Simplified Income Tax Bill 2025: Key Changes && Impact

New Delhi, Feb 12 (PTI) The proposed simplified Income Tax Bill 2025, which is likely to be tabled in Parliament on Thursday, seeks to eliminate obsolete sections of the existing Act, reduce litigation, and improve compliance, experts said.

The primary objective of new Bill is to simplify the tax laws, ensuring they are more transparent, easier to interpret, and taxpayer friendly, they said.

"By replacing complex provisions with clearer provisions, it aims to reduce legal disputes and encourage voluntary tax compliance... the bill promises a more streamlined, accessible tax system, making it easier for citizens and businesses to fulfill their obligations while fostering trust in the system," Deloitte India partner Rohinton Sidhwa said.

The new Bill seeks to replace the Income Tax Act, 1961 that has become too voluminous due to the amendments made over the last 60 years. The new law is expected to come into effect from April 1, 2026.

Multiple concepts of financial year, previous year and assessment year often caused confusion amongst taxpayers because of the semantics: this impacted the readability of tax law, Shardul Amarchand Mangaldas & Co partner Gouri Puri said.

A single concept of a tax year is easy to understand and in line with international practice even though there may not have been any substantive change, she said.

The Bill comprises 536 sections, 23 chapters and 16 schedules in 622 pages. It does not bring in any new taxes, but only simplifies the language of the existing Income Tax Act, 1961.

The six-decade old legislation has 298 sections and 14 schedules. It had 880 pages when the Act was introduced.

According to Amit Maheshwari, Tax Partner, AKM Global, there are multiple cross-referencing between sections and rules in the existing law that often led to complications for taxpayers.

"In the new bill, the number of proviso and explanations have been substantially reduced and the references to rules and other sections have been curtailed. This will ensure that a taxpayer will be able to gain sensible understanding of the section by reading the section itself and he does not need to refer to other rules and sections," Maheshwari said.

Keeping this objective and the directionality in mind, it is unlikely that the new tax bill will introduce new tax provisions or amend existing tax rates, said Munjal Almoula, Head of Tax, BDO India.

"Hence, I do not expect any additional tax burden to be cast upon taxpayers through the new tax bill," he added.