Where Legal Compliance Meets Business Success
Your Path to Financial Success Starts Here
Our expert team is here to guide you every step of the way, helping you navigate the complexities of personal finance.
Book a MeetingNeed Help?
Social Networks
Home / GST Filing
DTC 2025
"GST registration is essential for legal business operations and unlocking tax benefits."
Enquiry for DTC 2025
DTC 2025
What is the Income Tax Act, 2025?
The new Income Tax Act, 2025 will be taken up for discussion in the monsoon session of Parliament, Finance Minister Nirmala Sita raman said on Tuesday. Union Minister Nirmala Sita raman speaks in the Lok Sabha during the Budget session of Parliament, in New Delhi, Tuesday, March 25, 2025. (Sansad TV via PTI). Replying to the discussions on the Finance Bill 2025 in the Lok Sabha, Sitharaman said the new income tax bill, which was introduced in the House on February 13, is currently being vetted by the Select Committee. The Select Committee has been mandated to submit its report by the first day of the next session of Parliament. The monsoon session of Parliament is usually convening in July and runs through August. The simplified Income Tax Bill, which is half the size of the 1961 Income Tax Act, seeks to achieve tax certainty by minimising the scope of litigation and fresh interpretation, the Income Tax department had earlier said. The new bill has a word count of 2.6 lakh, lower than 5.12 lakh in the I-T Act. The number of sections is 536 against 819 effective sections in the existing law. The number of chapters has also been halved to 23 from 47. The Income Tax Bill 2025 has 57 tables compared to 18 in the existing Act and removed 1,200 provisos and 900 explanations.
Treatment of Capital Gains
The structure and substance of capital gains are still there in the Income Tax Act, 2025; however, the wording has been simplified. The Income Tax Act 2025's Clauses 67, 196, 197, and 198 now address the capital gains rules.
(1) Section 196: Tax on short term capital gains in certain cases:
Capital gains arising from the transfer of short-term capital assets are referred to as short-term capital gains (STCG). STCG is taxed at the taxpayer's slab rate. However, for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust, the concessional rate of 20% is applicable
(2) Section 197: Tax on long-term capital gains:
The long-term capital gain tax rate varies depending on the type of asset being sold. The tax rates applicable for different types of assets are as follows:
On Listed equity shares and equity-oriented mutual funds the Long-Term Capital Gains (LTCG) that exceed Rupees 1.25 lakh in a financial year are subject to a 12.5% tax rate from 23rd July, 2024. For transfers made up to 22nd July, 2024, the tax rate of 10% will be applicable.
But on the other assets (such as real estate, land, unlisted shares, etc.):
For Transfers made on or after 23rd July, 2024 (except for land and building) - LTCG is taxed at 12.5% without taking the indexation benefit.
But for Transfers made on or before 22nd July, 2024 - LTCG is taxed at 20% after taking the indexation benefit.
In case of transfer of land or buildings acquired before July 23, 2024, taxpayers have the option to pay tax at either a rate of 12.5% without indexation benefits or 20% with indexation benefits.
Treatment of Set-off of Losses
Set off of losses means adjusting the losses against the profit or income of that particular year. Losses that are not set off against income in the same year can be carried forward to the subsequent years for set off against income of those years. A set-off could be an intra-head set-off or an inter-head set-off.
As per section 108 of new income tax act, 2025 Set off of losses under the same head of income
1) The losses from one source of income can be set off against income from another source under the same head of income.
2) For example, the Loss from Business A can be set off against profit from Business B, where Business A is one source and Business B is another source and the common head of income is “Business”.
3) But there is Exceptions to an intra-head set off:
(i) Losses from a Speculative business will only be set off against the profit of the speculative business. One cannot adjust the losses of speculative business with the income from any other business or profession.
(ii) Loss from an activity of owning and maintaining race-horses will be set off only against the profit from an activity of owning and maintaining race-horses.
(iii) Long-term capital loss will only be adjusted towards long-term capital gains. However, a short-term capital loss can be set off against both long-term capital gains and short-term capital gain.
(iv) Losses from a specified business will be set off only against profit of specified businesses.
But the losses from any other businesses or profession can be set off against profits from the specified businesses
As per section 109 Set off of losses under any other head of income
1) The losses from one source of income can be set off against income from another source under the same head of income.
2) For example, the Loss from Business A can be set off against profit from Business B, where Business A is one source and Business B is another source and the common head of income is “Business”.
