Income Tax Act, 1961 Vs.

Income Tax Bill, 2025

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

Section 4: Income-tax shall be charged for a Clause 4: Income-tax shall be charged Simplified language and the
financial year at rates as specified in the for a “tax year” (aligned with the introduction of "tax year"
Basis of Charge
Finance Act for the corresponding financial year) at rates specified in the terminology to align with
assessment year. Finance Act. modern usage.

Section 2: Provides definitions, including Clause 2: Consolidates definitions and Streamlined definitions;
“assessee,” “assessment year,” and introduces terms like “tax year,” “virtual introduces terms relevant to
Definitions
“previous year.” Definitions for digital digital asset,” and “electronic mode” for modern economic
assets are absent. clarity. transactions.

Clauses 5 and 9: Similar scope, but

Sections 5 and 9: Residents’ income Enhanced clarity for non-
Scope of Total explicitly defines deemed income (e.g.,
includes global income; non-residents are residents and deemed income
Income payments made to specified persons)
taxed on income accruing in India. rules.
and accrual sources.

Clause 6: Similar residency criteria but

Section 6: Defines residency based on stay Additional guidance for
Residence introduces nuances for residency
in India (182 days or 60 days in specific complex residential status
Criteria determination in complex cases (e.g.,
cases). cases.
multiple citizenships).

Sections 14 to 59: Includes Salaries, House Clauses 13 to 59: Similar structure but Expanded to address modern
Heads of Income Property, Business/Profession, Capital includes new income categories like income streams like virtual
Gains, and Other Sources. digital earnings and assets. assets and online activities.

Sections 10, 80C to 80U: Wide-ranging Clauses 11 to 154: Consolidates Introduces deductions for
Deductions & deductions, including those for deductions and introduces provisions for innovation, digital enterprises,
Exemptions investments, donations, and specific startup benefits and digital business and renewable energy
expenses. incentives. investments.

Sections 45 to 55A: Categorizes capital Clauses 67 to 91: Retains similar

Explicit rules for digital assets
gains into short-term and long-term based categorization but adds specific
Capital Gains and revised treatment for new
on holding periods; special rates for provisions for virtual digital assets and
asset classes.
securities. updates beneficial rates.

Clauses 263 to 389: Introduces faceless

Sections 139 to 158: Covers audit Emphasis on automation,
Administrative assessments, e-filing mandates, and
requirements, filing of returns, and transparency, and reduced
Provisions provisions for taxpayer-friendly
assessment processes. human intervention.
administration.

Clauses 178 to 184: Comprehensive

Broader GAAR provisions,
Anti-Avoidance Sections 95 to 102: General Anti-Avoidance GAAR covering impermissible
ensuring stricter checks against
Rules Rules (GAAR) with limited application. arrangements, transactions lacking
tax avoidance.
commercial substance, and specific risks.

Clauses 332 to 355: A detailed Comprehensive regime with

Sections 11 to 13: Defines income tax
Non-Profit framework defining taxable income, stricter compliance
exemptions for certain charitable purposes;
Organizations compliance, and restrictions on non- requirements and well-defined
limited guidance on compliance.
profit commercial activities. exemptions.
 Income from Salary

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

Section 15: Income is chargeable under the Clause 15: Similar provision, covering
No major structural changes;
Chargeability head "Salaries" when due or received, income due or received, including arrears
language simplified for clarity.
including arrears of salary. of salary, for the tax year.

Section 17: Includes wages, annuities, Clause 16: Covers wages, annuities, Maintained scope but adds
Scope of Salary pensions, gratuities, commissions, pensions, gratuities, commissions, clarity for digital
perquisites, and profits in lieu of salary. perquisites, and profits in lieu of salary. compensation forms.

Section 17(2): Defines perquisites and Clause 17: Similar definition but explicitly
Modernized to exclude work-
taxable benefits provided by the employer, excludes certain allowances for digital
Perquisites related digital assets from
such as accommodation and motor tools or assets used exclusively for work
taxable perquisites.
vehicles. purposes.

Clause 19: Standard deduction increased

Section 16: Includes standard deduction, Standard deduction increased
Deductions to ₹75,000 or salary, whichever is less, for
tax on employment, and entertainment and new conditions added for
from Salary certain categories; similar allowances
allowance (specific cases). eligibility.
retained.

