial year (in specific cases). The term ‘Tax year’ is commonly used in income- tax legislation in comparable tax jurisdictions.
As a tax year can be a period which is less than the financial year in certain cases, the term ‘financial year’ has not been used while doing away with the terms ‘previous year’ and ‘assessment year’. However, many actions are carried out by tax authorities and other stakeholders while implementing the tax law, being procedural actions and compliances, such as time period for filing returns, rectifications etc, which require reference to a financial year. In such cases, the time period denoted by a financial year has more relevance. This means that the term ‘financial year’ is required separately.
QI.3 Is ‘financial year’ also defined in the new Bill? Has the term ‘financial year’ also been used in the new Bill? Why is it still appearing in the Bill if it is the same as a ‘tax year?
Ans: The term ‘financial year is not defined in the Income-tax Bill. It is not defined in the Income-tax Act, 1961 also. It is defined in section 3(21) of the General Clauses Act, 1897 as the year commencing on 1st April.
The term ‘financial year’ has been used in the Income-tax Bill. For example, in the proposed section 21(5) of the Bill, reference has been made to a financial year in relation to the completion certificate issued by a competent authority in case of a building held as stock-in- trade. In such cases, the term financial year has relevance instead of the term ‘tax year’.
QI.4 Can a ‘tax year’ be a period which is less than a ‘financial year’?
Ans: Yes. This will happen when a business is newly set up during any financial year, or a source of income comes into existence during a financial year. In such cases, the tax year will begin from the date of setting up of the business or the source of income coming into existence, and end on the last day of that financial year.
QI.5 Will the concept of ‘tax year’ conflict with the concept of an ‘assessment year’ at any particular time? For example, if the new Act comes into effect from 1st April, 2026, will the tax year 2026-27 of the new Act conflict with the Assessment Year 2026-27 of the Income-tax Act, 1961?
Ans. No. The reasons are as follows:
i. The Assessment Year 2026-27 of the Income-tax Act, 1961 will pertain to the income of a taxpayer for the previous year 2025-26 and not to the income of the financial year 2026-27;
ii. The tax year 2026-27 of the new Act will pertain to the income of a taxpayer for the financial year 2026-27;
iii. The assessment for income of the previous year (financial year) 2025-26 of a taxpayer shall be done as per the provisions of the Income-tax Act, 1961 for the assessment year 2026-27;
iv. The assessment for income of tax year (financial year) 2026-27 of a taxpayer shall be done as per the provisions of the Bill for tax year 2026-27.
QI.6 Is there any change in the content of the charging section?
Ans: In the Income-tax Act, 1961, the charge of income-tax was on ‘total income’ of the ‘previous year’ of a person. Further, income-tax is charged for an ‘assessment year’ at the rate or rates provided by a Central Act. In the Income-tax Bill, in place of the term ‘previous year’, the term ‘tax year’ has been used. Further, the use of term ‘assessment year’ has been discontinued. Now, the total income also pertains to a ‘tax year’ and the rate or rates of income- tax also pertain to that ‘tax year’.
QI.7 In what way has the charging section been simplified?
Ans: In the Income-tax Act, 1961, section 4 has two sub-sections and one proviso. Long sentences have been used in the section. In the Income-tax Bill, there are five sub-sections, explaining the charge of income-tax in smaller and simpler sentences.
QI.8 Whether the Bill has introduced references to ‘Finance Companies’ and ‘Finance Units’ in the context of dividends, which could have implications for financial institutions and investors?
Ans: The Income Tax Bill 2025 also contains all amendments proposed in Finance Bill 2025. Therefore, the users are advised to compare the provisions of the Income Tax Act, 1961, as updated with proposed amendments in Finance bill 2025, while reading the Income Tax Bill, 2025. Therefore, no such additional term has been introduced in the Bill. Finance Bill 2025 has proposed exclusion of advance or loans between two group entities where one of the entities is “Finance Company” or a “Finance Unit”, from the definition of the term ‘dividend’. The Bill only incorporates the proposal made in the Finance Bill, 2025.
II. Non-Profit Organisations
Answers to Frequently Asked Questions
QII.1 Why have the provisions related to non-profit organisations been revamped in this Bill?
Ans: The Income-tax Act provides for exemptions to various entities including Government funded entities engaged in objects which are charitable in nature. In addition to this, specific exemption is also available to entities engaged in certain activities which satisfy social purposes. These entities receive donations, voluntary contributions and have other incomes from activities which are charitable in nature. The total number of electronically filed returns of such entities till 30th November 2024 for the assessment year 2023-24 is 2,50,682. The total amount applied by such entities for charitable and religious purposes during the FY 2022-23 is Rs 10,01,572.04 crores. Therefore, it was considered necessary to simplify and consolidate all the provisions relating to non-profit organisations for ease of understanding and compliance.
QII.2 Where are the provisions related to non-profit organisations contained in the present Income-tax Act?
Ans: The present provisions related to registered non-profit organisations are contained across the following Chapters:
i. Chapter I: Charitable Purpose sec 2(15)
ii. Chapter III: Sections 10(23C), section 11, section 12, section 12A, section 12AA, section 12AB, section 12AC & section 13
iii. Chapter VIA: Section 80G
iv. Chapter XII: Section 115BBC, Section 115BBI
v. Chapter XII EB: Section 115TD, Section 115TE, Section 115TF
QII.3. What are the challenges with the present provisions of the Act related to NPOs?
Ans: The present provisions related to registered non-profit organisations are difficult to comprehend due to the following reasons:
i. Since the provisions are spread across Chapters, there are several cross
ii. Since the provisions related to registered non-profit organisations evolved with time, several amendments have been brought to the present Act in the form of Explanations and provisos which make them difficult to read. In Section 11 itself, there are 13 Explanations and 16 provisos.
iii. The interplay of different provisos and Explanations makes it quite difficult to
QII.4 What is the approach followed while redrafting the provisions related to registered non-profit organisations?