3) But there is Exceptions to an intra-head set off:
(i) Losses from a Speculative business will only be set off against the profit of the speculative business. One cannot adjust the losses of speculative business with the income from any other business or profession.
(ii) Loss from an activity of owning and maintaining race-horses will be set off only against the profit from an activity of owning and maintaining race-horses.
(iii) Long-term capital loss will only be adjusted towards long-term capital gains. However, a short-term capital loss can be set off against both long-term capital gains and short-term capital gain.
(iv) Losses from a specified business will be set off only against profit of specified businesses.
But the losses from any other businesses or profession can be set off against profits from the specified businesses
As per section 110
The unabsorbed loss from house property for any tax year shall be carried forward to the subsequent tax year, and shall be set off only against income from house property, if any, computed for such subsequent tax year, and so on and the unabsorbed loss from house property referred to in sub-section (1) shall be carried forward to the following tax year, not being more than eight tax years immediately succeeding the tax year in which such loss was first computed.
As per section 111 Carry forward and set off of loss from Capital gains.
i) The unabsorbed capital loss for any tax year shall be carried forward to the subsequent tax year and shall be set off in the manner provided.
ii) The unabsorbed capital loss arising from transfer of capital asset, being a long-term capital asset, may be set off only against capital gains, if any, from transfer of any other long-term capital asset during the subsequent tax year and so on; and (b) a short-term capital asset, shall be set off against capital gains, if any, from transfer of any other capital asset during the subsequent tax year and so on.
iii) And also remember that the unabsorbed capital loss, shall be carried forward to the following tax year, not being more than eight tax years immediately succeeding the tax year in which such loss was first computed.
As per section 112
i) The unabsorbed business loss (other than loss from speculation business) for any tax year shall be carried forward to the subsequent tax year and shall be set off only against the profits and gains of business or profession, carried on by him and assessable for that tax year, if any, computed for such subsequent tax year, and so on.
ii) And the unabsorbed business loss, shall be carried forward to the following tax year, not being more than eight tax years immediately succeeding the tax year in which such loss was first computed.
As per section 113
i) Any loss computed from a speculation business carried on by the assesse, during any tax year, shall be set off only against profits and gains, if any, of another speculation business for the said tax year.
ii) And the unabsorbed speculation business loss for any tax year shall be carried forward to the subsequent tax year and shall be set off only against the profits and gains of speculation business, if any, computed for such subsequent tax year, and so on.
And the unabsorbed speculation business loss shall not be carried forward for more than four tax years immediately succeeding the tax year in which such loss was first computed.
As per section 114 Set off and carry forward of losses from specified business as per Section 46
i) Any loss computed from a specified business carried on by the assesse, during any tax year, shall be set off only against profits and gains, if any, of any other specified business for the said tax year.
ii) And the unabsorbed loss from the specified business for any tax year shall be carried forward to the subsequent tax year and shall be set off only against the profits and gains of any specified business, if any, computed for such subsequent tax year, and so on.
As per section 115 Set off and carry forward of losses from specified activity
i) Any loss incurred by the assessee in the specified activity during any tax year, shall not be set off against the income, if any, from any source other than specified activity for the said tax year.
ii) Then the unabsorbed loss from the specified activity for any tax year shall be carried forward to the subsequent tax year and shall be set off, only against the income from specified activity, if any, computed for such subsequent tax year, and so on; and only when the specified activity is carried on by the assessee in that tax year.
iii) And the unabsorbed loss from the specified activity shall not be carried forward for more than four tax years immediately succeeding the tax year in which such loss was first computed.
Treatment of Clubbing of Income
Clubbing of income means adding or including the income of another person (mostly family members) to one’s own income. This is allowed under Section 99 of the New Income Tax. However, certain restrictions pertaining to specified person(s) and specified scenarios are mandated to discourage this practice. There are many occasions when you may require to club income of someone else with your income. If you are planning to transfer any of your assets/income to another person as a means of tax planning to avoid the income getting taxed in your hands, hold on. Such transfers could result in attraction of clubbing provisions under the Indian income tax laws. Even genuine gifts extended to your kith and kin could have these income tax implications. It will help you immensely if you get some insights on the clubbing provisions under the Indian income tax law.
As per Section 96 Transfer of income without transfer of assets
i) Transferring income without transferring asset either by way of an agreement or any other way,
ii) The Any income from such asset will be clubbed in the hands of the transferor.
Section 97
i) Chargeability of income in transfer of assets.
ii) All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-tax as income of the transferor and shall be included in his total income.
