5 min readFeb 14, 2025 08:19 PM IST
First published on: Feb 14, 2025 at 04:38 PM IST
On Thursday, Finance Minister Nirmala Sitharaman introduced the much-awaited Income-Tax Bill, 2025 in the Lok Sabha. The Central Board of Direct Taxes (CBDT) formed an internal committee for a comprehensive review of the Income Tax Act, 1961 (referred to as ‘Act’ henceforth) with a stated goal of making it “concise, clear, and easy to understand, which will reduce disputes, litigation, and provide greater tax certainty to taxpayers”.
The new Bill has an approximate word count in the range of 2,75,000 words with 536 sections and 16 schedules. This is a remarkable reduction from the existing approximate word count of 5,10,000 under the Act. There is also a more cohesive structure proposed under the new Bill. Provisions relating to the similar subject matter have been clubbed within a single or related heading rather than being scattered all over the Act, as is the position currently. A few minor changes have been made in certain definitions to explicitly state the obvious. A few redundant provisions whose applicability had already expired have been dropped in the new Bill. These efforts bear fruits in making the form of the law concise and clearer.
Despite the above features, the new Bill doesn’t pass the muster when one looks at its substance. The new Bill attempts to simplify semantics in the name of simplifying the law. In doing so, it fails to achieve both. The Bill has largely lifted provisions from the Act as it is and renumbered them. In the name of simplification, the numerous explanations, exceptions and provisos in various sections of the Act have merely been either re-enforced as new subsections within the parent section or introduced as separate schedules under the Bill. With minimal changes in the language, no solution or clarity has been provided to the complications that exist presently. These get carried into new sections and schedules under the Bill.
In other parts of the Bill, the existing provisions containing complex workings have been simply transposed as tables either within the sections themselves or as separate schedules. Therefore, the present form of confusing legalese has now been tabulated as a mere ready reckoner without ironing out the underlying confusion. These tables and schedules still contain multiple cross references to different provisions, thereby making the interpretation and implementation an equally tedious task as is presently the case.
One of the avowed objectives of the whole exercise was also to reduce compliance and litigation. On this count, it is disconcerting to note that the new Bill contains no reforms to rationalise the strict penalty and prosecution provisions, even in cases of non-serious or smaller infractions of law. Similarly, various threshold and concessional limits for compliances and claiming deductions have not been revised upwards. They have been bodily lifted from the present Act into the Bill, without any application of mind. These monetary references had been fixed long back and have constantly been falling behind the inflationary impact that a taxpayer experiences. In this context, the new Bill is not a forward-looking document.
Apart from the substantive and machinery provisions, the implementation of the Act is backed by a robust IT infrastructure. This ensures seamless online filing and processing of income tax returns, issuance of refunds, verification of claims with the statutory provisions, issuance of notices, assessment, filing of forms, etc. In view of the new Bill, the existing IT infrastructure will have to be recalibrated to align it with the new provisions, new tables, new forms and renumbered sections. In addition to that, the old disputes and assessments under the current Act will also continue on the same IT infrastructure on the side. This will cause massive constraints on IT resources, with teething troubles in the early days of implementation. If the intent was only to make cosmetic changes to the language to aid the readability of the law, the same could have been achieved by way of a mere amendment to the current Act. This would have obviated the need to recalibrate the IT infrastructure, assessments, training of tax officers and also saved huge expenditure from the public exchequer.
Lastly, mere renumbering of the existing sections and shifting them from one chapter to another does violence to the decade-old jurisprudence on the interpretation of these sections and phrases used therein. The positioning of a particular provision at a specific place or chapter also influences its interpretation. Thus, the settled principles and interpretation are susceptible to being challenged afresh by tax officers. There is no assurance in the new Bill that the tax officer will follow the interpretation given by the Supreme Court to a phrase or a provision when the same is just renumbered or shifted in the present Bill. Therefore, there is a risk that the Bill unsettles the present interpretation and introduces more complexities and confusion. This could increase disputes.
With no substantial reforms or structural changes, there is a plausible chance that a number of amendments will be made year after year once it is enacted as a law. This defeats the very purpose of the whole exercise of bringing clarity and certainty. The Bill is old wine spilling out of a smaller bottle, creating unnecessary troubles.
The writer is an Advocate-on-Record in the Supreme Court of India and a Chartered Accountant
The new Bill has an approximate word count in the range of 2,75,000 words with 536 sections and 16 schedules. (Express Photo by Praveen Khanna) 
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