Ans: The following approach has been followed while redrafting the provisions related to non- profit organisations:
i. The present Act uses different terms such as trust, institution, university, educational institution, hospital etc. in different provisions. A common term registered non-profit organisation has been used in the Bill in line with the international practices.
ii. Section 10(23C) uses the term “approval” while section 12AB uses the term “registration”. In order to avoid confusion, “registration” has been used in the Bill.
iii. All the provisions related to registered non-profit organisations have been arranged in Part B of Chapter XVII titled “––Special Provisions for Registered Non-Profit Organisation” which comprises provisions corresponding to present sections 11, section 12, section 12A, section 12AA, section 12AB, section 13, section 115BBC, section 115BBI, section 115TD, section 115TE, section 115TF, and the provisions related to approval under the first and second proviso to section 80G(5) of the present Income-tax Act.
iv. Redundant provisions have been
v. Some of the provisions have been tabulated for lucid understanding of different scenarios such as the provisions related to:
a. Application for registration;
b. Specified income and the tax year in which it is taxable;
c. Computation of tax on accreted income
QII.5 How many words have been reduced as a result of this exercise?
Ans: As a result of the exercise, there has been a substantial reduction of the words from the approximately 12,800 words to 7,600 words.
QII.6. What is the structure of the new Part?
Ans: The following is the structure of new Part XVII-B The following is the structure of new Part XVII-B
The entire Part related to non-profit organisations has been divided into 7 sub-parts which contain the provisions related to registration, income, commercial activities, compliances, violations, registrations for the purposes of eligibility of donations and interpretations.
QII.7 What is the meaning of ‘registered non-profit organization’ which is not used in the present Act?
Ans: The present Income-tax Act uses different terms such as trust, institution, university, educational institution, hospital etc. in different provisions. The term registered non-profit organisation has been defined to mean any person having a valid registration under section 12A, 12AA or 12AB or section 10 (23C) of the Income-tax Act, 1961 and such registration has not been cancelled. The use of common term ‘registered non-profit organisation’ intends tp avoid confusion and for lucid understanding of the provisions of the Bill.
QII.8 What is the meaning of registration under the new provisions? Is the same word registration now used for approval as well?
Ans: Section 10(23C) uses the term “approval” while section 12AB uses the term “registration”. In order to avoid confusion, “registration” has been defined in the Bill to include provisional registration, provisional approval or approval, as referred to in the second proviso to sections 10(23C) or 12AB (1) of the Income-tax Act, 1961 and under proposed section 332 of the new Income Tax Bill, 2025. However, it does not include approval under the second proviso to section 80G (5) of Income Tax Act, 1961 or section 354 of the Income Tax Bill, 2025.
QII.9 Will the existing registered non-profit organisations be again required to get themselves registered under the new provisions?
Ans: There were two regimes for exemption of registered non-profit organisations. The first regime is contained in section 10(23C) and the second one was contained in section 11 to 13 of the Income Tax Act, 1961. There were certain provisions common to both the regimes that were contained in section 115BBC, 115BBI, 115TD, 115TE, 115TF and section 2(15) of the Income Tax Act, 1961. The Finance (No. 2) Act, 2024 provides that no application can be made under the first regime on or after 01st October, 2024. However, the approvals granted under the first regime shall continue to be valid for the period of their approval. They are eligible to apply for registration, subsequently, under the second regime.
As per the provisions of the Bill, all the registered non-profit organisations are eligible to claim benefits. The registered non-profit organisation has been defined to mean any person having a valid registration under section 12A, 12AA or 12AB or section 10 (23C) of the Income-tax Act, 1961 and such registration has not been cancelled.
Thus, the Bill proposes to protect the eligibility of existing registered non-profit organisations under the first as well as the second regime.
QII.10 Can you provide an example as to how the new provisions will help better understand the provisions?
Ans: The provisions of the present Act contained several cross references. The Table in the proposed section 332(3) of the Income Tax Bill, 2025 provides the time limits for furnishing application, time limit for passing the order and the validity of registration in different cases in a very simple and lucid manner.
QII.11 There is a dedicated proposed section 334 on the taxability of income of the registered non-profit organisations. Is there any additional tax proposed to be levied on the income of registered non-profit organisations?
Ans: No. Since most registered non-profit organisations apply 85% of their regular income for charitable or religious purposes, the taxable regular income in their cases shall be nil and there shall be no tax liability in their hands. However, if a registered non-profit organisation is not able to apply 85% of its regular income or accumulate the same, then regular income for such tax year as reduced by its application for charitable or religious purposes or accumulation thereof shall be its taxable regular income and chargeable to tax.
QII. 12 What is the concept of specified income and does it propose to tax any new income of the registered non-profit organisations?
Ans: No. No new income is proposed to be taxed. Present Act provides taxability of income scattered in different provisions such as section 13, section 115BBC and section 115BBI for different violations. The Bill seeks to bring all such provisions at the same place.
QII.13 The provisions related to capital gains under section 11(1A) have been done away with? Can you explain the rationale behind that?
Ans: Section 11(1A) of the present Income-tax Act provides that where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent provided under the said section.
Since the cost of acquisition of an asset for the objects of the registered non-profit organisation is considered as application of income, these provisions were redundant and therefore removed.
QII.14 Provisions related to deemed application have also been done away with the Bill. Can you explain the reason for the same?
