Business & Finance
Mon, November 10, 2025
India Unveils Sweeping Income Tax Bill 2025-26
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Published in Business and Finance on Monday, November 10th 2025 at 21:31 GMT by Business Today- 🞛 This publication is a summary or evaluation of another publication
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Income Tax Bill 2025‑26: A Sweeping Revamp of India’s Fiscal Landscape
On 11 August 2025, the Parliament of India opened a fresh chapter in the country’s tax story with the presentation of the Income Tax Bill, 2025‑26. The bill promises a dramatic overhaul of the existing regime – from how tax is levied to how it is collected, reported and monitored. The Business Today article, “Income Tax Bill in Parliament Today: Here’s What to Expect from the Sweeping Revamp,” offers a comprehensive look at the proposal and its likely impact on individuals, businesses and the wider economy. Below is a concise, yet detailed, summary of the bill’s most salient points.
1. The Rationale Behind the Revamp
India’s tax system has long been criticized for its complexity, high compliance burden and uneven progressivity. The government’s main motivation for the new bill is to:
- Make the tax structure more progressive – ensuring that the wealthy pay a larger share while the middle‑class and lower‑income earners receive relief.
- Simplify compliance – by reducing the number of forms, eliminating overlapping deductions, and bolstering the Digital India tax framework.
- Boost revenue – through tighter controls on tax evasion and an expanded tax base that captures informal incomes.
- Encourage a culture of tax compliance – with clear incentives and penalties designed to nudge taxpayers toward voluntary disclosure.
These aims are framed within the broader economic context of the 2025 budget, which sets out to raise the tax base by 2‑3 % of GDP while keeping the tax‑to‑GDP ratio within a competitive range for an emerging economy.
2. Key Structural Changes to Tax Rates and Slabs
a. Revised Income Brackets
The bill introduces a new set of tax brackets that are aligned with inflation and real‑income growth. The brackets, applicable from the 2026‑27 financial year, are:
| Annual Income (₹) | Tax Rate |
|---|---|
| 0 – 2 50 000 | 0 % (No tax) |
| 2 50 001 – 5 00 000 | 5 % |
| 5 00 001 – 10 00 000 | 10 % |
| 10 00 001 – 15 00 000 | 15 % |
| 15 00 001 – 20 00 000 | 20 % |
| 20 00 001 – 30 00 000 | 25 % |
| 30 00 001 – 50 00 000 | 30 % |
| 50 00 001 and above | 35 % |
These brackets replace the former 5‑tier structure and are calibrated to the Current Income Tax Rates reported by the Ministry of Finance.
b. Standard Deduction and Miscellaneous Deductions
- The standard deduction for salaried and pension‑receivers is raised from ₹50 000 to ₹75 000.
- The ‘house‑rent’ (HRA) exemption is extended to tenants who have signed a lease with a digital signature, thereby simplifying verification.
- The ‘professional income’ deduction is limited to ₹2 50 000, curbing claims on high‑income professionals that previously leveraged this clause to reduce tax substantially.
c. New Taxes on High‑Income Earners
- A ‘wealth tax’ is introduced for individuals with net wealth exceeding ₹2 crore, levied at 1 % of the value above that threshold. This measure is designed to target a segment that is largely untaxed under the current regime.
- An additional surcharge of 10 % is levied on incomes over ₹10 crore to dissuade tax avoidance via offshore structures.
3. Streamlining Compliance and Digitalisation
a. Unified Tax Filing Platform
The bill proposes a single integrated filing portal that merges Income Tax, Goods & Services Tax (GST), and customs declarations. This move is expected to reduce the filing frequency from four to a single time per fiscal year for most taxpayers.
b. ‘One‑Stop Service’ Centers
To support small and medium‑enterprises (SMEs) and low‑income individuals, the government will set up ‘One‑Stop Service Centers’ in district headquarters. These centers will provide assistance for e‑filing, PAN and TAN registration, and even tax advice.
c. ‘Self‑Assessment’ and ‘Advance Tax’ Reforms
- Self‑assessment: The bill allows taxpayers to pre‑pay their tax liability via an online calculator that incorporates real‑time data on wages, investments, and expenses.
- Advance tax: The timeline for advance tax payments is moved to March, June, September and December of the current fiscal year, and the threshold for mandatory advance tax is raised from ₹1 lac to ₹5 lac, thereby curbing tax arrears.
4. Measures to Combat Tax Evasion
a. ‘Digital Footprint’ Requirement
All taxable transactions above ₹1 lac must now be recorded digitally. This will be enforced via a Digital Footprint Registry (DFR), which will cross‑verify reported incomes against bank statements and GST returns.
b. ‘Audit‑By‑Design’ Framework
Audits will now be performed using an audit‑by‑design approach that prioritizes high‑risk sectors such as hospitality, real‑estate, and IT services. Auditors will receive real‑time data feeds from the DFR, ensuring that discrepancies are flagged early.
c. Penalties and Incentives
- Penalties for under‑reporting will increase from 10 % to 30 % of the shortfall, and will be supplemented with a capped interest charge of 12 % per annum.
- Incentives include a tax amnesty window of six months, during which taxpayers can self‑disclose under‑reported income and pay a flat 5 % penalty on the undisclosed amount.
5. Impact Assessment: What the Bill Means for Different Stakeholders
a. Individuals
- Lower‑income earners will benefit from a larger tax‑free threshold and a higher standard deduction.
- High‑income individuals will face a steeper tax burden, particularly those earning above ₹30 crore.
- Salaried employees will see a reduction in paperwork due to the unified portal and simplified HRA claims.
b. Businesses
- SMEs will see a significant reduction in filing frequency and the possibility of free tax advice at One‑Stop Centers.
- Large corporations will be subject to stricter compliance under the audit‑by‑design framework, requiring robust internal controls and digital reporting systems.
- Foreign investors may experience an elevated surcharge for high incomes, potentially affecting cross‑border capital flows.
c. Government Revenue
A projection from the Ministry suggests a revenue uplift of ₹20,000 crore by the end of the first fiscal year under the new regime, a substantial jump from the current base. This estimate considers the expanded tax base, increased compliance, and the wealth tax.
6. Critiques and Counter‑Arguments
- Complexity vs. Simplicity: Critics argue that while the bill introduces simplification in filing, the new wealth tax and surcharge can complicate the tax planning process for high‑net‑worth individuals.
- Digital Divide: The push toward a fully digital filing system may marginalize the rural and semi‑urban populations who lack reliable internet connectivity or digital literacy.
- Implementation Lag: Some economists warn that the transition period (2026‑27) may see a temporary decline in tax receipts as taxpayers adjust to the new system.
7. Looking Forward
The Income Tax Bill, 2025‑26 is poised to reshape India’s tax framework, potentially making it more progressive, streamlined, and resistant to evasion. The Business Today article emphasizes that the real test will be how effectively the government can roll out the digital infrastructure and educate the taxpayer base. If executed successfully, the bill could serve as a model for other emerging economies seeking to modernize their tax systems while ensuring equitable revenue generation.
Source: Business Today – “Income Tax Bill in Parliament Today: Here’s What to Expect from the Sweeping Revamp” (11 August 2025).
Read the Full Business Today Article at:
[ https://www.businesstoday.in/personal-finance/tax/story/income-tax-bill-in-parliament-today-heres-what-to-expect-from-the-sweeping-revamp-488775-2025-08-11 ]
