The Indian government has finally unveiled the much-awaited Income Tax Bill 2025. Spanning 622 pages, this comprehensive bill introduces various clauses, chapters, and schedules, bringing significant updates to the tax system. The bill is set to become effective from April 1, 2026.
While we will be covering various provisions and terms in future blogs, here are some key changes that stand out in the new Income Tax Bill:
1. Cloud-Based Storage Now Recognized in Books of Account!
One of the most notable changes is the updated definition of Books of Account, which now includes cloud-based storage.
- Previously, tax laws primarily recognized physical and digital records stored on local systems.
- Now, with businesses—big and small—relying on cloud storage, this update aligns taxation laws with modern technology.
This move ensures that businesses maintaining records on cloud platforms comply with tax regulations without ambiguity.
2. Say Goodbye to “Financial Year” and “Assessment Year”!
The new Income Tax Bill 2025 introduces the term “Tax Year”, replacing the traditional Financial Year (FY) and Assessment Year (AY).
- While the tax period remains 12 months, this change aims to simplify tax terminology and eliminate confusion between FY and AY.
- This is expected to make compliance easier for taxpayers and professionals alike.
3. “Recomputation” Introduced in Tax Assessments
A major addition to tax procedures is the inclusion of “Recomputation” under the definition of assessment.
- The updated definition now covers assessment, reassessment, and recomputation.
- This broadens the scope of tax assessments, allowing for more refined tax evaluations.
- It will be interesting to see how this change is implemented and whether it affects scrutiny and reassessment cases.
4. No Change in the Definition of “Business”
The definition of “Business” in the new Income Tax Bill remains unchanged. It continues to include:
- Trade, commerce, or manufacture
- Any adventure or concern in the nature of trade, commerce, or manufacture
This means existing tax interpretations regarding business income remain valid.
5. No Change in the “Heads of Income”
The five traditional heads of income remain the same in the new bill:
- Salaries
- Income from House Property
- Profits & Gains of Business/Profession
- Capital Gains
- Income from Other Sources
Taxpayers and professionals will continue to follow the same categorization for filing income tax returns.
6. Chartered Accountants to Continue Conducting Tax Audits
Under the new Income Tax Bill 2025, Chartered Accountants (CAs) remain central to tax audits.
- The bill continues to define “Accountant” as a Chartered Accountant, recognizing their expertise in auditing and compliance.
- This ensures continuity in professional auditing standards.
Final Thoughts
The Income Tax Bill 2025 marks a significant step towards modernizing India’s tax structure. While some changes simplify compliance, others expand tax assessment powers.
We will be closely analyzing more provisions of this bill in our upcoming blogs to provide deeper insights.
Stay tuned for more updates!