Ans: There are two types of accumulations allowed to the registered non-profit organisations. First, as per the provisions of section 11(2) accumulation is allowed for a period of five tax years. Second, deemed application is allowed as per the provisions of Explanation 1(2) to section 11(1) for certain specified reasons (generally accumulation for one year on account of non-receipt of the income). The dual provisions for accumulation were creating difficulties in implementation and interpretation.
The provisions related to deemed application under Explanation 1(2) to section 11(1) of the present Income-tax Act have been rationalised. This will help reducing litigation and ease the compliance. Accumulation under proposed section 342 of the Bill can be for any purpose stated in the prescribed Form.
III. Section 10 ‘Exemptions’
Answers to Frequently Asked Questions
QIII.1 Can you briefly explain the provisions related to exemptions provided in the present section 10 of the Income Tax Act, 1961?
Ans: The provisions related to exemptions are contained in section 10 of the present Income- tax Act, 1961. There are around 140 clauses in said section 10, providing exemption to different persons and incomes. Section 10 evolved into its present shape with changes being made in different years to either provide exemption to a class of persons or income or their withdrawal, as the case may be.
QIII.2 What are the difficulties in comprehending the existing provisions?
Ans: Since section 10 of the Income Tax Act,1961 starts with an opening sentence and different exemptions provided therein are in the form of clauses, there were inherent limitations in the drafting. Clause 23C of section 10 contains 15 sub-clauses with numbers such as 10(23C)(i), (ii), (iii), (iiia), (iiiaa), (iiiaaa), (iiiaaaa), (iiiab), (iiiac), (iiiad), (iiiae), (iv), (v), (vi), and (via). Clause (23C) has 24 provisos. The 3rd proviso to clause (23C) has 7 Explanations and Explanation 2 to the 3rd proviso has again 8 provisos. Thus, there are provisos within clauses, Explanations to these provisos and again provisos to the Explanations making it difficulte to comprehend the provisions!
QIII.3 What is the approach followed while considering the provisions of section 10 presently in the Income Tax Act, 1961, writing the Bill?
Ans: The following approach has been followed while redrafting the provisions:
i. All the provisions related to exemptions have been drafted in 6 different schedules related to specific category of taxpayers as mentioned below.
ii. Redundant provisions have been
iii. Income eligible for exemption, eligible persons and the applicable conditions have been provided in different columns of the Table under each of these Schedules for the ease of understanding.
All the clauses of section 10 have been placed in 6 different schedules as follows:
Ans: The following is the structure of new Part XVII-B
QIII.4 How many words have been reduced as a result of the exercise?
Ans: As a result of the exercise, there has been a substantial reduction of the words from the approximately 30,000 words presently in Income Tax Act, 1961 to approximately 13,500 words in the new Income Tax Bill, 2025, in so far as section 10 is concerned.
Q.III.5 How are complexities proposed to be reduced by the Bill?
Ans: Besides rationalisation of provisions, as per question III.10 and III.11 above, all 90 Explanations and 134 provisos in the present section 10 have been done away with in the new Bill.
Q.III.6 If the provisions related to exemptions are proposed to be taken to Schedules, then are there any provisions in the main body of the Bill?
Ans: Yes, Section 11 of the proposed Bill contains certain provisions relating to exemptions while the rest are placed in the Schedules.
QIII.7 What about the clauses of section 10 which do not find place in the Schedules?
Ans: The clauses of section 10 of the Income Tax Act, 1961 which have been sun-set have not been included in the Schedules. However, certain exemptions which have been protected for past investments etc. have been protected in the Bill through the saving clause.
IV Salary and House Property
Answers to Frequently Asked Questionss
QIV.1 How has the simplification been done in the language and structure in salary and house property provisions in the new Bill to make it easier for the taxpayer?
Ans: The simplification focuses on enhancing clarity and ensuring ease of compliance. The chapter on Salary and House Property has been specifically crafted for this purpose so that the taxpayer can on his own read those chapters and file his own Return of Income. While drafting these Chapters, areas/issues resulting in common grievances received from such category of taxpayers have been addressed.
QIV.2 How has the Chapter been simplified and how many words have been reduced in the new chapter?
Ans: The restructuring has significantly reduced the length of the chapter by eliminating redundant provisions while retaining all essential provisions. All existing provisos and explanations across various sections have been integrated into the main provisions for eliminating fragmentation, improving readability, and ensuring that related provisions are presented cohesively. The key changes are summarized in the table below:
- The number of words has been reduced from 4401 to 3420 for the Part ‘Salaries’ and from 1658 to 1177 for the Part ‘Income from House Property’
- All provisions related to salary are brought under the part ‘Salaries’ so that the taxpayer does not have to refer to separate chapters for filing of his Return of Income.
- The language is simple to read, clarifying all crucial terminology like Perquisite, Profit in lieu of salary, Standard Deduction etc and placing them in separate sections.
- The legal and technical jargons have been minimized, and provisions like Perquisites have been rewritten in a more structured and clear manner.
- Some of the provisions have been taken to the Rules, and redundant and repetitive provisions have been removed for better readability.
QIV.3 Why have more changes not been carried out in the Chapter for ‘Salary’ and ‘House Property’?
Ans: The objective of this exercise was to simplify the existing framework rather than completely overhaul it. The proposed Bill maintains continuity while ensuring improved clarity and efficiency.
Especially for the part on ‘Income from House Property’, it was noted that the provisions are already fairly simple and have been well received by the general public. The concepts like Annual Value of House Property, Self-occupied property etc. have been accepted well and
there is minimal dispute in interpreting the provisions and computation of this Head of income. Hence, minimal changes have been proposed in this part to ensure smooth transition and minimal confusion.
V. Profits and gains of business and profession
Answers to Frequently Asked Questions
QV.1. What are the major changes in the chapter Profits and gains of business and profession?
