Feb 12, 2025 10:59 PM IST
The new Income Tax Bill 2025, which is likely to be tabled in the Parliament on February 13, aims to simplify the terminology used in tax laws in India.
The Centre plans to table the new Income Tax Bill 2025 in the Parliament on February 13. The new bill, a copy of which has been published by the government, aims to simplify the terminology used in tax laws in India. It will make tax filing easier for the general public and may even encourage people to begin paying taxes.
Also read: New Income Tax Bill 2025: What are expected changes and how will they affect you?
Current terminology
Financial year: It begins on April 1 of a particular year and ends on March 31 of the following year. This means that for FY25, which is currently ongoing, the time period began on April 1, 2024 and till end on March 31, 2025.
For tax purposes, whatever an individual or an entity (company or organisation) earns between this time period will be considered their income. Thus, tax will be calculated based on the entire amount of money earned by them in this period.
Also read: 10 things every taxpayer must know about Nirmala Sitharaman’s Union Budget 2025
Assessment year: The assessment year is the year which comes after the financial year. It is a purely tax-related concept and is used to describe the time period during which a person must file taxes and returns on the income they have earned during a financial year.
Therefore, for income a person or an entity earned in FY25, the tax and returns will be filed in AY26, which will begin on April 1, 2025 and end on March 31, 2026.
New terminology
Tax year: The new bill aims to replace the terms financial year and assessment year with a single term ‘tax year’, according to reports. This term will refer to the time period in which a person earns income, on which tax will be calculated in the following year.
To put it simply, the concept of ‘financial year’ will be replaced with ‘tax year’ and the concept of ‘assessment year’ will be done away with. This is likely to make tax filing easier for taxpayers, who used to find the current terminology confusing.
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