Tax yr, crypto, salary deductions: What you should know about New Tax Bill
New Delhi, Feb 14, 2025
The new bill has also provided repeals and savings clause to ensure that rights and benefits accrued to the taxpayers under the old law are safeguarded.
The new Income Tax Bill, set to come into force on April 1, 2026, introduces a significant overhaul to India’s taxation framework, aiming for simplicity and clarity. The old Income Tax law, spanning over 800 pages with complex language and numerous provisions, has now been trimmed down to just 622 pages. Redundant sections have been eliminated, and fragmented provisions consolidated into more straightforward chapters. For example, provisions for non-profit organizations, previously scattered across multiple sections, are now unified into one chapter.
Tax Year: A key feature of the new bill is the introduction of the 'tax year' concept, replacing the long-standing 'assessment year' and 'previous year.' This simplification aligns the tax year with the financial year (April 1 to March 31), streamlining income reporting and reducing confusion.
" It shall be used to refer to all income and transactions relating to the period for which taxation will be computed. The term financial year shall be continued to be used for prescribing procedural timelines," said SR Patnaik, Partner (head - taxation), Cyril Amarchand Mangaldas.
Ankit Jain, Partner, Ved Jain & Associates explains this further:
Under the current Income Tax Act, 1961, all communications between taxpayers and the tax department refer to the 'Assessment Year,' which is the year following the Financial Year in which the income is earned.
For example, if a person earns a salary during the Financial Year 2024-25, the corresponding Assessment Year is 2025-26. When filing a tax return, the taxpayer submits it for Assessment Year 2025-26, and all related forms and notices are issued accordingly.
Similarly, if a taxpayer receives a notice for a default in Assessment Year 2022-23, it actually pertains to income earned in the Financial Year 2021-22. This discrepancy often causes confusion among taxpayers regarding the applicable years. Additionally, tax professionals face challenges in interpreting provisions, as amendments often refer to different years, making it difficult to determine their effective dates.
To simplify this, the new Income Tax Code replaces the 'Assessment Year' with a single 'tax year,' which is now aligned with the 'Financial Year.' Under this system, the 'tax year' is the same as the year in which the income is earned, and it will be taxed accordingly. By introducing a uniform definition of the tax period, this reform aims to eliminate confusion for both taxpayers and professionals, ensuring greater clarity and efficiency in tax compliance.
Virtual digital assets
Virtual digital assets (VDAs) like cryptocurrencies have also been recognized as capital assets under the new law, subject to taxation. "The new bill has recognized VDAs as an asset under the definition of property. Hence, VDAs shall be treated as a capital assets," said SR Patnaik, Partner (head - taxation), Cyril Amarchand Mangaldas.
Presumptive taxation regime under sections 44AD, 44AE and 44ADA:
Additionally, the bill proposes an increase in turnover thresholds for businesses and professionals under the presumptive taxation scheme (Section 44AD and related sections), boosting the limit to Rs 5 crore for businesses and Rs 75 lakh for professionals.
TDS and TCS provisions have been made easier to comprehend by providing tables.
There are separate tables for payment to residents and non-residents, and where no deduction at source is required.
What has been done to simplify the provisions related to Non-Profit rganizations?
The provisions related to Non-Profit Organizations were present at different places in the existing Act, in section 11, section 12, section 12A, section 12AA, section 12AB, section 13, section 115BBC, section 115BBI, section 115TD, section 115TE, section 115TF. The provisions related to approval are under the first and second proviso to section 80G (5). These have been simplified and consolidated into one chapter. All the provisions related to registered Non-Profit Organisations have now been arranged in Part B of Chapter XVII titled “B.–– Special Provisions for Registered Non-Profit Organisation” in the new Bill.
What simplification has been carried out for salaried employees in the new bill?
All the provisions pertaining to salary have been consolidated at one place for ease of understanding so that the taxpayer does not have to refer to separate chapters for filing his return of income. The deductions which were earlier allowed under section 10 of the Income Tax Act,1961, like gratuity, leave encashment, commutation of pension, compensation on VRS and retrenchment compensation, are now part of the salary chapter itself. Some of the allowances like HRA are now provided in Schedule II of the new Bill that finds reference in the provisions relating to salary. The objective was to improve readability by way of providing tables and formulas.
"Deductions from salaries, such as standard deduction, gratuity, and leave encashment, have been consolidated and presented in one place The tax slabs under the new tax regime remain the same as announced in the budget," said Ritika Nayyar, Partner, Singhania & Co.
What are the changes on rates and other policy in the new bill?
There are no changes related to rates. Since there have been regular amendments to the Income Tax Act, 1961 including amendments proposed in Finance Bill, 2025, the Act stands updated from policy perspective. All amendments proposed upto Finance Bill 2025 have been duly incorporated in the new Income tax bill 2025. Therefore, while no major policy related changes have been made in the Bill, the above aspects have led to proposed ‘material’ changes in the existing law.
"All the provisions pertaining to salary have been consolidated at one place for ease of understanding so that the taxpayer does not have to refer to separate chapters for filing his return of income.Key changes include the replacement of “assessment year” and "previous year" with “tax year,” aligning terminology with global standards. The bill has removed redundant, obsolete and unnecessary provisions. The bill also formally classifies virtual digital assets, such as cryptocurrencies, under taxable income, eliminating ambiguity. The tax slabs and rates are now structured in tabular format to improve accessibility. With a strong emphasis on digital compliance, the bill streamlines tax filing, dispute resolution, and assessment procedures, reducing litigation risks," said Akhil Chandna, Partner, Global People Solutions Leader, Grant Thornton Bharat.
[The Business Standard]
