Section 202 of the New Income Tax Bill
- Dipali Waghmode
- Apr 13
- 6 min read
Redesigned and simplified from Section 115BAC of the Income-Tax Act, 1961, Section 202 of the Income-Tax Bill, 2025, introduces a simplified new tax regime for individuals, Hindu Undivided Families (HUFs), and other designated taxpayers. By eliminating the majority of deductions and exemptions, the new tax regime seeks to simplify matters, reduce tax rates, and make compliance easier. This article covers the new tax structure outlined in Section 202 of the Income Tax Bill 2025.
Table of Content
What is Section 202 of the Income Tax Bill?
After the law passes both houses of parliament and gets ratified by the president, it will become the Income-Tax Act of 2025, and Section 202 will go into effect on April 1, 2026. This part presents the new tax system applicable to individuals, Hindu Undivided Families (HUFs), and other taxpayers listed. Since it will still be the default tax regime, taxpayers who want to stick with the previous one will need to specifically choose to do so.
Eligibility to File under New Tax Regime
The following types of taxpayers are subject to the provisions of this section:
Hindu Undivided Families (HUFs)
Individuals
AOPs, or associations of persons, that are not cooperative societies
Individuals' Bodies (BOIs), whether or not incorporated
Artificial juridical persons
New Tax Rates under Section 2025
Tax Slabs | Rate of Tax |
Up to Rs. 4,00,000 | Nil |
Rs. 4,00,001 to Rs. 8,00,000 | 5% |
Rs. 8,00,001 to Rs. 12,00,000 | 10% |
Rs. 12,00,001 to Rs. 16,00,000 | 15% |
Rs. 16,00,001 to Rs. 20,00,000 | 20% |
Rs. 20,00,001 to Rs. 24,00,000 | 25% |
Above Rs. 24,00,000 | 30% |
Tax Rebate in New Tax Regime
The following deductions from income tax (calculated before permitting the deduction) are allowed if a resident individual assessee's entire income is subject to tax under the new tax regime: if—
Income that is below Rs. 12 lakhs, 100% of the amount of income tax due, or Rs. 60,000, whichever is lower;
When the income surpasses Rs. 12 lahks, the tax due gets deducted from the total income above Rs. 12 lakh.
Exemptions Available under New Tax Regime
The following are eligible for tax exemptions or deductions under the new tax regime:
Transportation reimbursements for those with special needs.
Allowance received to cover the costs of transportation incurred while working.
Any payment received to cover the expense of a transfer or tour.
You receive a daily stipend to cover any usual expenses or charges that you incur due to your absence from your regular place of employment.
Benefits for formal reasons
Exemption from gratuities, leave encashment, and voluntary retirement
Rs. 75,000 is the standard deduction.
Home loan interest on rented property up to Rs 50,000
Family pension deduction up to Rs 25,000
Gifts up to Rs 50,000
Deduction under section 124(1) for the employer's payment to the NPS account
Deduction under section 125(3) for the amount paid or put in the Agniveer Corpus Fund
Deduction for additional employee expenses.
Deduction for capital and revenue spent on the company's internal scientific research.
Exemptions Not Available under New Tax Regime
Under the new regime, the following deductions and exemptions are no longer available:
The daily allowance that an MP, MLA, or committee member receives
Individual Travel Allowance
Rs. 1,500 in the parents' hands against the minor's income
Any Special Permission for Non-Formal Uses
Deduction available to assessees working in SEZs under 10AA
Employment Tax
Interest on Home Loans for Self-Occupied Real Estate and Extra
Business Depreciation
The amount contributed to the development accounts for tea, coffee, and rubber.