Ans: Major changes brought about in the chapter Profits and Gains of Business and Profession are as follows:
i. The flow of the sections has been revised to improve coherence, create logical links, and ensure a smoother progression.
ii. Similar sections, such as those on presumptive taxation for residents and non-residents, have been merged to simplify the content, make it more concise, and consolidate all related scenarios in one place.
iii. Provisions on similar topics, such as deductions on employee welfare, which were previously scattered across the chapter, have been grouped together for easier understanding and compliance.
iv. Formula-based explanations have been added to clarify complex concepts that were previously difficult to understand, such as the definition of Written-down Value.
v. Provisions involving multiple scenarios, like those for determining Actual Cost, which were previously presented as provisos or explanations, have been organized into a table for better readability and comprehension.
vi. All provisos and explanations in the chapter have been converted into sub-sections to eliminate ambiguity and ensure clarity.
vii. Redundant and already sun-set provisions have been
viii. Provisions specific to a single business segment which are used by small sub set of taxpayers have been moved to a new Schedule, while some procedural provisions have been transferred to rules to reduce complexity and focus on the substance of the section.
ix. As a result, the total word count has been reduced by more than half, and the number of sections has decreased from 65 to 41.
QV.2 How and why the order of sections been changed in the chapter on PGBP?
Ans: An effort has been made to group similar provisions together. For example, provisions related to general expenditure allowances (section 37) and deductions for actual payments (section 43B) have been placed along with the provisions of sections 40 and 40A. Similarly, provisions on scientific research expenditure, section 35AD (investment-linked deductions), skill development project expenditure, and agricultural extension project expenditure have been grouped together in the proposed sections 45,46 and 47.
QV.3 What are the differences in provisions relating to, “Deductions related to employee welfare” in the Income Tax Bill 2025?
Ans: In the Income Tax Act, 1961, provisions related to expenses for contributions to Provident Fund, Gratuity Fund, Superannuation Fund, etc., were spread across various sections, such as 40A (7), (9) and 36(1)(iv), (iva), (v), (va). To determine the allowability of these expenses, one had to refer to multiple provisions in addition to the charging sections. In the new tax bill, these provisions have been consolidated under a single section (proposed section 28), making them easier to understand and comply with. While the language has been simplified, there is no change in the tax incidence or deductibility.
QV.4. What is the difference in provisions relating to, “Deduction for bad debt and provision for bad and doubtful debt” in the Income Tax Bill 2025?
Ans: In the Income Tax Act, 1961, provisions related to the deduction for bad debts are contained in Section 36(1)(vii),(viia) and 36(2), which include 10 clauses/subsections, 6 provisos, and 4 explanations. These provisions have now been consolidated into a separate section, with all provisos and explanations converted into sub-sections/clauses. Additionally, for banks and financial institutions, the allowance for bad debt provisions has been presented in a tabular format. These changes make the provision easier to understand and comply with. There is no change in the allowability or timing of allowability.
QV.5 What is the difference between section 32 of IT Act,1961 and new section 33 of Income Tax Bill,2025, i.e. “Deduction for depreciation”?
Ans: Section 32 of the Income Tax Act, 1961, which deals with depreciation, has become very complex over the past 63 years. It includes 6 clauses/subsections, 9 provisos, and 6 explanations. In the new bill, all provisos and explanations have been converted into subsections/clauses, reducing the word count by 40%. These changes make the provision easier to understand and comply with. There has been no change in the rate of depreciation, eligibility, or method of allowance.
QV.6 What are the changes in the definition of ‘Actual cost’ and ‘Written down Value’?
Ans: The definitions of ‘Actual Cost’ and ‘Written-Down Value’ have been simplified by converting various explanations, provisos, and provisions into a tabular format. However, the current definitions of Actual Cost and Written-Down Value remain unchanged. Only redundant provisions (e.g., Goodwill adjustment for determining Written-Down Value) have been removed. The tabular format simplifies the understanding, improves clarity and reduces the potential for ambiguity.
QV.7 What are the changes in the provisions relating to ‘Expenditure on Scientific Research’?
Ans: The existing provision in Section 35 deals with the deductibility of expenses for scientific research. However, it has become complex and unnecessarily lengthy due to the addition of several provisos over time. In the Income Tax Bill 2025, the clarity of scientific research
expenditure deductions has been improved by reorganizing the flow while maintaining the existing policy in the proposed section 45.
QV.8 How is the section on ‘Capitalising the impact of foreign exchange fluctuation’ is different compared to section 43A of IT Act,1961?
Ans: Section 43A of the current Act addresses capitalizing the impact of foreign exchange fluctuations when paying for a capital asset liability. The existing text is lengthy, complex, and contains repetition and redundancy. In the new Bill, while preserving the meaning of the section, it has been divided into four subsections, which are drafted in a more coordinated manner. The complexity has been reduced by introducing a formula for “Variation in liability,” further simplifying the understanding of the section.
QV.9 Which provisions have been shifted to Schedule and the reasons for the same ?
Ans: Provisions related to the Site Restoration Fund, as well as those for the Tea Development Account, Coffee Development Account, and Rubber Development Account, which apply only to specific trades and a small number of taxpayers, have been moved to the Schedules. The provisions related to the insurance business remain in the schedule as they were previously.
QV.10 How have the provisions relating to deferred expenditure been changed under the Income Tax Bill ,2025?
Ans: Provisions related to the amortization of expenses for telecommunications services, amalgamation, demerger, and voluntary retirement schemes have been presented in a tabular form. In the current text, the repetitive presentation has lengthened the text and also made it difficult to read. In the proposed Income Tax Bill 2025, an effort has been made to consolidate these expenses into one section while simplifying the language, without suggesting any policy changes.
