Income Tax Bill 2025 – Summary & Key Highlights

The Income Tax Bill, 2025, scheduled to be tabled in Parliament on Thursday, February 13, 2025, represents a landmark reform in India’s tax regime. Replacing the Income Tax Act of 1961, this new legislation is designed to modernise and simplify the tax framework and will take effect from April 1, 2026, once passed.

What’s Changing?

• Modernised Framework: The bill eliminates obsolete provisions that have accumulated over more than six decades. Its goal is to reduce litigation, simplify tax compliance, and promote voluntary compliance.

• Structural Expansion:

  • The new law comprises 536 sections, compared to 298 sections in the 1961 Act.

  • The number of Schedules increases from 14 to 16.

  • Despite broader scope, the document is more concise, reduced to 622 pages through streamlined formatting and clearer language.

• New Terminology:

  • Traditional terms like “Assessment Year” and “Previous Year” are replaced with a single, simplified term: “Tax Year”.

• Simplified Language and Format:

  • Use of shorter sentences, tables, and formulae to explain provisions such as TDS, presumptive taxation, salary income, and bad debt deductions.

  • All TDS-related provisions are consolidated under a single clause with user-friendly tables.

• Empowered Administration:

  • Under Clause 533, the Central Board of Direct Taxes (CBDT) can frame tax administration rules, implement digital compliance systems, and issue procedural guidelines without requiring frequent parliamentary amendments.

• Taxpayer-Centric Measures:

  • The bill mandates the CBDT to issue a Taxpayer’s Charter, detailing taxpayers’ rights and responsibilities, along with binding directions for tax authorities to uphold these standards.

• Elimination of Redundancies:

  • Fringe Benefit Tax and other outdated provisions have been scrapped.

  • The bill avoids the use of complex “explanations” and “provisos,” making the law more accessible