New Income Tax Bill 2025 to be Introduced Today in Lok Sabha by Finance Minister Nirmala Sitharaman
The Indian government introduced the Income-Tax Bill, 2025, to replace the 1961 Act, aiming for simplification, reduced litigation, and modern tax provisions. Learn about key changes, the new 'tax year' concept, and its impact on taxpayers and businesses.
kowshik Reddy
On February 13, 2025, the Indian government introduced the Income-Tax Bill, 2025, in the Lok Sabha, aiming to replace the six-decade-old Income-tax Act of 1961. This initiative seeks to modernize and simplify the country's tax system, making it more comprehensible and taxpayer-friendly.
Key Features of the Income-Tax Bill, 2025:
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Simplified Language and Structure: The new bill reduces the length of the legislation from 823 pages to 622 pages by eliminating obsolete provisions and using clearer language. This restructuring includes the removal of provisos and explanations, aiming to make the law more accessible to taxpayers.
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Introduction of 'Tax Year': The bill defines a 'tax year' as the 12-month period beginning from April 1. For newly established businesses or professions, the tax year will commence from the date of setup and conclude at the end of the financial year. This replaces the existing concept of the assessment year, aligning tax reporting more closely with actual economic activities.
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Focus on Reducing Litigation: By clarifying provisions and removing ambiguities, the bill aims to minimize legal disputes. As of March 2024, tax-related disputes amounted to 13.4 trillion rupees. The government anticipates that the streamlined law will encourage voluntary compliance and reduce the backlog of cases.
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Modernization Efforts: The bill proposes tighter tax provisions for virtual digital assets, including them in the scope of searches for undisclosed income alongside existing categories like money, bullion, and jewelry. Additionally, it introduces new sections covering revenue recognition for service contracts and mandates valuing inventory at the lower of cost or net realizable value.
The introduction of the Income-Tax Bill, 2025, follows Finance Minister Nirmala Sitharaman's announcement in the July 2024 Budget, where she emphasized the need for a comprehensive review of the Income-tax Act, 1961. The bill is expected to be referred to a parliamentary committee for further examination and recommendations before it is enacted.
This legislative move reflects the government's commitment to creating a more efficient and transparent tax system, aiming to foster economic growth and improve the ease of doing business in India.