Provisions related to the amortization of preliminary expenses and expenses for prospecting minerals have been kept in a separate section.
QV.11 What has changed in provisions relating to presumptive taxation of residents in the new Income Tax Bill ,2025?
Ans: Under the current provisions of the Act, residents earning income from business (Section 44AD), profession (Section 44ADA), and the business of plying, hiring, or leasing goods carriages (Section 44AE) are allowed a simplified taxation regime.
In the proposed Income Tax Bill 2025, an effort has been made to consolidate all these identical presumptive taxation schemes into one section in tabular form, while adopting simplified language without suggesting any policy changes. Common eligibility conditions are listed as sub-sections below the table. This approach offers a clearer understanding of the presumptive
taxation regimes for residents, improves readability, and significantly shortens the text compared to the existing provisions.
QV.12 What has changed in provisions relating to presumptive taxation of non-resident in New Income Tax bill?
Ans: Under the current provisions of the Act, non-residents earning income from certain business activities are allowed a simplified taxation regime. Currently, these presumptive taxation schemes are spread across five sections.
The Finance Bill 2025 has also proposed a similar scheme for non-residents providing services to domestic electronic goods manufacturing.
In the proposed Income Tax Bill 2025, an effort has been made to consolidate these identical presumptive taxation schemes into one section in tabular form, while simplifying the language. The common eligibility conditions are listed as sub-sections below the table. This approach provides a clearer understanding of the presumptive taxation regimes for non-residents, improves readability, and significantly reduces the text length compared to the existing provisions.
QV.13 What has changed in provisions relating to “Special provision for computing deductions in case of business reorganisation of co-operative banks” in the new Income Tax Bill, 2025?
Ans: To simplify the section and eliminate repetitiveness, the formula for determining depreciation and other deductions for the predecessor co-operative bank and the successor co- operative bank/converted banking company has been merged. This ensures that the section is easier to understand, while the intent remains unchanged.
QV.14 Whether the Bill has introduced new sections for revenue recognition of service contracts and inventory valuation?
Ans: As has been noted elsewhere, the Bill has not made any major policy changes. No new sections have been introduced for revenue recognition of service contracts and inventory valuation. Section 43CB of the Income tax Act,1961 already prescribes the methodology for determining the profits and gains of business arising from service contract while section 145A prescribes the method for valuation of inventory. Clauses 57 and 277 of the Bill have been proposed as clauses for service contracts and inventory valuation corresponding to relevant section sunder the Income Tax Act,1961.
QV.15 Is there any change in the new Bill as regards powers of the Assessing Officers to examine legitimacy of business expenditure?
Ans: Section 37 of the Income Tax Act, 1961 prescribes conditions for allowing deduction of expenditure for the purpose of computing the income chargeable under the head “Profits and
gains of business or profession”. The Income tax Bill,2025 retains the scope of such provisions. Clause 34 of the Bill provides for similar general conditions for allowing deduction of expenditure for the purposes of business or profession being carried on by taxpayer.
VI. Clubbing provisions
Answers to Frequently Asked Questions
QVI.1 Is there any change in incidence of taxation or methodology of clubbing in the proposed Income Tax Bil, 2025?
Ans: There are no changes in incidence of taxation, or methodology of clubbing of income in the new Bill.
Q.VI.2 What has been changed in the provisions relating to ‘Clubbing of Income’?
Ans: We have simplified the language and removed redundant provisions. Further, certainty has been brought in wherever it was possible. Formula has been introduced for ease of understanding and certainty in computation. For example
| Section in existing Income Tax Act, 1961 | Section in new Income Tax Bill 2025 |
| Explanation 3 to s. 64 (1) in IT Act, 1961 Explanation 3. —For the purposes of clauses
(iv) and (vi), where the assets transferred directly or indirectly by an individual to his spouse or son’s wife (hereafter in this Explanation referred to as “the transferee”) are invested by the transferee,— (i) in any business, such investment being not in the nature of contribution of capital as a partner in a firm or, as the case may be, for being admitted to the benefits of partnership in a firm, that part of the income arising out of the business to the transferee in any previous year, which bears the same proportion to the income of the transferee from the business as the value of the assets aforesaid as on the first day of the previous year bears to the total investment in the business by the transferee as on the said day ; (ii) in the nature of contribution of capital as a partner in a firm, that part of the interest receivable by the transferee from the firm in any previous year, which bears the same proportion to the interest receivable by the transferee from the firm as the value of investment aforesaid as on the first day of the previous year bears to the total investment by way of capital contribution as a partner in the firm as on the said day, shall be included in the total income of the individual in that previous year. |
Formula (sample):
A = B × (C/D)
where, ––
A = Income to be included in the hands of individual for the tax year.
B = Income or interest or both, arising to the spouse or son’s wife from the business or from the firm, as applicable during the tax year.
C = Value of such assets invested, or contributed as capital by the spouse or son’s wife as on the first day of the tax year.
D = Total investment or total capital contribution, as the case may be, by the spouse or son’s wife as on the day for which A is being computed. |
VII. Deeming Provisions (S 68-69D of the Income Tax Act, 1961)
Answers to Frequently Asked Questions
Q.VII.1 Please highlight any major changes made through Income Tax Bill 2025 in deeming provisions? How has the change improved certainty?
Ans: The provisions have been simplified. Section 69B has been split and merged with sections 69 and 69A. In order to reduce disputes on rate of taxation and to provide certainty, the reference of the section specifying the rates of taxation has been provided in this Chapter. Towards reducing ambiguity, certainty has been provided as far as possible and rate of taxation has been specified in the chapter itself.
QVII.2 Why has the name of section 68 ‘cash credits’ in the existing Income Tax Act been changed to ‘unexplained credits’ in the Bill?
