A draft of the new Income Tax Bill is out, and at first glance, it feels like the same old story in a new book.
While there are some structural updates, the core of the tax system remains unchanged.
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Introduction of ‘tax year’: Up until now, we had financial year (FY)—the period in which you earn income—and assessment year (AY)—the year in which you file your taxes for that income. This often led to confusion.
Now, the bill simplifies it by introducing ‘Tax year’—a single term that replaces both and it will be used to refer the year when income was earned.
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ITR filing is mandatory for foreign assets: If you own any asset outside India, you are mandated to file an ITR—no exceptions. This rule already existed, but now, the bill clearly spells it out to remove any ambiguity.
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No changes to key tax rules or rates:
While there’s a lot of buzz around the new bill, many things remain exactly the same:
- Due dates → No extensions, the timelines stay as they are.
- Heads of income → No restructuring, the categories remain unchanged.
- Capital gains tax rates → No reductions, no increases.
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Budget announcements now part of the bill: By now, you’ve probably seen posts floating around about higher tax-free income, revised slabs, etc. in the new tax bill. But these changes were already announced in the Union Budget 2025.
The new bill doesn’t introduce them—it simply formalizes them. If you followed the Budget updates, there’s nothing dramatically new here.
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Changes won’t be effective immediately: The new Income Tax Bill is not effective immediately. It’s subject to approval and amendments before it becomes law. The earliest it will take effect is April 1, 2026.
What does that mean for us?
Tax computation and filing for FY 2024-25 and FY 2025-26 will still be done under the existing Income Tax Act.
While the new Income Tax Bill brings some clarity, it’s more of a structural cleanup than a major tax reform.
What are your thoughts?