New Income Tax Bill Introduced in Parliament

On February 13, 2025, Finance Minister Nirmala Sitharaman introduced the Income Tax Bill, 2025, in the Lok Sabha during the Budget session. The bill aims to replace the Income Tax Act, 1961, which has become bulky and complex due to multiple amendments over the years. The new legislation simplifies tax provisions, introduces clearer terminology, and expands the number of sections and schedules. Despite opposition protests, the bill was introduced after a voice vote. The Lok Sabha was then adjourned until March 10, 2025, for the second half of the Budget session.

Key Highlights of the Income Tax Bill, 2025

1. Introduction & Legislative Process

• Introduced in the Lok Sabha on February 13, 2025, by Finance Minister Nirmala Sitharaman.
• Opposition parties objected to the bill’s introduction, but the motion passed through a voice vote.
• The bill has been referred to a Select Committee of Lok Sabha for further examination.

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2. Objectives of the New Bill

• Simplification of tax laws and removal of outdated terminologies.
• Clarity and ease of understanding for taxpayers.
• Reduction in litigation by making provisions more direct and unambiguous.
• Incorporation of modern tax concepts to align with contemporary global tax systems.

3. Major Terminology Changes

• “Assessment Year” and “Previous Year” replaced with “Tax Year” for simplification.
• Earlier, income earned in 2023-24 was taxed in the assessment year 2024-25; now, it will simply be part of the tax year.

4. Structural Changes in the Income Tax Law

• The number of sections increased from 298 in the Income Tax Act, 1961 to 536 in the Income Tax Bill, 2025.
• The number of schedules expanded from 14 to 16.
• Removal of unnecessary provisos and explanations to enhance readability.

5. Expected Impact

• Easier compliance for taxpayers due to straightforward language.
• More transparent and streamlined tax filing process.
• Faster resolution of tax disputes and reduced litigation.
• Improved adaptability of tax laws to changing economic conditions.