On February 13, 2025, Finance Minister Nirmala Sitharaman introduced the Income Tax Bill 2025 in the Lok Sabha. The proposed legislation aims to simplify the terminology and structure of India’s tax laws, making it easier for taxpayers to understand and comply with tax regulations. The bill seeks to reduce the number of sections in the Income Tax Act from the current 819 to 536, streamlining the existing framework.
The introduction of the bill was met with opposition from several MPs, who staged a walkout during the session. The protest was led by NK Premachandran, an MP from Kerala’s Kollam, who raised concerns about the bill having more sections than the original Income Tax Act of 1961. In response, Sitharaman clarified that the current Act has expanded significantly over the years, and the new bill aims to consolidate and simplify the provisions.
The new bill aligns with the tax reforms announced in the Union Budget 2025-26, which was presented on February 1, 2025. Among the key changes is the introduction of revised tax slabs designed to reduce the tax burden on middle-class and salaried taxpayers. Under the new regime, individuals earning up to ₹12 lakh annually will not be required to pay any income tax.
The updated tax slabs and rates are as follows:
0-4 lakh rupees: Nil
4-8 lakh rupees: 5%
8-12 lakh rupees: 10%
12-16 lakh rupees: 15%
16-20 lakh rupees: 20%
20-24 lakh rupees: 25%
Above 24 lakh rupees: 30%
The new tax regime is expected to provide significant relief to middle-income earners. For instance, individuals earning up to ₹12 lakh annually will benefit from zero tax liability, while those earning above this threshold will see reduced tax rates under the revised slabs. The government estimates that taxpayers could save up to ₹2.6 lakh annually under the new structure.
The Income Tax Bill 2025 marks a significant step toward simplifying India’s tax laws and reducing the compliance burden on taxpayers. However, the bill’s introduction has sparked political debate, with opposition MPs raising objections and staging a walkout during the parliamentary session. The bill’s progress and potential implementation will be closely watched in the coming weeks.
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