On February 13, 2025, Finance Minister Nirmala Sitharaman introduced the Income Tax Bill, 2025, in the Lok Sabha, aiming to replace the six-decade-old Income Tax Act of 1961. This initiative seeks to simplify and modernize India’s tax framework, making it more comprehensible and user-friendly for taxpayers.
Key Features of the Income Tax Bill, 2025:
- Simplification of Language and Structure:
- The new bill reduces the number of sections from 819 in the previous act to 536, and condenses the text from over 800 pages to 622 pages. This streamlining involves eliminating obsolete provisions and presenting information in clearer terms.
- Introduction of ‘Tax Year’:
- Replacing the concepts of ‘assessment year’ and ‘previous year,’ the bill introduces a unified ‘tax year’ to align with international practices and reduce taxpayer confusion.
- Enhanced Access for Tax Authorities:
- The bill proposes granting tax authorities broader powers to access taxpayers’ electronic records, including emails, trading accounts, and social media, during investigations. This measure aims to address modern digital financial activities but has raised concerns regarding taxpayer privacy and potential misuse.
- Consolidation of Exemptions and Deductions:
- Various exemptions and deductions have been reorganized into schedules for better clarity. While the bill does not introduce significant policy changes, it focuses on making existing provisions more transparent.
- Tax Rates and Slabs:
- The bill maintains the current tax rates and structure, with no immediate changes proposed. However, it sets the stage for future adjustments to be made through subsequent finance acts.
Next Steps:
Following its introduction, the Income Tax Bill, 2025, has been referred to a Select Committee of the Lok Sabha for further review. The committee is expected to present its findings in the upcoming parliamentary session. If enacted, the new law is anticipated to come into effect on April 1, 2026.
This legislative move reflects the government’s commitment to updating India’s tax system, aiming for greater simplicity, transparency, and efficiency in tax administration.