Section 17(3): Includes payments due to

Clause 18: Retains similar inclusions but Expanded examples and
Profits in Lieu of termination of employment, such as
provides additional clarity on lump-sum clearer language for specific
Salary gratuities and Keyman insurance policy
compensation scenarios. cases of termination benefits.
payments.

Relief on Clause 157: Relief provisions extended to Broader applicability for relief
Section 89: Relief provided for tax liability
Arrears of multiple-year salaries and lump-sum on specific types of income,
arising due to receipt of arrears of salary.
Salary payments from family pensions. including arrears.
 Income from House Property

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

Section 22: The annual value of any Clause 20: Similar provision, charging
No significant change;
property consisting of buildings or lands income from buildings or lands
Chargeability maintains scope and
appurtenant thereto is chargeable to tax appurtenant thereto under "Income from
structure.
under "Income from House Property." House Property."

Section 22: Property used for the owner’s Clause 20(2): Property portions occupied
Exemptions for business or profession is excluded if profits for business or profession, with profits Clearer phrasing but similar
Business Use are taxable under "Profits and Gains of taxable under other heads, are excluded concept.
Business or Profession." from this computation.

Section 23: Annual value is deemed as the Clause 21: Annual value determined as
Explicitly allows for
Determination of higher of fair rental value or actual rent the higher of reasonable expected rent or
exclusions such as
Annual Value received; allows for deductions on property actual rent received; provides deductions
unrealizable rent.
taxes paid. for local authority taxes.

Section 23(1)(c): If a property is vacant for Clause 21(2): Similar provision for
Vacancy No significant change in
part of the year, the annual value is adjusted adjusting annual value when properties
Allowance approach.
based on rent received or receivable. are vacant for part of the tax year.

Section 24: Deduction for municipal taxes, Clause 22: Similar deductions for Aligns broadly with existing
Deductions from standard deduction (30% of annual value), municipal taxes, 30% of annual value as provisions; retains
Income and interest on borrowed capital up to standard deduction, and interest on ₹2,00,000 limit for interest
₹2,00,000 for self-occupied properties. borrowed capital with conditions. deduction.

Clause 21(6): Annual value deemed nil for

Section 23(2): Annual value is considered nil Maintains similar scope but
Self-Occupied two self-occupied houses; interest
for two self-occupied houses; interest simplifies applicability
Property deduction restrictions similar but defined
deduction restricted to ₹2,00,000. rules.
clearly.

Clause 23: Similar provisions, taxing

Section 25AA: Arrears of rent or unrealized Aligns with current law but
Arrears and arrears and unrealized rent recovered;
rent recovered are taxed as income; 30% with improved language for
Unrealized Rent deduction of 30% on such amounts
deduction allowed. clarity.
allowed.

Clause 21(5): Properties held as stock-in-

Introduces a specific relief
Property Held as Not specifically addressed; treated under trade are deemed to have nil annual value
period for properties held
Stock-in-Trade general provisions of business income. for two years from the end of the
as stock-in-trade.
financial year of completion.

Section 26: Income from co-owned property Clause 24: Similar provision, assessing No significant change;
Properties Owned
is divided in proportion to ownership share, income for co-owners based on retains the current
by Co-Owners
assessed separately for each owner. ownership share. approach.
 Income from Business and Profession

Income Tax Bill, 2025 (Clause &

Provision Income Tax Act, 1961 (Section & Description) Key Changes
Description)

Section 28: Specifies the income chargeable Clause 26: Similar provisions defining
under the head "Profits and Gains of Business income chargeable under the head No structural changes,
Chargeability
or Profession," including profits from “Profits and Gains of Business or but language is simplified.
business, trade, and vocation. Profession.”

Sections 30 to 37: Lists various allowable Clauses 28 to 37: Retains similar

Modernization of
Deductions deductions, including rent, depreciation, deductions but with added clarity,
conditions for expenses,
Allowed insurance, and repairs, provided they are particularly for digital payments and
including digitalization.
incurred wholly for business purposes. business-related tools.

