NEW DELHI: The Income Tax Bill of 2025, aimed at replacing the existing Income Tax Act of 1961, will be taken up for discussion in the monsoon session of Parliament, Finance Minister Nirmala Sitharaman announced while addressing the Lok Sabha during discussions on the Finance Bill. The Finance Minister emphasised that the Finance Bill 2025 will offer unprecedented tax relief to honest taxpayers.
The Income Tax Bill was introduced in the Lok Sabha on February 13, 2025. While it retains most of the key provisions of the 1961 Act, its primary objective is to modernise tax legislation by simplifying the language and removing obsolete clauses for greater efficiency.
Key Features
- Introduction of ‘Tax Year’
The new Bill introduces the term ‘tax year’ in place of the previously used ‘previous year’ and ‘assessment year.’ This change aims to eliminate confusion among taxpayers, as the earlier terms referred to different financial years. According to FAQs issued by the Income Tax Department, the tax year will now align with the financial year, simplifying compliance and reducing ambiguity. The term ‘tax year’ is commonly used in international tax jurisdictions, making Indian tax terminology more aligned with global practices. - Significant reduction in text and complexity
One of the most notable changes in the new Bill is the substantial reduction in the length and complexity of the law. The current Income Tax Act has 47 chapters, 819 effective sections, and a total of 5.12 lakh words. In contrast, the new Bill is more concise, containing only 23 chapters, 536 sections, and approximately 2.60 lakh words. Additionally, around 1200 provisions and 900 explanatory notes from the existing Act have been omitted, streamlining the legal framework. - Simplified and structured drafting
The drafting of the new Bill follows a structured approach, ensuring that provisions, explanations, and definitions are consolidated in a logical manner rather than being scattered across multiple sections. The new format, which organises content into sub-sections, clauses, and sub-clauses, improves clarity and accessibility, making it easier for taxpayers and legal professionals to navigate the law. - Rationalisation of Tax administration
The Bill aims to modernise tax administration by removing outdated provisions, refining definitions, and making compliance procedures more efficient. The changes seek to reduce litigation, minimise interpretational disputes, and make tax laws more user-friendly. - Customs tariff reforms
As part of broader tax policy reforms, the Finance Minister also announced that the Finance Bill 2025 proposes the removal of seven customs tariff rates applicable to industrial goods. This measure is intended to simplify the tariff structure, boost trade efficiency, and support industrial growth.
The introduction of the new Income Tax Bill marks a significant step in India’s tax reform journey. By replacing outdated legal jargon with a more streamlined and modern approach, the government aims to improve compliance, reduce disputes, and make the tax system more transparent and efficient. The Bill is expected to be thoroughly debated in the monsoon session of Parliament before being enacted into law.
