Are you required to choose the New Tax Regime once more in the 2025 Income-Tax Bill? What's the scope for Old Tax Regime

The Income Tax Bill, 2025 was presented in the Lok Sabha by Finance Minister Nirmala Sitharaman on February 13, 2025. The proposed Bill aims to simplify and modernise India's tax system by replacing the old Income Tax Act, 1961. Once approved by the Parliament and signed by the President, the new bill will come into effect.

In the FAQs, the Income Tax Department shared that the proposed Bill is designed to be user-friendly, transparent, and easier to comprehend. Unlike the current Income-tax Act, 1961, which has 18 tables, the new Bill includes over 57 tables. This comprehensive format includes essential details such as deductions, TDS/TCS rates, and exemptions in a more accessible tabular layout for taxpayers’ convenience.

In terms of taxes and personal taxation, the Income Tax Bill 2025 has not made any major change in the direct taxation structure, ensuring continuity and stability. 

Unlike the present Act, the Bill has specified deductions for rent paid, life and health insurance premia, contribution to provident fund, and home loan among others. Tax slabs in the new tax regime are provided in tabular format. However, it does not provide a table for the tax rates for the old tax regime. 

Are you required to choose the New Tax Regime once more in the 2025 Income-Tax Bill?

Taxpayers who have already selected the new tax regime in the Income-Tax Act 1961 will not need to choose it again in the upcoming Income Tax Bill 2025. The current regulations for selecting a tax regime will remain unchanged in the new bill. 

The transition from the old act to the new bill is expected to be smooth, as confirmed by the Central Board of Direct Taxes (CBDT). Additionally, all existing rules pertaining to income tax return filing will remain in place.

New tax regime under Income Tax Bill 2025

The new income-tax bill includes no policy changes related to the new tax regime. Instead, the Central Board of Direct Taxes (CBDT) has implemented measures to simplify the provisions of the new regime for better understanding. 

This separate section in the bill focuses on the special rate of taxation for individual taxpayers, domestic companies, cooperative societies, and other eligible taxpayers. 

Redundant provisions have been eliminated, and tables have been included to streamline explanations and conditions. The bill also consolidates various types of income that qualify for special rates.

Current rules for opting old tax regime or new tax regime

Currently, taxpayers have the option to file their returns under either the new or old tax regimes, each with its own advantages and disadvantages. Taxpayers are free to choose the regime that best suits their individual circumstances. However, there are specific conditions that must be considered when selecting a tax regime:

Taxpayers with business or professional income are restricted from switching between the two regimes annually. Once they opt out of the new regime, they are only allowed one opportunity to switch back. Once they have made the switch back to the new regime, they are unable to revert to the old regime.
Individuals with non-business income, like salaried employees, can switch between the new and old tax regimes each year. However, the choice to utilize the old tax regime must be made before the income-tax return due date.

It is important to note that these rules will remain in effect under the new income-tax bill as well.