As per section 99 of new income tax act, 2025 Income of individual to include income of spouse, minor child, etc.
1) Any income arising or accruing to your minor child where child includes both step child and adopted child. The clubbing provisions apply even to minor married daughter:
i) Income will be clubbed in the hands of higher earning parent.
ii) But If the marriage of the child’s parents does not subsist, income shall be clubbed in the income of that parent who maintains the minor child in the previous year.
iii) But income shall not include in the total income of the individual where the income arising or accruing to the minor child is from manual work done by such child, or from activities where his skill, talent, specialized knowledge or experience is applied, or where such minor child is suffering from disability of the nature specified in Section 154.
2) Clubbing of income in case of Spouse
i) If your spouse receives any remuneration irrespective of its nomenclature, such as Salary, commission, fees or any other form and by any mode, i.e., cash or in kind from any concern in which you have substantial interest then Income shall be clubbed in the hands of the taxpayer or spouse, whose income is greater (before clubbing).
ii) An exception to clubbing: Clubbing is not allowable if spouse possesses technical or professional qualifications in relation to any income arising to the spouse, and such income is solely attributable to the application of his/her technical or professional knowledge and experience.
3) Direct or indirect transfer of assets to your spouse by you for inadequate consideration then Income from out of such asset is clubbed in the hands of the transferor:
i) Provided the asset is other than the house property. ii) But it has Exceptions while clubbing of income in the following cases: (a) Where the asset is received as part of divorce settlement, or (b) If assets are transferred before marriage, or (c) No husband and wife relationship subsists on the date of accrual of income, or (d) The asset is acquired by the spouse out of pin money pin money means an allowance given to the wife by her husband for her personal and usual household expenses
4) Transfer of asset to Daughter-in-law
Transfer of assets transferred directly or indirectly to your daughter in-law by you for inadequate consideration then Any income from such assets transferred is clubbed in the hands of the transferor.
5) Any person or association of person
Transferring any assets directly or directly for an inadequate consideration to any person or association of persons to benefit your daughter in-law either immediately or on deferred basis then the Income from such assets will be considered as your income and clubbed in your hands.
In case of HUF
A member of HUF transfers his individual property to HUF for inadequate consideration or converts such property into HUF property then Income from such converted property shall be clubbed in the hands of individual.
As per section 100, income of a person, other than the assesse, arising from any asset, or income from membership of a firm, is included in the total income of the assesse under this Chapter or under section 25(a), then, such person, in whose name such asset stands, shall be liable to pay, that portion of the tax levied on the assesse which is attributable to the income so included, upon service of notice of demand by the Assessing Officer in this behalf, and also where any such asset is held jointly by more than one person, they shall be jointly and severally liable to pay such tax.
- FAQ
1. Describe the 2025 Income Tax Bill.
The Income-tax Act of 1961 will be replaced with the comprehensive legislation known as the Income Tax Bill 2025. Its main goals are to reduce conflicts, streamline compliance processes, and update the tax system. The bill focuses on simplifying current regulations rather than proposing major changes to the taxation regime.
2. When is the 2025 Income Tax Bill going to take effect?
It is anticipated that the bill will take effect on April 1, 2026.
3. What 'Tax Year' is included in the new bill?
'Tax Year' is a 12-month period that starts on April 1 and ends on March 31 of the following year. This corresponds to the Indian financial year used for taxation.
4. What impact does the new bill have on tax slabs and rates?
The tax slabs under the new tax regime are revised by the Income Tax Bill 2025. With a standard deduction of ₹75,000, income up to ₹12 lakhs is notably tax-exempt, meaning that income up to ₹12.75 lakh is tax-free. Income beyond ₹24 lakhs is now subject to the maximum tax rate of 30%.
5. Have the exemptions and deductions changed?
The standard deduction is now ₹75,000 instead of ₹50,000. Furthermore, there is no tax on withdrawals from the National Savings Scheme made on or after August 29, 2024.
6. How does the bill affect salaried people's tax compliance?
By removing uncertainties and adding clearer provisions, the law seeks to make tax compliance easier. The altered tax slabs and higher standard deduction may help salaried individuals reduce their tax obligations.
7. Which resources might be used to comprehend the modifications made to the Income Tax Bill 2025?
To compare the provisions of the new Income Tax Bill 2025 with the existing Income Tax Act of 1961, the Income Tax Department has established an online self-help tool. This tool helps users better understand the changes by offering a thorough mapping of the parts from both the old and new tax legislation.