The newly introduced Income Tax Bill 2025 aims to simplify the existing provisions of the Income-Tax Act, of 1961. The provisions of the New Tax Regime outlined in Section 115BAC of the Income-Tax Act, 1961 will be moved to Section 202 in the new Income-Tax Bill 2025, effective from April 1, 2026.
The bill includes a dedicated section for the New Tax Regime applicable to individual taxpayers, domestic companies, cooperative societies, and other eligible taxpayers.
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The New Tax Regime under Section 115BAC came into effect from the financial year 2020-21 (Assessment Year 2021-22) with concessional tax rates and reduced deductions and exemptions. Section 115BAC was amended in Budget 2023, making the new regime the default from the financial year 2023-24.
The Union Budget 2025 has made adjustments to the New Tax Regime (NTR) to offer the middle class relief amounting to Rs 1 lakh crore. Meanwhile, the old tax regime (OTR) remains unchanged. The Budget 2025 has eliminated income tax for annual incomes up to Rs 12 lakh (previously Rs 7 lakh), benefiting over one crore taxpayers in the country and reducing the tax burden for others. These changes were implemented by increasing rebates and restructuring tax slabs.
Section 202 v/s 115BAC
Section 115BAC of the current Income Tax Act outlines the new tax regime applicable to individuals and HUFs. Similarly, Section 202 of the New Income Tax Bill addresses the tax regime for individuals, HUFs, Associations of Persons, Bodies of Individuals, and Artificial Juridical Persons.
The option to opt-out of the new tax regime is available in both the existing Income Tax Act and the New Income Tax Bill, with the new regime being the default option.
It is important to note that deductions not permitted under Section 115BAC of the current Income Tax Act are also not allowed under Section 202 of the New Income Tax Bill. Conversely, deductions permitted under Section 115BAC remain available under the new Income Tax Bill.
Income-tax slabs and rates under Section 202
The tax slabs and rates outlined in section 202 mirror those suggested for the upcoming tax system by Finance Minister Nirmala Sitharaman in the 2025 Budget. The tax-less threshold is set at Rs 4 lakh income, with earnings exceeding Rs 24 lakh subject to a 30% tax rate.
Total income Rate of tax
Up to Rs 4,00,000 Nil From Rs 4,00,001 to Rs 8,00,000 5% From Rs 8,00,001 to Rs 12,00,000 10% From Rs 12,00,001 to Rs 16,00,000 15% From Rs 16,00,001 to Rs 20,00,000 20% From Rs 20,00,001 to Rs 24,00,000 25% Above Rs 24,00,000 30%
Section 156 under New Tax Regime
If a resident individual assessee's total income is subject to tax under the New Tax regime, the following deductions are allowed from the income tax (computed before allowing the deduction):
If the income does not exceed Rs 12 lakh, 100% of the income tax payable or Rs 60,000, whichever is less. If the income exceeds Rs 12 lakh, the income tax payable on the total income, reduced by the total income in excess of Rs 12 lakh.
For those who choose the old tax regime, a rebate of up to Rs 12,500 is provided under section 156 if the total income does not exceed Rs 5 lakh.
Old Tax Regime under New Income Tax Bill
Under the old regime, income tax rates have remained unchanged:
Nil tax on income up to Rs 2,50,000 5% tax on income between Rs 2,50,001 to Rs 5,00,000 20% tax on income between Rs 5,00,001 to Rs 10,00,000 30% tax on income above Rs 10,00,000
For individuals aged 60-80 years, the basic exemption limit is Rs 3,00,000. For those above 80 years, it is Rs 5,00,000.
The Old Tax Regime also includes deductions under different sections:
Up to Rs 1,50,000 deduction under Section 80C for investments in instruments like PPF, ELSS, and LIC premiums.
Deductions for health insurance premiums under Section 80D.
Deduction for home loan interest up to Rs 2,00,000 under Section 24(b).
Additional exemptions for items like HRA and LTA are also available.