Income Tax Bill 2025: Tax year not financial year or assessment year will come up in new bill; here's what it means
One significant amendment in the revised Income Tax Bill is the introduction of the term 'tax year', which replaces the traditional concept of the 'assessment year'.


- Feb 12, 2025,
- Updated Feb 12, 2025 2:53 PM IST
The government has released the new Income Tax Bill to the public ahead of its scheduled presentation in Parliament on February 13, 2025. This comprehensive document consists of 622 pages and will be a substantial update to the existing Income Tax Act of 1961. The Bill is comprised of 23 chapters, 16 schedules, and 536 clauses aimed at streamlining tax terminology.
One significant amendment in the revised Income Tax Bill is the introduction of the term 'tax year', which replaces the traditional concept of the 'assessment year'. Under the current system, taxes were calculated based on income earned in the fiscal year prior to the assessment year (e.g. AY25 corresponds to FY24). The new bill eliminates the distinction between the previous year and the assessment year, consolidating them under the streamlined concept of the tax year.
Key points
1. The term "Tax Year" will replace "Assessment Year," and "Financial Year" will replace "Previous Year."
2. The incoming income tax legislation will eliminate mentions of FY (financial year) and AY (assessment year) in favor of a unified term, known as tax year.
3. Tax year will now refer to the twelve-month period starting on April 1st of the financial year. In instances where a business or profession is newly established, or a source of income is newly generated in a particular financial year, the tax year will commence from that point.
(a) the date of setting up of such business or profession; or (b) the date on which such source of income newly comes into existence, and ending with the said financial year.
4. When starting a business or new profession, the tax year starts on the date of establishment and concludes at the end of the financial year. Essentially, income tax is calculated based on the economic activity and earnings within a designated 'tax year'.
5. Currently, the income tax system operates based on the concept of an assessment year, where taxes are calculated on income received in the previous financial year. To illustrate, income earned during the financial year 2024-25 (from April 1, 2024, to March 31, 2025) will be assessed in the assessment year 2025-26 (starting on April 1, 2025).
Experts believe that this change in terminology could lay the groundwork for a more streamlined income tax reporting process in the future.
The introduction of the Income-Tax Bill, 2025 by Finance Minister Nirmala Sitharaman represents a pivotal moment for India's taxation system. This landmark legislation signifies a shift towards a more efficient, transparent, and technology-driven approach to tax compliance. It was unveiled during the July Budget session last year and is viewed as a significant step towards modernizing the tax system, enhancing transparency, simplifying compliance, and creating a more favorable environment for taxpayers.
The government has released the new Income Tax Bill to the public ahead of its scheduled presentation in Parliament on February 13, 2025. This comprehensive document consists of 622 pages and will be a substantial update to the existing Income Tax Act of 1961. The Bill is comprised of 23 chapters, 16 schedules, and 536 clauses aimed at streamlining tax terminology.
One significant amendment in the revised Income Tax Bill is the introduction of the term 'tax year', which replaces the traditional concept of the 'assessment year'. Under the current system, taxes were calculated based on income earned in the fiscal year prior to the assessment year (e.g. AY25 corresponds to FY24). The new bill eliminates the distinction between the previous year and the assessment year, consolidating them under the streamlined concept of the tax year.
Key points
1. The term "Tax Year" will replace "Assessment Year," and "Financial Year" will replace "Previous Year."
2. The incoming income tax legislation will eliminate mentions of FY (financial year) and AY (assessment year) in favor of a unified term, known as tax year.
3. Tax year will now refer to the twelve-month period starting on April 1st of the financial year. In instances where a business or profession is newly established, or a source of income is newly generated in a particular financial year, the tax year will commence from that point.
(a) the date of setting up of such business or profession; or (b) the date on which such source of income newly comes into existence, and ending with the said financial year.
4. When starting a business or new profession, the tax year starts on the date of establishment and concludes at the end of the financial year. Essentially, income tax is calculated based on the economic activity and earnings within a designated 'tax year'.
5. Currently, the income tax system operates based on the concept of an assessment year, where taxes are calculated on income received in the previous financial year. To illustrate, income earned during the financial year 2024-25 (from April 1, 2024, to March 31, 2025) will be assessed in the assessment year 2025-26 (starting on April 1, 2025).
Experts believe that this change in terminology could lay the groundwork for a more streamlined income tax reporting process in the future.
The introduction of the Income-Tax Bill, 2025 by Finance Minister Nirmala Sitharaman represents a pivotal moment for India's taxation system. This landmark legislation signifies a shift towards a more efficient, transparent, and technology-driven approach to tax compliance. It was unveiled during the July Budget session last year and is viewed as a significant step towards modernizing the tax system, enhancing transparency, simplifying compliance, and creating a more favorable environment for taxpayers.