Income Tax Bill 2025: Breaking Down the Top 5 Changes for Taxpayers

You can't afford to ignore taxes if you're earning, saving, or investing. And guess what? The new income tax bill is shaking things up by several notches. Proposed to come into effect from 1st April 2026 , the new income tax law is all set to overhaul the present Income Tax Act, 1961. Several changes have been proposed in new tax laws, which are crucial for you, the taxpayer. What are these? Let's find out.

1. Simplified Language and Reduced Length

In its present format, it would not be an understatement to say that reading the laws and understanding them means hiring a lawyer and sitting with a dictionary. The language is extremely complex and difficult for the common person to understand. If you have been following budget news on income tax, you must have noticed the honourable FM stressing the concept of simplification of tax laws.

The new income tax bill does exactly that. It’s been rewritten in simpler and clearer language, so you don’t have to decode legal jargon. For example, ‘notwithstanding’ is now just ‘irrespective’ — a small change that makes things easier to understand. The number of sections has been brought down to 536 from the previous 700 plus. Content in terms of the number of pages has been slashed to 622 from 823 .

2. Goodbye Assessment Year (AY) and Previous Year (PY)

If you ever felt tax terms like AY and PY are highly confusing, you aren’t alone. The latest income tax updates simplify things by replacing AY and PY with a single, easy-to-understand term tax year. Tax year means the 12-month period of the financial year that starts from 1st April.

If you're starting a new business or suddenly getting income from a new source, your tax year begins from that date or from the date your new income source comes into existence.

3. No More Entertainment Allowance for Government Employees

Starting April 1, 2026, the new income tax law will scrap the entertainment allowance deduction. This was a perk that government employees could claim, which would have been the lowest of the :

• 1/5th of their basic salary
• ₹5,000
• Actual amount received as entertainment allowance

4. Clarity on Gift Tax

Ever received a gift from a long-lost relative and wondered if you had to pay tax on it? Good news! The new income tax bill clears up the confusion. Under Section 56(2)(x), gifts from your lineal ascendants or descendants (including those of your spouse) are tax-exempt.

What’s new? The bill makes it clear that lineal relatives can be from either the maternal or paternal side. No more second-guessing if Nana or Dada’s gift is taxable.

5. TDS Provisions are Now All in One Place

If you’ve ever struggled to keep track of different tax deducted at source (TDS) sections, here’s some good news. The new income tax bill consolidates all TDS provisions (Section 192 to 194T) under a single section — Section 393.

The rates and threshold limits remain unchanged. Whatever was proposed in Budget 2025 still holds. This means less confusion and fewer scattered rules.

Conclusion

The new tax rules in the new income tax bill aim to simplify life for taxpayers by eliminating jargon and making tax laws lucid. Redundant sections are deleted, and tables are provided for better understanding. Do follow this section for the latest income tax updates.