Ans: Section 68 of the Income Tax Act, 1961 is concerned with taxing the unexplained credits (rather than credits on account of cash) found in the books of accounts. In the corresponding section 102 of the new bill, the provisions of the section remain the same and there is only change in nomenclature. The unexplained credits will continue to be taxed under this section.
VIII. Set-off and Carry-forward of loss and unabsorbed depreciation, etc (S 70-80 of the Income Tax Act,1961)
Answers to Frequently Asked Questions
Q.VIII.1 Will the changes announced in the recent Budget speech pertaining to capping the carry forward loss in the amalgamation and business reorganisation provisions be included in the Income Tax Bill,2025?
Ans: Yes, the proposed simplified Income Tax Bill has included such amended provisions in the Income Tax Act introduced by Budget 2025.
Q.VIII.2. Can you give examples of removal of redundant sections and provisions in this Chapter?
Ans: Yes. The examples are Sec. 71A and Sec 75.
| Section in existing Income Tax Act, 1961 | Section in new Income Tax Bill 2025 |
| Transitional provisions for set off of loss under the head “Income from house property”.
71A. Where in respect of the assessment year commencing on the 1st day of April, 1993 or the 1st day of April, 1994, the net result of the computation under the head “Income from house property” is a loss, such loss in so far as it relates to interest on borrowed capital referred to in clause (vi) of sub-section (1) of section 24 and to the extent it has not been set off shall be carried forward and set off in the assessment year commencing on the 1st day of April, 1995, and the balance, if any, in the assessment year commencing on the 1st day of April, 1996, against the income under any head. |
omitted |
| Losses of firms.
75. Where the assessee is a firm, any loss in relation to the assessment year commencing on or before the 1st day of April, 1992, which could not be set off against any other income of the firm and which had been apportioned to a partner of the firm but could not be set off by such partner prior to the assessment year commencing on the 1st day of April, 1993, then, such loss shall be allowed to be set off against the income of the firm subject to the condition that the partner continues in the said firm and to be carried forward for set off under sections 70, 71, 72, 73, 74 and 74A. |
omitted |
IX. Chapter VIA of the Income Tax Act, 1961
Answers to Frequently Asked Questions
QIX.1: What are the major snapshots of simplification with reference to Chapter VIA?
Ans: In this Chapter, the existing provisos and explanations have been integrated into the main sections, improving clarity and coherence. Large and complex sections, such as Section 80C, have been streamlined, and detailed provisions have been moved to Schedule XV for better presentation and comprehension.
Further, the provisions of Section 80-IA, 80-IB, 80-IAB, 80-IBA of the Income-tax Act, 1961 would still be applicable for the undertakings or enterprises or projects which were already eligible to avail deductions as per these sections, which is ensured by incorporating necessary savings and repeals clause.
QIX.2 What major restructuring has been done in Section 80C?
Ans: The various sums eligible for deduction under Section 80C, which were previously spread throughout the section, have now been transformed into a simplified arrangement of eligible savings instruments in the proposed Schedule XV. The deduction limit remains clearly stated within the section, while the Schedule provides an easy-to-understand breakdown of eligible deductions. This simplifies the process for taxpayers, making it more transparent and organized. The changes have been made for better accessibility and comprehension.
QIX.3 How has Section 80G been improved?
Ans: Section 80G, which provides deductions for donations, has been revised to clearly segregate deductions based on the percentage of eligible deductions—100% and 50%, without making any policy change. This makes it easier for taxpayers to identify and claim the correct deduction amount.
QIX.4 What changes have been made to Sections 80TTA and 80TTB?
Ans: Previously, Sections 80TTA and 80TTB provided deductions on interest earned from savings accounts—80TTA for the general public and 80TTB for senior citizens. These sections have now been merged into a single proposed section, with clearly defined sub-sections. The eligibility criteria and deduction limits for different categories of assessees are now explicit, reducing the need to refer to multiple sections. This change enhances clarity and ease of use, particularly for senior citizens.
QIX.5 What improvements have been made to Section 80PA?
Ans: The definition of eligible assessees under Section 80PA has been clarified, and the various eligibility criteria have been listed pointwise. This ensures that taxpayers can easily determine their eligibility without misinterpretation.
QIX.6 How has Section 80RRB been simplified?
Ans: The definition of eligible assessees who can claim deductions on royalties earned from patents has been made clearer. Additionally, the language has been modified to explain the computation of the deduction amount.
QIX.7 The tax incentives under Chapter VIA of Income-tax Act, 1961 are not available in new tax regime. Has the same approach been adopted in proposed legislation?
Ans: There are several provisions for which sunset date had earlier been outlined in Finance Act, 2016. Hence, the deduction for the same is available till such date. However, investment linked deductions have not been phased out. Hence, deduction under 80C, 80CCD, 80D, 80DD, 80DDB, 80EEA, 80EEB, 80U, etc. find place in the new Income Tax Bill, 2025.
QIX.8 How has section 80JJAA or provision relating to start-up or IFSC been addressed?
Ans: These provisions continue to be in operation in the new Income Tax Bill, 2025.
X. Advance tax, refund and Interest
Answers to Frequently Asked Questions
QX.1 Are there any changes in the provisions related to advance tax in the new Income Tax Bill, 2025?
Ans: There are no policy changes. However, the provisions have been made easy to read with the following approach:
i. The provisions related to the payment by the assessee on his own accord and as per the order of the Assessing Officer have been segregated in two different sections to avoid
ii. Redundant provisions have been
iii. A formula has been provided for the computation of the advance tax liability
QX.2 What are the major improvements in the provisions related to refunds and interest?
