Key Changes in the New Income-tax Bill, 2025
The revised Income-tax Bill, 2025, is set to replace the decades-old Income-tax Act of 1961 with a modern, simplified, and more transparent direct tax code. The government withdrew the original draft to incorporate over 285 recommendations from a parliamentary Select Committee, ensuring a smoother legislative process.
What to Expect:
- Taxpayer-Friendly Updates: The bill introduces several changes to simplify the process for taxpayers. You’ll now be able to claim TDS refunds even after the ITR filing deadline without penalties. Tax officials will also be required to issue notices and consider your responses before taking any action, promoting fairness.
- Modernization and Digitization: A new digital-first, faceless assessment framework is on the way. This aims to streamline compliance, reduce face-to-face interactions with officials, and cut down on corruption risks.
- Simplified Language: The draft legislation aims to make tax law more accessible by replacing the complex legal language of the 1961 Act with clearer, more understandable terms. The bill is expected to be nearly 50% shorter, making it easier for everyone to navigate.
- Regulations for Trusts: The new bill clarifies rules for donations, limiting anonymous donations exclusively to purely religious trusts. Trusts that also run social services, like hospitals or schools, will not be covered by this provision.
The government is calling this one of the most ambitious tax reforms in recent decades, aiming to create a modern, simplified, and litigation-resistant tax system.
Why Was the Original Bill Withdrawn?
The original bill was withdrawn to ensure legislative clarity and efficiency. The parliamentary Select Committee, led by BJP MP Baijayant Panda, submitted a report with 285 recommendations. As Parliamentary Affairs Minister Kiren Rijiju explained, it would have been procedurally “unworkable” to pass each of these amendments individually. Reintroducing a single, revised bill with all accepted changes saves significant time and effort, making the process more efficient.