Section 115BAC Changes to Section 202 in the New Income Tax Bill 2025

The Income Tax Bill 2025 brings significant changes to the taxation framework to aim to simply the Income Tax Act 1961. The new bill moves the provisions of the new tax regime under Section 115BAC of the Income-Tax Act, 1961, to Section 202. It is effective from April 1, 2026, and aims to simplify the Income-Tax Act while retaining the existing tax slabs and rates. The updated bill will feature a dedicated section for the new tax regime, impacting individual taxpayers, domestic companies, cooperative societies, and other eligible taxpayers. This article helps you understand this latest change in a comprehensive manner.

What is Section 115BAC in the Income Tax Act, 1961?

Section 115BAC of the Income Tax Act, 1961 provides an option for individuals or Hindu Undivided Families (HUFs) with income other than from a profession or business to be taxed under a new tax regime featuring reduced tax slab rates. Introduced in the financial year 2020-21, this regime became the default tax regime from the financial year 2023-24. While taxpayers opting for this regime benefit from lower tax rates, they forfeit various deductions and exemptions available under the old tax regime.

Change in Section 115BAC under the Income Tax Bill 2025

The Income Tax Bill 2025 brings a significant change to Section 115BAC of the Income-Tax Act, 1961. Under the new bill, the provisions of the current tax regime will be moved to Section 202, which is set to come into effect from April 1, 2026. This change aims to streamline the tax code, ensuring better clarity and organisation of the new tax regime. Although the tax slabs and rates remain unchanged, the restructuring of the provisions reflects the government's commitment to simplifying the Income-Tax Act while maintaining the benefits of the new regime for eligible taxpayers.

Income Tax Slabs and Rates under Section 202

Under Section 202 of the Income Tax Bill 2025, the income tax slabs and rates will remain unchanged from those outlined in Section 115BAC. The basic exemption limit will be ₹4 lakh and income above ₹24 lakh will be taxed at the highest rate of 30%. However, it is important to note that the new tax regime does not allow for the various deductions and exemptions available under the old tax regime. Here is the income tax slab as given in Section 202 of Income Tax Bill 2025, 

Here’s an attachment detailing Section 202 from the official Income Tax Bill 2025,

Learn more: Key Changes in Personal Income Tax 2025

Tax Rebate under Section 156 of the New Bill

Section 156 of the new Income Tax Bill introduces a tax rebate for taxpayers opting for the new tax regime, aiming to make income up to ₹12 lakh tax-free. This rebate, which is separate from the rebate provided under Section 87A of the Income-tax Act, 1961, allows for a reduction in the total tax payable based on the taxpayer's income.

Under Section 156 of the new bill, the tax rebate provisions are as follows:

• For taxpayers with income up to ₹12 lakh: 100% of the income-tax payable or ₹60,000, whichever is lower, will be allowed as a rebate. This means that if the total income is ₹12 lakh or less, the taxpayer could effectively reduce their tax liability to zero.
• For taxpayers with income exceeding ₹12 lakh: The rebate will be the income-tax payable on the total income, reduced by the income that exceeds ₹12 lakh. This ensures that taxpayers with a higher income still benefit from a partial rebate, though it is scaled based on their income over ₹12 lakh.

For individuals opting for the old tax regime, Section 156 will provide a rebate of up to ₹12,500, but this applies only if their total income does not exceed ₹5 lakh.

This rebate is designed to benefit middle-income earners, ensuring they face a reduced tax burden under the new regime. It simplifies the taxation process while promoting the adoption of the new tax regime for eligible taxpayers.

Conclusion

In conclusion, the Income Tax Bill 2025 brings notable changes, particularly in how the new tax regime under Section 115BAC will be structured under Section 202, effective from April 1, 2026. While the tax slabs and rates remain unchanged, this restructuring simplifies the Income-Tax Act, providing greater clarity and organization for taxpayers. The introduction of the tax rebate under Section 156 further reduces the tax burden for those with income up to ₹12 lakh, offering a more straightforward path for taxpayers to benefit from the new regime. These updates reflect the government’s ongoing efforts to streamline taxation and make the system more efficient and accessible.

Other Articles Related to Income Tax Bill 2025

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• Tax Year in Income Tax
• TDS/TCS Provisions in New Income Tax Bill 2025
• Salary Income Taxation under the New Bill
• Section 80C moves to Section 123 in New Bill

FAQs

1. What is Section 115BAC in the Income Tax Act?

Section 115BAC allows individuals and Hindu Undivided Families (HUFs) to opt for a new tax regime with reduced tax slab rates, introduced in FY 2020-21. However, taxpayers choosing this regime must forfeit deductions and exemptions available under the old regime.

2. What is the key change in the Income Tax Bill 2025 regarding Section 115BAC?

The provisions of Section 115BAC will be moved to Section 202 in the new bill, effective from April 1, 2026. This restructuring simplifies the tax code without changing the existing tax slabs or rates.

3. What are the tax slabs under Section 202 of the Income Tax Bill 2025?

The tax slabs under Section 202 remain the same as those under Section 115BAC:

• Up to ₹4,00,000: Nil
• ₹4,00,001 to ₹8,00,000: 5%
• ₹8,00,001 to ₹12,00,000: 10%
• ₹12,00,001 to ₹16,00,000: 15%
• ₹16,00,001 to ₹20,00,000: 20%
• ₹20,00,001 to ₹24,00,000: 25%
• Above ₹24,00,000: 30%

4. How does the new tax rebate under Section 156 work?

Section 156 introduces a rebate for taxpayers opting for the new tax regime. For incomes up to ₹12 lakh, the entire income tax payable, or ₹60,000 (whichever is lower), will be rebated, effectively making the tax liability zero. For income above ₹12 lakh, the rebate reduces based on the income exceeding ₹12 lakh.

5. How is the Section 156 rebate different for the old tax regime?

Taxpayers choosing the old regime under Section 156 can claim a rebate of up to ₹12,500 if their total income does not exceed ₹5 lakh.

6. When will these changes to Section 115BAC under Section 202 become effective?

These changes will come into effect from April 1, 2026.

7. What does the change from Section 115BAC to Section 202 mean for taxpayers?

The change aims to simplify and organize the Income Tax Act while maintaining the existing benefits of the new tax regime. The tax slabs and rates remain unchanged, but the provisions are better structured for clarity.

8. Who benefits most from the changes in Section 115BAC to Section 202?

Middle-income earners, particularly those with income up to ₹12 lakh, will benefit from the tax rebate, making their tax liability more manageable under the new regime.