Ans: Formulas have been provided for the computation of interest in different situations for example, the following formula has been provided for the computation of interest for defaults in furnishing of the return of income:
I= 1%* A*T
where,––
I = the interest payable;
A = the amount of tax on which interest is payable;
T = number of months comprised in the period commencing on the date immediately following the starting date and ending on the end date.
QX.3 What are other improvements in the provisions related to interest computation?
Ans: The computation of interest is based on the period and rate of interest. For the computation of period, the most crucial factors are the start date and the end date and the same have been provided in the form of a Table as follows:
| Sl. No | Circumstances | Starting date | Ending date | The amount of tax on which
interest is payable |
| A | B | C | D | E |
Thus, the taxpayers will have clarity about the start date and the end date for the computation of the period for which interest is payable in different scenarios and also the amount on which interest is payable.
XI. Taxation in Special Rate cases
Answers to Frequently Asked Questions
QXI.1 I have opted for New tax regime under the Income-tax Act, 1961. Do I have to opt for it again in the new Income Tax Bill, 2025?
Ans: No, all the rights and duties of taxpayers will continue to remain intact. In fact, the transition is expected to be seamless.
QXI.2 Will new rules and forms be prescribed for the proposed Act, especially for opting for new tax regime or for claiming MAT?
Ans: The proposed Bill has been tabled in the Parliament. As and when the law is enacted, the administrative measures for implementing them will be made operational, keeping in mind the convenience of tax payers and all stakeholders. The necessary details will be informed in due course.
Q XI.3 Have the changes made in the recent budget been incorporated in the proposed Act, especially for individual taxpayers?
Ans: Yes, the changes made in the slab rates and the related rebate have been incorporated in the proposed Bill.
QXI.4 Are there any changes in the rates or conditions for taxation of special cases?
Ans: No policy change has been proposed for such special rate provisions. Special rate regimes will work as before. However, there is substantial simplification through structural change in the Act which makes it taxpayer friendly.
Q.63. Are there any changes in the provisions related to special rates for domestic taxpayers? Ans: There are no policy changes. However, the provisions have been made easy with the following approach:
a) New Tax Regime is now separate part that is dedicated for special rate of taxation for individual taxpayers, domestic companies, cooperative societies and other eligible
b) Redundant provisions have been
c) Tables have been provided to do away with multiple explanations and provisos and also for bringing together various special types of income that attract special rates under the Act.
XII. Double Taxation Relief
Answers to Frequently Asked Questions
QXII.1. Is there anything new in relation to interpretation of terms contained in a tax treaty?
Ans: The Bill only clarifies India’s tax treaty position in relation to terms used in such treaty. The proposed section 159(7) of the Bill now mentions that:
i. If any term is used in the agreement and defined both in the agreement and the Bill, it will have the meaning which is provided in the agreement;
ii. If any term is used in the agreement but has not been defined in it, but has a definition in the Bill, it will have the meaning provided in the Bill or in any explanation which is given to it by the Central Government, and the meaning will be applicable from the date of the agreement;
iii. If any term is used in the agreement and is neither defined in the agreement nor in the Bill, it will have the meaning given to it in any notification issued by the Central Government, and such meaning will be applicable from the date of the agreement;
iv. If any term is used in the agreement and is not defined in the agreement or in the Bill or in any notification, it will have the meaning given in any Act of the Central Government relating to taxes, or in its absence, in any other law of the Central Government, and such meaning will be applicable from the date of the agreement.
This clarified position will reduce litigation and provide certainty to how any term is interpreted in a tax treaty situation. It reflects India’s present tax treaty position and is also aligned with international tax treaty practices in this regard.
XIII. Tonnage Tax
Answers to Frequently Asked Questions
QXIII.1 What changes are made in the proposed Act as regards the tonnage tax scheme?
Ans: No substantive changes have been made in the tonnage tax scheme. The sections have however been rearranged and reorganized for better readability. The changes made in the Budget 2025 have also been suitably incorporated.
XIV. Tax Administration
Answers to Frequently Asked Questions
QXIV.1 Section 247 of the proposed bill equivalent to section 132 of the income tax Act provides for “competent authority”, “approving authority” etc. Why such change is proposed?
Ans: The terms “Competent Authority” and “Approving Authority” have been defined in the proposed bill to avoid confusion in the mind of taxpayers and to clearly distinguish roles and functions of such authorities.
QXIV.2. Why the definition of ‘computer system’ in section 261(e) of the proposed Act is different from the meaning as given in the Information Technology Act, 2000?
Ans: Income tax Act and Information Technology Act are two different Acts and serve different purposes. The definition of computer system in the Income Tax Act includes computer network, computer resources, communication devices, digital or electronic data storage devices, virtual digital space etc.
QXIV.3 While there are four parts in the Income Tax Act, 1961 under chapter XIII pertaining to Income tax authorities, there are only two parts in the proposed bill under the heading ‘tax administration’ under chapter XIV. What is the difference?
Ans: In the proposed Bill, Part A & B is merged as they pertain to income tax Authorities and their jurisdiction. Further, Part C relating to powers and part D relating to disclosure of information have been merged in the proposed bill.
XV. OFFENCES AND PROSECUTION
Answers to Frequently Asked Questions
QXV.1 Is there any increase in the punishment for any offence under the Bill?
Ans: No.
QXV.2 Has any new prosecution section been introduced for any of the provisions of the Bill?
Ans: No.
XVI. MISCELLANEOUS
Answers to Frequently Asked Questions
QXVI.1 If I have a pending refund under the Income-tax Act, 1961, will I get it after the new Act comes into force?
Ans: Yes. All the rights and duties of taxpayers will continue to remain intact. The taxpayer will get his due refund in accordance with law.
QXVI.2 Has the faceless approval or registration been removed?