Clause 33: Similar provision; retains

Section 32: Provides for depreciation No major changes;
existing depreciation structure but
Depreciation deductions on tangible and intangible assets focuses on ease of
simplifies certain classifications and
based on specified rates. interpretation.
methodologies.

Section 40 & 40A: Lists non-allowable Clauses 35 and 36: Similar provisions but Expanded scope for
expenses, such as payments to non-residents include detailed rules for related-party disallowances related to
Disallowances
without tax deduction and excessive transactions and non-compliance with modern business
payments to related parties. digital payment systems. practices.

Clause 39: Retains the definition and

Income from Section 43(5): Defines speculative Updated rules for
treatment of speculative transactions but
Speculative transactions and their treatment for taxation speculative digital asset
provides more comprehensive rules for
Transactions purposes. trading.
digital trades.

Amortization of Section 35D: Allows amortization of certain Clause 44: Retains the concept but
Simplified computation
Preliminary preliminary expenses incurred before the simplifies the computation process and
methodology.
Expenses commencement of business. conditions for deduction.

Section 35: Allows deductions for capital and Clause 45: Similar provision but explicitly Broader scope for
Scientific Research
revenue expenditure on scientific research includes research in technology and scientific research
Expenses
related to the business. digital advancements. expenses.

Clause 58: Retains presumptive taxation

Sections 44AD, 44AE: Presumptive taxation
Presumptive but includes updated turnover limits and Adjusted turnover limits
for small businesses and professionals based
Taxation streamlined criteria for small businesses and simplified criteria.
on turnover or specific criteria.
and professionals.

Clause 140: Introduces explicit provisions

Dedicated provisions for
Special Provisions No explicit section for startups; benefits for eligible startups, including 100% tax
startups with high
for Startups included through various general provisions. exemption for three consecutive years
employment potential.
within the first 10 years.
 Income from Capital Gains

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

Section 45: Capital gains are taxable when Clause 67: Similar provision, specifying
No significant change;
Chargeability a transfer of a capital asset occurs during that capital gains arise on the transfer of
maintains scope and intent.
the previous year. a capital asset.

Section 2(42A): Defines short-term and Clause 72: Retains the definition but
Short-term and Holding period adjustments
long-term capital assets based on the aligns holding period thresholds with
Long-term Capital for certain asset classes,
holding period; gains computed contemporary practices and asset
Gains such as digital assets.
accordingly. classes.

Sections 48-50: Provides for computation

Clause 73: Retains the same Language modernization and
Computation of of gains by deducting indexed acquisition
methodology with additional clarity on coverage for newer asset
Capital Gains costs, improvement costs, and transfer
computation for modern asset types. categories like digital assets.
expenses from consideration.

Clauses 86-88: Retains similar

Sections 54 to 54F: Exemptions for Consolidated and clearer
Exemptions on exemptions but consolidates scenarios
reinvestment in residential properties, provisions for reinvestment
Reinvestment for reinvestment benefits in specified
bonds, and certain specified assets. exemptions.
asset classes.

Clause 73: Retains provisions but

Enhanced clarity for special
Section 55: Defines cost of acquisition and introduces clarity for determining cost of
Cost of Acquisition situations and valuation
indexed cost for long-term assets. acquisition in specific situations, such as
mechanisms.
inherited or gifted assets.

Capital Gains on Section 54D: Provides relief for gains from Clause 84: Retains similar provisions Modernization of
Compulsory compulsory acquisition of certain assets if with updated project definitions for reinvestment options for
Acquisition reinvested in specific projects. reinvestment. compulsory acquisitions.

Section 50B: Provides for taxation of gains Clause 77: Similar provision, with
Enhanced clarity and scope
Slump Sale arising from the slump sale of an enhanced definitions and clearer
for complex business sales.
undertaking as a going concern. computation methods.

Section 50C: If consideration is less than Clause 78: Retains similar provisions Better alignment with
Fair Market Value
the stamp duty value, the latter is deemed with flexibility for valuation in specific valuation realities in specific
for Consideration
as full value for consideration. cases. scenarios.

Clause 91: Retains the provision but

Section 55A: Allows reference to a Modern valuation
Valuation enhances its scope to include modern
valuation officer for ascertaining fair techniques explicitly
Reference valuation techniques for new asset
market value. included.
categories.

