How will new Income Tax Bill, 2025, help you?

According to several media reports, the new income tax bill will be tabled in Parliament today (February 13).

The idea behind the new bill is to simplify taxation laws – currently governed by the Income Tax Act, 1961 – for the common man.

The 1961 Act, which deals with personal tax, corporate tax securities, gifts, and wealth, has nearly two dozen chapters and 298 sections.

It originally had 800 pages when it was introduced.

The new law is set to take effect from April 1, 1996.

But how will the Income Tax Bill, 2025, help you?

Let’s take a closer look:

How will it help?

First, let’s take a brief look at the bill.

The bill comprises 536 sections, 23 chapters and 16 schedules.

Though the bill increases the number of schedules to 16 from 14, it keeps the number of chapters at 23.

However, it reduces the number of pages to 622 – nearly half of the current Act.

As per Indian Express, the new income tax bill makes the language of the law simpler.

It also removes stipulations and explanations – thus making it easier for the lay man to understand.

For example, it removes the term ‘previous year’ and replaces it with ’tax year’.

It also does away with the confusing assessment year terminology.

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Currently, income earned for the previous year (2023-2024) is paid in the assessment year (2024-2025).

The bill introduces the ‘tax year’ concept – which it defines as the 12-month period beginning April 1.

The new bill has removed redundant sections like those relating to Fringe Benefit Tax.

The word ’notwithstanding’, which was used excessively in the Income Tax Act, 1961, has been done away with.

It has been replaced almost everywhere with the term ‘irrespective’.

The bill also gives the reader tables and formulae to use when it comes to TDS, presumptive taxation, salaries, and deductions for bad debt.

The proposed law has made the taxes on employees’ stock options (ESOPs) clearer.

The Bill includes important judgments of the past 60 years to give taxpayers more clarity.

It also introduces a ‘Taxpayer’s Charter’ which outlines the rights and obligations of the taxpayers.

What do experts say?

Experts have praised the bill.

Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Andersen LLP told The Times of India, “Carved out now in 23 chapters divided into 536 sections and 16 schedules, over 600 pages, a quick look at the new bills demonstrates its comprehensiveness compared to existing Income Tax Act with 298 sections and 14 schedules.”

“The concepts of explanations and provisos have been removed from the new version, for ease of interpretation and understanding. New concepts such as tax year, instead of previous year and assessment year, have been introduced,” he added.

Jhunjhunwala further told Indian Express that income not forming part of total income has now been shifted to schedules.

“Deductions from salaries such as standard deduction, gratuity, leave encashment etc, have now been tabulated at one place, instead of being scattered over different sections and rules,” Jhunjhunwala added.

“This increase in sections reflects a more structured approach to tax administration, incorporating modern compliance mechanisms, digital governance, and streamlined provisions for businesses and individuals,” AMRG & Associates Senior Partner Rajat Mohan told PTI.

Sandeep Agrawal, Director and Founder of Teamlease Regtech told Financial Express, “The New Income Tax Bill, is set to reduce 50 per cent of the current provisions, marking a significant step towards simplifying tax laws and replacing the six-decade-old Income Tax Act of 1961.”

“The bill is expected to make compliance easy for taxpayers and administrators alike, ultimately helping to cut down on tax-related litigation,” Agrawal added.

What happens next?

Once introduced in the Lok Sabha likely on Thursday, the Bill will be sent to the Parliamentary Standing Committee on Finance for further deliberations.

The Statement of Objects and Reasons of the new I-T Bill said that the Income-tax Act passed in 1961 has been subjected to numerous amendments since its passage 60 years ago.

“As a result of these amendments the basic structure of the Income-tax Act has been overburdened and language has become complex, increasing cost of compliance for taxpayers and hampering efficiency of direct-tax administration,” it said.

Tax administrators, practitioners and taxpayers had also raised concerns about the complicated provisions and structure of the Income-tax Act.

Therefore, the government in the budget in July 2024 announced that a time-bound comprehensive review of the Income-tax Act, 1961 would be undertaken to make the Act concise, lucid, easy to read and understand.

Accordingly, the Income-tax Bill, 2025 has been prepared, which proposes to repeal and replace the Income-tax Act, 1961.

Finance Minister Nirmala Sitharaman had announced in Budget 2025-26 that the new tax bill will be introduced during the ongoing session of Parliament.

Sitharaman had first announced a comprehensive review of the Income-tax Act, 1961 in July 2024 Budget.

The CBDT had set up an internal committee to oversee the review and make the Act concise, clear, and easy to understand, which will reduce disputes, litigations, and provide greater tax certainty to taxpayers. Also, 22 specialised sub-committees have been established to review the various aspects of the Income Tax Act.

Public inputs and suggestions were invited in four categories: simplification of language, litigation reduction, compliance reduction, and redundant/obsolete provisions.

The income tax department has received 6,500 suggestions from stakeholders on review of the Income Tax Act.

With inputs from agencies

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