A parliamentary committee reviewing India’s Income Tax Bill, 2025, is set to recommend clarifying the language in some clauses to remove ambiguity, rather than proposing any major overhauls. This suggests the focus is on simplification and clarity within the existing framework.
The committee, led by BJP MP Baijayant Panda, is expected to submit its report on July 21, 2025, when the monsoon session of Parliament begins.
Introduced by Finance Minister Nirmala Sitharaman on February 13, 2025, the bill aims to replace the Income Tax Act of 1961 with a more streamlined version. If passed, the new law will take effect from April 1, 2026, with the government hoping for its passage during the upcoming winter session.
The Central Board of Direct Taxes (CBDT) has indicated that the new bill removes redundant provisions, utilizes clearer sub-sections and clauses, and employs simplified cross-referencing, along with tables and formulas for enhanced understanding.
While tax experts acknowledge the structural simplification, some express concern that simply refining language might not prevent future legal disputes, particularly over terms that have historically led to litigation, such as the definition of ‘royalty’. They suggest that cross-references should be more contextual, briefly explaining the referenced section’s content.
Furthermore, industry stakeholders have advocated for simplifying and rationalizing provisions like Tax Deducted at Source (TDS), intercorporate dividend deductions (Section 80M), LLP book profits taxation, and tax refunds.
Key changes highlighted in the bill include:
- An expanded definition of undisclosed income to include virtual digital assets.
- Allowing authorities access to virtual digital spaces during search and seizure.
- Requiring dispute resolution panels to issue directions with clear points of determination and reasons.
- Clarifying the interpretation of undefined terms in tax treaties.
- Replacing ‘Financial Year’ and ‘Assessment Year’ with a unified ‘Tax Year’.
- Introducing revised tax slabs and rebates under Section 115BAC for the new tax regime, as announced in Budget 2025.
- Increasing TDS/TCS thresholds for various sections.
- Providing benefits for units in International Financial Services Centres (IFSC).
- Removing the Equalisation Levy.
The committee’s approach signals a commitment to making tax laws more accessible. Do you think these linguistic clarifications will be enough to reduce tax-related litigation in India?