An extensive overhaul of India’s tax system is on the horizon with the introduction of the Income Tax Bill 2025, which was first presented to the Lok Sabha on February 13, 2025. The government’s goal is to modernize tax administration by simplifying laws, reducing litigation, and making compliance easier for everyone.
Thank you for reading this post, don't forget to subscribe!Key Changes and Simplifications
The new bill is a significant departure from the existing tax code, featuring a major reduction in its size and complexity:
- Shorter and Simpler: The law’s word count has been slashed from 5.12 lakh to 2.6 lakh words. It also reduces the number of sections from 819 to 536 and trims chapters from 47 to 23.
- Unified Tax Year: The bill proposes replacing the separate “previous year” and “assessment year” with a single, unified “tax year,” which is expected to simplify the process of filing returns.
- Reduced Legal Jargon: By removing over 1,200 provisos and 900 explanations, the new document is designed to be more readable and user-friendly, reducing the need for expert assistance.
Important Reforms and Proposals
The draft, which was shaped by recommendations from a Select Committee chaired by BJP MP Baijayant Panda, includes several key reforms:
- Tax Relief: Homeowners could benefit from fairer deductions on pre-construction interest for let-out properties.
- Support for Small Taxpayers: The bill plans to exempt small taxpayers from having to file returns solely to claim TDS refunds.
- Green Initiatives: It introduces tax relief for biodegradable waste management and provides R&D incentives for green businesses.
- Lower Litigation: The new law aims to reduce legal disputes by reintroducing terms that offer broader legal safeguards.
Next Steps
While the tax slabs and rates remain unchanged for now, the focus on clarity and reduced compliance burden marks a major shift in India’s tax policy. If the bill is passed, it’s scheduled to take effect on April 1, 2026.
