Income Tax Bill 2025: A modernised tax framework

Structured transparency

The Income-tax Bill, 2025, introduced in the Lok Sabha on February 13, 2025, aims to replace the Income-tax Act, 1961 and proposed to be made effective from 01 April 2026.

This bill brings a more structured and transparent tax regime. This overhaul focuses on simplifying tax provisions, enhancing digital compliance, and aligning with global standards while ensuring that taxpayers face minimal disruption in existing liabilities and benefits.

More organised

The proposed legislation introduces 538 clauses across 23 chapters and 16 schedules, compared to 298 sections in the existing law. Despite an increase in provisions, the bill actually simplifies compliance by breaking down lengthy sections into clearer, standalone provisions. For example, Section 80 of the existing law, which deals with various deductions, has been reorganised into separate clauses under Chapter VIII, improving readability. Similarly, exemptions under Section 10 of the existing law are now classified into six schedules, eliminating complex cross-references.

Simplification

To remove ambiguity, the proposed Bill modernises terminology, replacing multiple tax years with a single “tax year”, aligning India’s system with global practices. Additionally, it refines definitions of capital gains, taxable income, and non-resident entities, ensuring better alignment with international tax conventions. 

Simplified framework for non-profits

For non-profit organizations (NPOs), scattered provisions under ITA 1961 are consolidated into a single chapter, introducing the term “registered non-profit organization” for uniformity. This restructuring makes compliance simpler and more transparent, while retaining tax benefits.

Streamlined TDS, TCS, & tax administration

TDS and TCS provisions have been significantly simplified, reducing the number of sections from 69 to 13. Other key changes include merging similar provisions for assessments, refunds, and advance tax. The bill introduces formula-based calculations to clarify complex concepts such as computation of interest on refunds, written down values, clubbing of income etc. Additionally, presumptive taxation provisions are now consolidated in one place for ease of reference and understanding.

Short & crisp

One of the key highlights of the proposed Income Tax Bill is the significant reduction in word count across various sections, making the law more concise and easier to understand. For instance, the provisions related to non-profit organisations (NPOs) have been streamlined, reducing their word count from approximately 12,800 words to 7,600 words. More than 1,200 provisos and 900 explanations have been streamlined, with their essence seamlessly integrated into sub-sections or clauses.

Conclusion

The Income-tax Bill, 2025, is a landmark reform that makes tax laws more accessible by simplifying compliance, restructuring provisions, and enhancing digital integration by ensuring a transparent, taxpayer-friendly, and modernized tax system without disrupting existing tax liabilities. Presently, this bill will be examined by the House Select Committee which will present its findings on the first day of the upcoming session, which is scheduled in April 2025.

(The author is Partner, Deloitte India)

FM Nirmala Sitharaman tabled the new Income Tax Bill 2025 in Lok Sabha on Thursday.