Transfer to Site Restoration Account under Section 49
The amount spent on the agricultural extension project
The amount subtracted from the sum paid to a third party for scientific research
The amount deducted from the expenses required to run a particular firm
Any allowance or perquisite of any kind granted by any enacted statute
Excluding deductions under sections 124(1), 125(3), and 146 of Chapter VIII
Conclusion
In conclusion, the Income Tax Bill 2025 introduces significant changes, especially about the structure of the new tax regime under Section 115BAC, which will take effect on April 1, 2026, under Section 202. The Income-Tax Act is made simpler by this reorganization, which gives taxpayers more clarity and organization even while the tax slabs and rates stay the same. With the implementation of the tax refund under Section 156, the tax burden is further reduced for individuals earning up to Rs. 12 lakh, providing a way for taxpayers to take advantage of the new system. The government is continuously working to simplify taxes and improve the system's usability and efficiency, reflected in these updates.
FAQ
Q1. When is the new tax regime under Section 202 be applicable?
Once both houses of parliament have approved the Income Tax Bill 2025, it will become operative. Beginning on April 1, 2026, Section 202 will be in effect.
Q2. What is the new tax regime in 2025?
New income tax slabs will be implemented under the new tax regime on April 1, 2025. Additionally, if a person's net taxable income is less than Rs 12 lakh, they are excused from paying taxes under the new tax regime.
Q3. How will the unabsorbed depreciation and business loss be treated under the new regime?
If brought-forward business losses or unabsorbed depreciation are related to exemptions or deductions not accessible under the new tax regime, taxpayers with business income are not permitted to deduct them.
Q4. What is the key change in the Income Tax Bill 2025 regarding Section 115BAC?
Effective April 1, 2026, the new bill will shift the provisions of Section 115BAC to Section 202. This reorganization streamlines the tax code without altering the current tax rates or slabs.
Q5. What does the change from Section 115BAC to Section 202 mean for taxpayers?
The goal of the modification is to preserve the advantages of the new tax system while streamlining and organizing the Income Tax Act. The provisions are more clearly structured, but the tax slabs and rates stay the same.
Q6. Who benefits most from the changes in Section 115BAC to Section 202?
The tax refund will help middle-class individuals, especially those earning up to Rs. 12 lakh, manage their tax obligations under the new system.
Q7. How does the new tax rebate under Section 156 work?
A refund is offered to taxpayers who choose the new tax regime under Section 156. For incomes up to Rs. 12 lakh, the entire income tax due—or Rs. 60,000, whichever is less—will be reimbursed, thereby removing any tax obligation. For income over Rs. 12 lakh, the rebate gets reduced in proportion to the earnings.
Q8. How is the Section 156 rebate different for the old tax regime?
Taxpayers who opt for the previous system under Section 156 are eligible for a refund of up to Rs. 12,500 till their total income is less than Rs. 5 lakh.
Q9. What is Section 202 of the New Income Tax Bill?
Section 202 introduces new provisions regarding tax compliance, deductions, and penalties to streamline taxation processes.
Q10. Who is affected by Section 202?
The section applies to individuals, businesses, and professionals, especially those with taxable income exceeding specific thresholds.
Q11. Does Section 202 introduce any new deductions?
It may include changes to allowable deductions, potentially affecting tax planning strategies for individuals and businesses.
Q12. What penalties are imposed under Section 202 for non-compliance?
Late tax filing, non-disclosure, or misrepresentation can attract fines, penalties, and increased scrutiny under this section.
Q13. How does Section 202 impact salaried employees?
Salaried employees may see changes in TDS deductions, exemptions, or new requirements for tax documentation.
Q14. Are small businesses required to comply with Section 202?
Yes, if their taxable income or turnover meets the criteria specified under this section.
Q15. Does Section 202 offer any relief for senior citizens?
Some exemptions or lower tax rates might be introduced for senior citizens, but details depend on the final provisions.
Q16. How does Section 202 affect capital gains taxation?
The section may introduce revisions in tax rates or exemptions for capital gains from investments like stocks and property.
Q17. Are there any reporting requirements under Section 202?
Taxpayers may need to provide additional disclosures related to foreign income, assets, or high-value transactions.
Q18. When will Section 202 of the New Income Tax Bill be implemented?
The government will announce the implementation date, which may be phased over multiple financial years.
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