Clause 198: Retains similar provisions for

Improved clarity on
Special Provisions Section 112A: Taxation of long-term gains equity and fund units; includes
concessional rates and
for Equity & Units on equity shares and mutual fund units. concessional rates and thresholds for
eligibility thresholds.
applicability.
 Income from Other Sources

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

Clause 92: Income of every kind not

Section 56: Income not chargeable
chargeable under any other head is No significant change; maintains
Chargeability under any other head is taxable under
taxable under "Income from Other scope and intent.
"Income from Other Sources."
Sources."

Section 56(2): Includes dividends, Clause 92(2): Includes dividends, Expanded clarity for digital
Specific Incomes
lottery winnings, and rent from sub- winnings from lotteries, card games, earnings and certain
Included
letting. gambling, and interest on securities. compensations.

Clause 93: Retains similar deductions;

Section 57: Deductions include Alignment with modern payment
Deductions adds explicit provisions for expenses like
commission for realization of income, systems and clarity for
Allowed banking commissions for certain digital
repairs, and maintenance expenses. deductions.
incomes.

Section 58: Specifies non-deductible Clause 94: Retains similar restrictions;

Enhanced enforcement for
Amounts Not expenses, including personal expenses includes stricter compliance measures
compliance with international
Deductible and payments outside India without for international payments and digital
and digital payment systems.
tax compliance. transactions.

Clause 93(d): Deduction of 1/3rd of Increased deduction limits for

Section 57(iia): Deduction of 1/3rd of
Family Pension pension or ₹25,000, whichever is less, family pensions, providing relief
pension or ₹15,000, whichever is less.
for specified cases. to dependents.

Clause 194: Retains flat 30% tax rate but

Winnings from Section 115BB: Taxed at a flat rate of Inclusion of online games and
provides clarity for winnings from online
Lotteries 30% with no deductions allowed. digital platforms for taxation.
games and virtual contests.

Section 56(2)(ix): Forfeited advances Clause 92(2)(h): Similar provision; No change in treatment, but
Forfeited Advance
received during failed property taxable under "Income from Other clearer categorization under
Money
transfers are taxable as income. Sources." "Income from Other Sources."

Clause 92(2)(i): Retains similar

Interest on Section 56(2)(viii): Taxable as income;
provisions; deduction for 50% of Maintains current treatment for
Enhanced deduction allowed for 50% of such
interest on enhanced compensation is enhanced compensation interest.
Compensation interest under Section 57(iv).
allowed.

Income from Sub- Section 57(ii): Allows deduction for Clause 93(a): Retains similar deductions No significant change; maintains
Letting rent paid on sub-let property. for rent paid on sub-let properties. the existing approach.

Clause 92(2)(j): Income from virtual New provision addressing

Virtual Digital digital assets included explicitly as taxation of digital asset
Not explicitly covered.
Assets taxable under "Income from Other transactions like
Sources." cryptocurrencies.
 Assessment Proceedings

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

Section 142: Enables the Assessing Clause 268: Retains similar provisions;
Expanded scope for asset and
Inquiry Before Officer (AO) to make inquiries and call includes power to call for detailed
liability inquiries; codifies audit-
Assessment for information before finalizing statements of assets and liabilities, and
related procedures.
assessments. reference to special audits.

Section 143: Regular assessment

Clause 270: Provides for processing Streamlined process with
Assessment includes scrutiny assessment, wherein
returns, making prima facie adjustments, detailed provisions for prima
Procedure details are verified based on filed
and selection for scrutiny assessments. facie adjustments.
returns.

Section 144: Permits AO to complete Clause 271: Similar provisions, with added Additional safeguards for
Best Judgment
assessment based on best judgment if emphasis on procedural safeguards and taxpayers to ensure procedural
Assessment
the taxpayer fails to comply. opportunities for taxpayer response. fairness.

Clause 273: Comprehensive framework for Fully codified faceless

Not explicitly included; introduced
Faceless faceless assessments, including automated assessment structure, covering
under subsequent amendments to
Assessment case allocation via a National Faceless all stages of communication and
the 1961 Act.
Assessment Centre. compliance.

