New Income Tax Act, 2025 (PDF) – Download

The Income-tax Act passed in 1961 has been subjected to numerous amendments since its passage sixty years ago. As a result of these amendments the basic structure of the Income-tax Act has been overburdened and language has become complex, increasing cost of compliance for taxpayers and hampering efficiency of direct-tax administration. Tax administrators, practitioners and taxpayers have also raised concerns about the complicated provisions and structure of the Income-tax Act.

Therefore, the Government in the budget in July 2024 announced that a time bound comprehensive review of the Income-tax Act, 1961 would be undertaken to make the Act concise, lucid, easy to read and understand. Accordingly, the Income-tax Bill, 2025 has been prepared which proposes to repeal and replace the Income-tax Act, 1961.

The Notes on clauses explain in detail the various provisions contained in the Bill.

Clause wise summary of the Bill as under:

1. General Provisions

Clause 1: Defines the short title, extent, and commencement of the legislation.
Clause 2: Provides definitions of various terms and expressions used in the bill.
Clause 3: Defines the term “tax year” for consistency in tax calculations.

2. Income Tax Provisions

Chargeability & Scope of Income

Clause 4: Specifies the chargeability of income tax.
Clause 5: Defines total income for both residents and non-residents.
Clause 6: Outlines conditions for determining residential status in India.
Clause 7: Covers income deemed to be received.
Clause 8: Addresses income from receipt of capital assets or stock.
Clause 9: Defines income deemed to accrue or arise in India, including business connections, interest, dividends, royalties, and capital asset transfers.
Clause 10: Special provision for income apportionment between spouses under the Portuguese Civil Code.

Income Exemptions

Clause 11: Lists incomes not included in total taxable income (as per Schedules II–VII).
Clause 12: Exempts incomes of political parties and electoral trusts.

Income Classification & Computation

Clause 13: Classifies income under different heads for tax computation.
Clause 14: Specifies non-deductible expenses linked to tax-exempt income.
Clause 15-17: Covers salary income, including wages, pensions, gratuity, commissions, and exclusions for specific perquisites.

3. Taxation of Specific Income Categories

Income from House Property

Clause 20: Defines taxation of rental income from house property.
Clause 21: Determines the annual value of properties.
Clause 22-24: Provides deductions and co-ownership taxation rules.

Profits & Gains from Business or Profession

Clause 26-29: Covers business income, deductible expenses, and employee welfare deductions.
Clauses 30-33: Deductions for insurance, bad debts, depreciation, and other business expenses.
Clauses 34-38: Specifies conditions for allowing expenses and outlines taxable deemed business profits.
Clauses 39-43: Discusses definitions related to business expenses, asset valuation, and forex fluctuations.

Capital Gains

Clause 67-77: Covers taxation on asset transfers, distributions during liquidation, and exemptions.
Clauses 78-80: Special cases where market value is used instead of transaction value.
Clauses 81-86: Exemptions for capital gains reinvested in property, bonds, or Special Economic Zones.
Clauses 87-91: Rules for capital gains in mergers, acquisitions, and compulsory land acquisition.

Income from Other Sources

Clauses 92-96: Covers miscellaneous taxable income sources and their deductions.
Clauses 97-100: Clubbing provisions where income is transferred without transferring assets.

4. Special Taxation Provisions

Taxation of Non-Residents & International Transactions

Clause 59: Taxability of royalties and technical service fees for non-residents.
Clauses 60-61: Presumptive taxation for specific non-resident businesses.
Clauses 159-161: Agreements for double taxation relief and foreign tax credits.
Clauses 162-170: Transfer pricing rules and determination of arm’s length price.

Deductions & Incentives

Clause 123-140: Deductions for insurance, health expenses, higher education loans, electric vehicles, donations, and contributions to political parties.
Clauses 141-149: Business-related tax deductions, including SEZ development and start-ups.

Special Industry Taxation

Clause 225-235: Tonnage tax scheme for shipping companies.
Clause 221-224: Special taxation regimes for venture capital funds, infrastructure investment trusts, and real estate investment trusts.

5. Compliance, Filing, and Assessments

Tax Returns & Assessments

Clauses 262-270: Return filing requirements, electronic submissions, and audits.
Clauses 271-278: Processing returns, reassessments, and rectifications.
Clauses 279-287: Assessment of income that has escaped tax.
Clauses 288-296: Rules for reassessment in search cases.

Tax Recovery & Penalties

Clauses 289-295: Tax demand notices, appeals, and recovery proceedings.
Clauses 296-305: Legal representatives’ responsibilities for tax payments.
Clauses 312-328: Special cases for taxation of estates, partnerships, and dissolved firms.

Dispute Resolution & Appeals

Clauses 356-379: Appeal procedures before Income Tax Appellate Tribunal, High Courts, and Supreme Court.
Clauses 380-390: Advance Rulings for tax disputes.
Clauses 391-404: Tax deduction at source (TDS), tax collection at source (TCS), and advance tax payments.

6. Enforcement, Penalties, and Prosecution

Penalties for Non-Compliance

Clauses 439-450: Penalties for under-reporting income, non-maintenance of accounts, and tax evasion.
Clauses 451-465: Fines for non-deduction of TDS, false financial reporting, and non-filing of returns.
Clauses 466-470: Rules for penalty waivers in genuine cases.

Prosecution & Criminal Offenses

Clauses 471-498: Punishments for evading tax, falsifying accounts, and aiding tax fraud.
Clauses 499-505: Asset transfers to avoid tax liabilities deemed void.
Clauses 506-510: Reporting obligations for crypto transactions and high-value financial activities.

7. Miscellaneous Provisions

Clauses 511-520: Reporting of high-value transactions and information sharing.
Clauses 521-530: Compliance regulations for digital transactions and linking PAN with Aadhaar.
Clauses 531-540: Rules for processing tax refunds and interest on delayed refunds.

This bill provides a comprehensive framework for tax administration, compliance, deductions, and enforcement. It incorporates:

Resident & Non-Resident Taxation: Clear rules for income earned within and outside India.
Corporate Taxation & Start-up Benefits: Special incentives for businesses in key sectors.
International Taxation & Transfer Pricing: Guidelines to ensure fair taxation in global trade.
Stringent Anti-Tax Avoidance Measures: Strong penalties and prosecution for tax fraud.
Digital & Faceless Tax Assessment: Increased use of electronic filing and automated processing.

New Income Tax PDF

New Income Tax Bill 2025 – Clause wise details of the Income Tax Act 2025 – (Download)