New Income Tax Bill 2025: Date & Key Expectations
The New Income Tax Bill has been introduced by the government in parliament. The purpose of this bill is to simplify the complex Income Tax Act of 1961, which has 298 sections. The Income Tax Act has undergone many changes since 1961, as certain changes are made to it every year through the Union Budget. The Income Tax Act has evolved significantly over the past six decades, with everything from adjustments to tax rates to the introduction of new provisions, alongside the introduction of fresh exemptions and the removal of outdated ones.
Over the years, it has been revised so extensively that it now bears little resemblance to its original form when it was first enacted.
For quite some time, tax experts and taxpayers alike have expressed a need for a completely new law—one that is built from the ground up, integrating all existing provisions and expanding beyond them. The new income tax bill was approved by the union cabinet on 8th February 2025, it is likely to be introduced in the parliament today i.e. 10th February 2025.
Purpose of the New Income Tax Bill
In the Budget Speech of 2024, Finance Minister Nirmala Sitharaman revealed the government’s intention to scrutinise the Income Tax Act, 1961 in totality. Through this scrutiny, the Act was to be made more concise so that the taxpayers could easily read and understand it.
The primary objective mentioned by the Minister is to reduce disputes and litigation involving the tax system. The government would thereby enhance tax certainty with the promise of offering clarity and ease of compliance for taxpayers.
After the announcement, the Income Tax Department launched a public consultation process where taxpayers could propose changes they would like to see in the new law. This move shows the interest of the government in public input and a more inclusive approach to tax reform.
The Finance Minister in the 2025 Budget has assured that the new Income Tax Bill would be brought soon. She further said it would embody the same philosophy of Nyaya that was at the heart of Bharatiya Nyaya Sanhita. The law had repealed the Indian Penal Code of 1860 from July 2024. It is a commitment of the government to reform, fairness, and justice.
Changes in New Income Tax Bill
The new Income Tax Bill will have fewer provisions than the current law, with nearly half of its provisions. Being easier to read and understand for taxpayers and tax authorities alike, it is set to give more certainty to taxation and reduce litigation between taxpayers and the revenue authority.
The following are the changes expected in the new income tax bill:
- Simplified Residence Rule: It is expected that rules for determining residential status will be simplified.
- Simplified Tax Structure: It is expected to have almost half of the provisions of the current law.
- Ease of Compliance: It is expected that the new income tax bill will make the compliance easier for the taxpayers and the income tax authorities.
Benefits of New Income Bill
- Reduced Complexity: The new income tax bill is expected to simplify the tax structure by minimising the number of deductions and exemptions available to taxpayers.
- Increased Compliance: It will streamline tax laws and reduce legal ambiguities.
- Unified Tax Rates: It is expected to rationalise tax rates that align with global standards, making India more attractive for both domestic and foreign businesses.
- Minimised Legal Disputes: The simplification of tax laws is expected to reduce litigation burdens for individuals and businesses significantly.