Sections 147-149: Allows

Clauses 279-285: Similar provisions, with
Reassessment reassessment if income chargeable to Introduced stricter timelines and
stricter timelines and sanctions for issuing
(Escaped Income) tax has escaped assessment, subject codified procedures for notices.
notices and reassessment.
to specific conditions.

Section 153: Specifies timelines for Clause 286: Retains timelines but adjusts Updated timelines to
Time Limit for
completion of regular assessments, for faceless assessments and procedural accommodate faceless
Assessments
reassessments, and rectifications. changes. assessment frameworks.

Clause 275: Expands DRP applicability

Dispute Section 144C: Introduced for foreign Broadened scope for DRP
beyond foreign companies, allowing
Resolution Panel companies and transfer pricing applicability to improve taxpayer
domestic taxpayers access to this
(DRP) disputes. grievance redressal.
mechanism.

Sections 153A-153C: Specific

Clauses 292-296: Retains similar provisions Clarified timelines and scope for
Block procedures for search and seizure
with enhanced clarity on computation and block assessments in search
Assessments cases, with block periods for income
timelines for block assessments. cases.
assessment.

Section 142A: AO may refer to a Clause 269: Retains valuation provisions Modernization of valuation
Valuation and
Valuation Officer for estimating fair but incorporates digital and forensic tools methods with emphasis on
Technical Input
market value of property. for enhanced accuracy in assessments. technology.
 Appellate Proceedings

Income Tax Act, 1961 (Section & Income Tax Bill, 2025 (Clause &
Provision Key Changes
Description) Description)

First Appeal: Clause 357: Appeals to Commissioner Similar scope but with
Section 246A: Appeals against specified
Commissioner (Appeals) for specific orders, with a improved timelines and
orders to the Commissioner (Appeals).
(Appeals) structured procedure and time limits. procedural clarity.

Clause 356: Allows appeals to Joint

First Appeal: Joint Introduces a new appellate
Commissioner (Appeals) for cases handled
Commissioner Not explicitly provided in the 1961 Act. level for lower-ranking officer
by Assessing Officers below Joint
(Appeals) cases.
Commissioner rank.

Sections 252-255: Appeals to ITAT on

Clauses 362-364: Similar provisions for
Appeals to orders of Commissioner (Appeals); Retains core provisions but
appeals to the ITAT, with a focus on
Appellate Tribunal includes procedures and powers of the with streamlined language.
procedural efficiency and timelines.
Tribunal.

Clause 365: Retains appeals to High Court

Sections 260A-260B: Appeals on Simplified procedural
Appeals to High on substantial questions of law; enhanced
substantial questions of law; provisions guidelines and jurisdictional
Court clarity in defining jurisdiction and
for procedure and jurisdiction. clarity.
applicability.

Section 261: Appeals to Supreme Court Clause 367: Similar provisions; allows Procedural modernization;
Appeals to Supreme
on matters of law decided by the High appeals on specified substantial legal aligns with current legal
Court
Court. questions. practices.

Clause 379: Introduces the Dispute

Not explicitly provided; Dispute Expands the dispute
Dispute Resolution Resolution Committee (DRC) for small and
Resolution Panel (DRP) available under resolution mechanism to
Committee (DRC) medium taxpayers to resolve disputes
Section 144C for eligible taxpayers. include smaller taxpayers.
amicably.

Section 249: Specifies timelines for Clause 358: Retains similar timelines but
Consistent timelines and
Time Limits for filing appeals to Commissioner ensures consistent adherence and
emphasis on digital filing
Appeals (Appeals) and Tribunal; varies based on updated filing mechanisms (e.g., digital
processes.
the nature of the order. filing).

Clauses 381-389: Retains advance ruling Streamlined structure for

Advance Rulings Sections 245N-245V: Provisions for
provisions but introduces Board for advance rulings with an
and Appellate advance rulings for specified categories
Advance Rulings (BAR) for consistency and appellate mechanism for
Review of taxpayers.
appeals to High Court. clarity.

Clause 375: Allows reference to pending

Special Provisions
questions of law before the High Court or Introduces a provision to
for Repetitive Not explicitly addressed in 1961 Act.
Supreme Court to avoid repetitive reduce repetitive litigation.
Appeals
appeals.