India’s Budget 2025 proposes a new Income-Tax Bill to replace the Income Tax Act, 1961. For startup founders, this isn’t just legislative news—it’s a blueprint that may redefine fundraising, salary structures, and global expansion strategies.
This blog decodes what the New Income-Tax Bill means for founders compared to the old law—and what action you should take before the bill becomes law.
Legal Reference
- Income Tax Act, 1961: Governs current tax rules.
- Draft Direct Tax Code / New Income-Tax Bill (2025): Aims to simplify and modernize tax structures for individuals and businesses.
Key Differences That Founders Must Track
- Flat Corporate Tax Model vs. Existing Slab-Based Benefits
The new bill proposes uniform tax treatment, reducing deductions, exemptions, and startup-specific carve-outs. Under the old Act, startups could claim Section 80-IAC deductions, ESOP deferrals under 191(1A), etc.
Impact:
Startups may lose legacy benefits but gain simpler compliance and certainty.
- ESOP Taxation Rules Being Overhauled
Under the old regime, ESOPs were taxed as perquisites on allotment + capital gains on sale. The new bill proposes changes to when and how employee stock benefits are taxed.
Founders’ Watchlist:
- Changes to Section 17(2) perquisites
- Likely realignment of valuation norms
- New Global Anti-Avoidance Provisions (GAAR++)
The draft bill expands GAAR into a digital-first, international framework. This may affect SaaS startups routing transactions through low-tax jurisdictions like Dubai or Singapore.
- Startup Exemptions Under Scrutiny
Sections like 80-IAC (3-year tax holiday for DPIIT-registered startups) may be phased out. Founders should revisit holding periods, exit structuring, and angel tax positions.
Strategic Tips for Founders
- Review ESOP plans: Reprice or shift to phantom stock if new rules increase upfront tax.
- Revisit your shareholding structures: Especially if using overseas SPVs or dual entities.
- Prepare for simplification: Your existing Section 80-IAC or 54GB planning might become obsolete.
- Document substance: The new code may test residency, business presence, and fund flow control.
Conclusion
The proposed Income-Tax Bill is more than just a facelift—it’s a fundamental reset of how startups plan compensation, capital, and compliance. Founders should stay agile, begin restructuring now, and monitor the bill’s passage closely to avoid last-minute tax shocks.
Call to Action and Disclaimer
Need help reviewing your ESOP, business model, or tax strategy before Budget 2025?
Schedule a meeting with our Chartered Accountant, Anshul Goyal, by visiting:
Disclaimer: I am Anshul Goyal, a Chartered Accountant licensed with ICAI, India. This blog is for educational purposes only and does not replace legal or tax advice.
Frequently Asked Questions
1. Is the new Income-Tax Bill passed yet?
As of now, it’s proposed and under review. Not yet law.
2. Will the new bill remove Section 80-IAC benefits?
Most likely, yes. Simpler rate structures may replace such exemptions.
3. How will it affect ESOPs?
There may be changes to tax timing and valuation rules.
4. Are offshore structures still safe under the new bill?
The bill proposes stricter GAAR provisions. Risk analysis is needed.
5. Should I restructure before March 2025?
Yes, especially if you’re preparing for a funding round or founder exit.