Join our Whatsapp channel
Finance Minister Nirmala Sitharaman introduced the Income Tax Bill 2025 in the Lok Sabha, aiming to replace the Income Tax Act of 1961. The Bill seeks to simplify tax laws, making them more understandable for taxpayers while reducing litigation. This marks a significant overhaul of India’s tax system, which has remained largely unchanged for over six decades.
Key Highlights of the Income Tax Bill 2025
- Reduction in Sections for Simplicity
The new Bill streamlines tax regulations by reducing the number of sections from approximately 930 to 536. It also introduces a tabular format for presenting tax provisions, ensuring better clarity for individuals and businesses. - Introduction of the ‘Tax Year’ Concept
The Bill replaces traditional terms like ‘assessment year’ and ‘previous year’ with ‘tax year’ to eliminate confusion. This change aims to align tax terminology with global standards, making compliance easier. - Income Tax Slabs to Remain Unchanged
The new law retains the existing income tax slabs under both the old and new tax regimes:- Under the old tax regime, the basic exemption limit remains ₹2.5 lakh.
- Under the new tax regime, the basic exemption limit is ₹3 lakh.
- The new tax regime continues as the default option, but taxpayers can still choose the old regime if they prefer.
- Enhanced Compliance and Digital Tax Records
- The Bill proposes stricter compliance norms to improve tax transparency.
- Penalties for non-compliance have been revised, with increased fines for tax evasion.
- A stronger digital framework is introduced to enhance record-keeping and reduce manual intervention in tax matters.
- New Dispute Resolution Mechanism
- A Dispute Resolution Committee (DRC) will be established to fast-track tax dispute settlements.
- The committee aims to reduce the backlog of pending cases and provide a more efficient resolution process.
- Implementation Timeline
- The Income Tax Bill 2025 is expected to be implemented from 1 April 2026.
- Before coming into force, it will undergo parliamentary review and scrutiny by the Standing Committee on Finance.
Impact of the Income Tax Bill 2025
The proposed Bill is expected to simplify tax compliance, improve transparency, and align Indian tax laws with global best practices. The introduction of the ‘tax year’ concept and the tabular presentation of tax laws will make it easier for taxpayers to understand their obligations.
With reduced litigation, enhanced digital compliance, and a structured dispute resolution mechanism, the Bill aims to create a more efficient and taxpayer-friendly tax administration system in India.
The government is now seeking feedback from stakeholders before finalising the Bill, and further discussions are expected in the upcoming Parliamentary sessions.
