The draft bill has 23 chapters and 16 schedules. The bill explains who shall be liable to pay tax, taxable and non-taxable income, deductions, and other provisions.
Published Feb 12, 2025 | 4:17 PM ⚊ Updated Feb 12, 2025 | 6:56 PM
Income Tax. (iStock)
Union Finance Minister Nirmala Sitharaman is all set to present the Income-Tax Bill 2025, in the Lok Sabha. According to reports, the Bill will be presented on Thursday, 13 February.
The draft Bill has 23 chapters and 16 schedules. The Bill explains who shall be liable to pay tax, taxable and non-taxable income, deductions, and other provisions.
The Income-Tax Bill, 2025, introduces revised tax slabs under the new tax regime, with no tax up to an income of ₹4 lakh and 30 percent for income above ₹24 lakh.
The Bill also uses a “simplified language”, like replacing financial year with tax year. Tax year means the 12 months period of the financial year commencing on 1 April.
However, in the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with the date of setting up of such business or profession, or the date on which such source of income newly comes into existence, and, ending with the said financial year.
According to the draft Bill, “Income-tax for any tax year shall be charged as per the provisions of this Act at the rate or rates which are enacted by a Central Act for such tax year.”
It means that every taxpayer with an income above the exemption limit for the assessment year has to pay income tax according to the specified rate.
According to the Bill, under the new regime, income tax is not payable if the taxable income is less than ₹12 lakh. There is also a standard deduction of ₹75,000, effectively making the non-taxable income ₹12.75 lakh.
If the taxation is based in the old regime, there is no tax up to an income of ₹5 lakh. The standard deduction is ₹50,000.
Income-tax payable by a person, being—
(a) an individual;
(b) a Hindu undivided family (HUF);
(c) a company;
(d) a firm;
(e) an association of persons or a body of individuals, whether
incorporated or not;
(f) a local authority; and
(g) every artificial juridical person, not falling within any of the
preceding brackets,
And, all incomes under the following heads of income are liable to pay tax
(a) Salaries;
(b) Income from house property;
(c) Profits and gains of business or profession;
(d) Capital gains; and
(e) Income from other sources.
While resident Indians are liable to pay tax on global income — income earned in India and abroad — non-resident Indians are liable to pay tax only on income generated in India.
An individual shall be resident in India in a tax year if that person is in India for a total of 182 days or more in that tax year; or is in India cumulatively for 60 days or more during that year and has been in India cumulatively for 365 days or more in the four years preceding such tax year.
A company is considered a resident of India if its management and control are based in India.
Further, any income that is earned, received, or arises in India is taxable in India, including salary paid by an Indian company (even if you work abroad), business profits made in India, interest from Indian bank accounts, rental income from property in India and capital gains from selling Indian shares or land.
A person has to pay income tax based on the following rates if the income exceeds the non-taxable income.
The income tax is calculated for the income obtained via the five heads mentioned above.
For a salaried individual, tax has to be paid on basic salary, Dearness Allowance (DA), bonuses, commissions and other perks. A standard deduction of ₹75,000 can be claimed by salaried individuals who have opted for the new tax regime and ₹50,000 for the old regime.
Any income obtained from properties (rental income) is taxable with a standard deduction of 30 percent. However, if the property has any loans, the payable interest can also be deducted from the taxable income.
Income from profits and gains of business or profession is taxable. The taxable income is calculated after deducting the expenditure from the profit.
Capital gains refer to the income generated from the sale of an asset, including property, shares, mutual funds etc. The taxable income is calculated based on short-term gains and long-term gains.
For stocks and equity mutual funds, it is considered short-term if held for a period of one year or less and long-term if otherwise. For debt mutual funds, gold and bonds it is three years, and for real estate or property it is two years.
In terms of short-term gains, a 15 percent tax is payable for stocks and equity mutual funds. Real estate, debt funds, and other assets are taxed based on income slab.
In terms of long-term gains, a 10 percent tax is payable, if gains exceed ₹1 lakh, for stocks and equity mutual funds. For real estate, debt funds, and other assets, there is a 20 percent tax with indexation benefit.
Indexation is the adjustment of prices, wages, or asset values based on changes in another price or index.
All other income other than the ones mentioned above are classified under “income from other sources”. Standard income from other sources, like interest, dividends, and family pensions, are taxed according to income slab rate.
For bank interest income, a deduction of up to ₹10,000 on savings account interest can be claimed. For senior citizens, it is ₹50,000. For a family pension, a deduction of ₹15,000 or one-third of the pension amount, whichever is lower, can be claimed.
Lottery winnings and betting income are taxed at a flat 30 percent rate. Gifts from family members are tax-free, but gifts from non-relatives, if valued above ₹50,000, are taxable.
It is to be noted that income from agriculture is exempt from tax.
Similarly, income earned by a charitable or religious institution is exempt from tax, provided it is used for charitable purposes. Registered political parties and electoral trusts are exempt from tax, as long as they comply with disclosure rules.
Additionally, there will be some deductions, like payment of insurance premiums, for the taxpayers following the old tax regime.
