New Income-Tax Bill, 2025: A simpler & more structured tax code

February 14, 2025 Finance Talk Valli Sarvani

The Income-Tax Bill, 2025, aims to simplify tax laws with clearer language, streamlined provisions, and expanded income definitions.

The 622-page Bill reduces cross-references, removes outdated exemptions, and introduces a ‘tax year’ concept to replace the existing assessment year.

Key Features of the New Bill:

Simplified Language & Structure: The Bill condenses legal jargon, making it easier for taxpayers to understand provisions without referring to multiple sections.
Defined ‘Tax Year’: The 12-month period begins on April 1, aligning taxation with the financial year. For businesses, the tax year starts from the date of establishment.
Consolidated Tax Provisions: TDS rules, presumptive taxation rates, and assessment time limits are now presented in tabular format for clarity.
Removal of Redundant Sections: Provisions like Section 54E, which dealt with pre-1992 capital gains exemptions, have been eliminated.

While the number of chapters remains at 23, the sections have increased from 298 to 536, with schedules rising from 14 to 16.

Explanations and provisos have been merged into clauses to avoid excessive referencing.

The Dispute Resolution Panel section now provides clear steps for determination and decisions, ensuring transparency.

Income tax deductions related to salaries, gratuity, and leave encashment are grouped for better accessibility.

Experts believe the Bill will make tax compliance easier. The shift from ‘notwithstanding’ to ‘irrespective of anything’ enhances readability. Clauses from other laws, such as wealth tax, have been integrated to eliminate confusion.

New sections address revenue recognition for service contracts and inventory valuation, improving tax clarity for businesses. Additionally, income not included in total income is now categorized under schedules.

The Bill was shared with MPs and is set for introduction in Parliament. After review by a parliamentary committee, the government will decide on further amendments. The expected rollout date is April 1, 2026.

This reform follows previous efforts to modernize tax laws, including the 2018 task force report and the Direct Taxes Code (DTC) proposed in 2009. The latest Bill reflects inputs from over 6,500 public suggestions received in 2023.

With a more structured approach and simplified provisions, the Income-Tax Bill, 2025, aims to make tax compliance smoother while maintaining continuity.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on February 25, 2017