Old Income-Tax Act 1961 vs New Income-Tax Bill 2025: Clear all confusions with this 9-point guide

Tax experts have hailed the government's efforts to completely revamp the tax laws. "After the GST reform in 2017 wherein all the indirect taxes were subsumed, the effort made by the government to revamp completely the Income-Tax Act 1961, which was legislated about 64 years ago, is quite appreciable," said CA Dr Suresh Surana.

However, ever since the announcement of the new income-tax bill, there has been a lot of confusion among taxpayers about what might change in the new tax law compared to the existing Income-Tax Act, 1961.

This 9-point guide will help you clear all confusions about the old Income-Tax Act and the new Income-Tax Bill.

The Income-Tax Bill (ITB) 2025 has 536 sections spread over 23 chapters and 16 schedules in 622 pages. In contrast, the Income Tax Act (ITA) 1961 has 819 sections and 11 schedules spread over 823 pages. The following is a quick overview of the ITA and ITB in terms of size:

In the new tax bill, significant effort has been made to remove the provisos, explanations contained in the sections and wherever necessary, tables have been inserted to make it more legible.

For instance, Dr Surana said, the meaning of agricultural land in ITA was quite complex as it was in a paragraph format. Now under the ITB, an effort has been made to tabulate certain part of the wordings, to make the meaning of an agricultural land easier to comprehend.

In the Income-Tax Act, 1961, there are over 1,200 provisos and more than 550 explanations. However, the entire new tax bill does not contain a single proviso or an explanation.

"The ITB simplifies the structure, removes the redundant and omitted provisions of ITA, and replaces the Provisos and Explanations of ITA with sub-sections, clauses, or sub-clauses," said Naveen Wadhwa, vice-president, Taxmann.

The new income-tax bill has not proposed any change in tax slabs and rates applicable to taxpayers. The focus of the new bill is to streamline the framework of the income-tax regulations to make it user-friendly and clear.

With respect to the residential status determination, there is no substantive change in the new bill

• In the new bill, the determination of residential status is in Section 6 and has been rephrased without any change in the meaning
• Sub clauses have been renumbered: For instance, deemed residency under section 6(1A) of Income-Tax Act 1961 is now contained in section 6(7) of the Income Tax Bill 2025
• Further, there is no substantive change in the determination of residential status in case of other assessees such as companies, HUFs, etc which are contained in section 6 of the ITB.

Under the Income-Tax Act, 1961, the income chargeable to tax is classified under five different heads of incomes. It was expected that there could be a change in the heads of Income. However, the new bill mentions no change in heads of Income. They are retained as following:

• Salaries
• Income from house property
• Profits and gains of business or profession
• Capital gains
• Income from other sources

"As per the ITB, in many cases it has been mentioned that rules would be prescribed under the ITB. Further, section 2(80) defines “prescribed” to mean prescribed by Rules made under this Act," he added.

He further said we need to wait for the rules under the new bill , which would provide more clarity on the operational aspects, such as perquisite valuation, disallowance of expenditure incurred to earn exempt income, valuation rules, etc.

Section 10 of the ITA, which provides for exemption of certain income such as agricultural income, share of profit from partnership firm, family pension, scholarships, certain interest on NRE/FCNR deposits, short stay exemption, etc has now been covered separately in Schedule II to Schedule VII of the ITB in a tabular format.

Under Income-Tax Act, 1961, there are several sections such as 194A (Interest), 194I (Rent), 194J (Professional fees, Fees for technical Services, Royalty payment), 194H (Commission), 194C (Contracts), etc. Most of the sections had similar provisions except for the applicable tax rates, thresholds, etc.

Under the ITB, the issue of overlapping and almost similar provisions of TDS has been addressed by covering the TDS provisions (except salaries) under section 393 of the ITB in a concise and tabular manner.

Further the provisions of TDS on salary contained in section 192 of the ITA has been covered in section 392 of the ITB. Similarly, the provisions of TCS contained in section 206C of the ITA has been covered in a tabular manner in section 394 of the ITB for ease of reference.

Currently, section 115A of the Income-Tax Act provides for the applicable tax rates on certain payments to non-residents such as towards royalties, fees for technical services, dividends, interests etc., and the rates applicable is 20% under the ITA (subject to the benefit available under the DTAA).

In the Income-Tax Bill 2025, similar provisions have been covered in section 207 wherein the tax rates are tabulated for ease of reference. However, no substantive change is proposed in the rate structure.