Ans: No.
QXVI.3 Will new rules and forms be prescribed for the proposed Bill?
Ans: The proposed Act has been laid before the Parliament. Subsequently, the administrative measures for implementing them will be made operational, in terms of the provisions in the new Income Tax Bill, 2025. The necessary details will be informed in due course.
QXVI.4 Whether the Bill gives additional responsibilities to CBDT to frame tax administration rules, introduce compliance measures, and enforce digital tax monitoring systems without requiring legislative amendments?
Ans: Section 295 of the Income tax Act, 1961 already requires CBDT to frame rules for carrying out the purposes of the Act. Without prejudice to the generality of such powers in sub- section 1, specific matters are also enumerated in sub-section 2 of the section. Clause 533 of the Income Tax Bill, 2025 replicates these responsibilities which are already conferred on CBDT.
XVII. Assessment Procedure
Answers to Frequently Asked Questions
QXVII.1 What are highlights of changes made in this Chapter?
Ans: Section 153 of the Income-tax Act, 1961 which provides limitation for making assessment and reassessment etc. and section 155 of the said Act which deals with other amendments have been converted into tabular format for ease of readability.
Section 144B of the said Act which lays down the procedure for making faceless assessment has been simplified and redrafted as proposed section 273 of the Bill.
Sections 153A to 153D stand omitted in the Bill as these provisions do not apply to searches conducted after 1st April’ 2021.
QXVII.2 What is the extent of reduction in terms of number of sections and number of words in this Chapter?
Ans: Part A of the Chapter XVI in the new Income Tax Bill,2025 contains 24 sections as against 33 sections in the Income-tax Act, 1961. Further, number of words has also been reduced from 26,651 words to 13,160 words.
QXVII.3 Please state policy changes made, if any, in this Chapter.
Ans: No major policy changes have been made in this Chapter of the Bill. However, minor changes that are clarificatory/procedural in nature have been made in certain provisions, as under-
a. The following has been included as ‘information’ for the purposes of issue of notice under section 148, for which the procedure prescribed under section 148A shall not be required, –
i. Directions of Approving Panel
ii. Any finding or direction contained in an order passed by any authority, Tribunal or Court.
b. Provisions relating to various faceless schemes have been consolidated into one proposed section, namely Section 532 which confers powers on the Central Government to frame schemes for eliminating interface with the assessee.
c. Virtual digital asset has been included in the definition of ‘undisclosed income’ for the purposes of search assessment.
XVIII. Return of Income
Answers to Frequently Asked Questions
QXVIII.1 How will the simplification efforts in filing the return of income will help me as tax-payer?
Ans: Chapter XV of the bill is divided into two parts: Part A (pertaining to PAN) and Part B (pertaining to the filing of return of income). The proposed section 263(1)(a) of the Bill lists the various categories of assessees who are required to file the returns of income. Under Section 139 of the Income Tax Act, 1961, these assessees are scattered across various sub-sections. In the proposed Income Tax Bill, all assessees are consolidated in one place which makes it easier for each category of assessees to locate and fulfil their return filing obligations.
QXVIII.2 Are exempt entities required to file return of income?
Ans: Yes, exempt entities continue to be under obligation to file return of income if their total income before allowing exemption exceeds the maximum amount not chargeable to income tax.
QXVIII.3 Have the due dates for filing returns of income changed?
Ans: No, the due dates for filing returns of income for each category of assessees are still the same. They are now presented in a tabular format for easier understanding.
QXVIII.4 Have the provisions for belated returns, revised returns, and updated returns changed?
Ans: No, the provisions regarding belated returns, revised returns, and updated returns remain the same as in the Income Tax Act, 1961(including amendments proposed vide Finance Act, 2025).
XIX. Tax Deduction and Collection at Source
Answers to Frequently Asked Questions
QXIX.1. What are highlights of simplification made in TDS/TCS provisions?
Ans: In the existing Act, there are 43 sections which specify the various sums which are liable to TDS, depending on the status of the payer/payee, subject to applicable monetary limits. The sections provide the rate at which tax is liable to be deducted at source.
In the proposed Bill, all these sections have been merged into one section. Section 393 of the proposed bill contains 3 Tables applicable to three broad categories of Payees- Residents, Non- residents and any person. The respective Table for each category in turn specifies the nature of income or sum, monetary threshold, payer/person and the applicable rate of TDS.
In the table for Resident payees, similar nature of sums have been clubbed together, such as Commission, Rent, Interest, Income from Capital Market, etc. Further, a separate Table has been provided covering the cases/conditions where TDS is not required to be deducted.
Similarly, the provisions relating to TCS have been merged and placed in one section. Section 394 of the proposed bill contains one Table which specifies the nature of receipts, monetary threshold, collector and rate of TCS. The said section also lays down the conditions for no collection of TCS.
Furthermore, provisions relating to the following matters, which were present through-out the Chapter in the existing Act, have been merged and placed together as independent sections in the proposed Bill,
- Certificates including Lower Deduction/Collection Certificates
- Compliance and reporting (filing of statements )
- Consequences of failure to deduct or collect tax or pay the tax deducted or collected
- Processing of Statements
QXIX.2. What is the extent of reduction in terms of number of sections and number of words?
Ans: In the proposed Bill, provisions relating to TDS/TCS are contained in 13 sections as against 69 sections in the existing Income Tax Act,1961.
The relevant parts of the Chapter XIX of the proposed Bill contains 14,675 words as against 27,452 words in the existing Income Tax Act,1961.
QXIX.3 How many rates of TDS /TCS have been prescribed in the proposed Bill?
Ans: Rates of TDS/TCS as well as thresholds are same as in Income Tax Act, 1961(being amended upto Finance Bill, 2025)
