3 min readFeb 13, 2025 06:11 PM IST
First published on: Feb 13, 2025 at 06:10 PM IST
Written by Sunil Badala and Himanshu Parekh
The present Income Tax Act of 1961 (“the 1961 Act”) has been subject to numerous amendments over the last six decades. As a result, the basic structure of the 1961 Act has undergone a significant change and the language of the provisions has become complex. It has resulted in ambiguity in interpretation of provisions and tax disputes leading to protracted litigation.
As a result, with the aim to make the income tax law concise, lucid, easy to read and understand, and with a view to reduce tax disputes and litigation and provide certainty to the taxpayers, the Finance Minister, in her Budget speech of July 2024, announced a comprehensive review of the 1961 Act. To this end, the Central Board of Direct Taxes (CBDT) had set up a committee with 22 specialised sub-committees to review various aspects of the 1961 Act. Comments were also sought from the public on the simplification exercise.
After taking into account more than 6,500 suggestions, the new Income-tax Bill, 2025 (“the Bill”) has been formulated. The Bill approved by the Union cabinet on February 7 was presented in Lok Sabha today. It spans 622 pages and includes 23 chapters, 16 schedules and 536 clauses. In comparison to the 1961 Act which is of 823 pages, length of the new Bill stands reduced by 24 per cent.
Compared to the 1961 Act, the Bill replaces the term “previous year” with “tax year”. Also, the concept of assessment year has been done away with. The tax year will continue to start on April 1 and end on March 31. Another change is that under the Bill, the CBDT will have the authority to establish tax administration rules, implement compliance measures, and enforce digital tax monitoring systems without the need for frequent legislative changes.
The Bill, while not introducing major substantive changes to the tax framework, still marks a pivotal effort of the government to simplify the tax legislation. By adopting modern, clear, and straightforward language, it moves away from complex legal jargons that previously complicated understanding of the provisions. The Bill also does away with the use of explanations and provisos, which further enhances clarity and simplicity of the law. The strategic use of tables, such as those detailing TDS rates and incomes subject to special tax rates, also contributes to its user-friendliness. It has also clubbed the salary deductions and exemptions in a tabular form and employed formula-based computation mechanisms at relevant places like that for Written Down Value (WDV) calculations.
The Bill’s introduction in Parliament today represents a historic milestone in the nation’s tax landscape. It will now undergo scrutiny by Parliament’s Standing Committee on Finance.
Scheduled to take effect on April 1, 2026, it emphasises a “trust first, scrutinise later” philosophy. It aims to modernise India’s tax system by enhancing its efficiency and making it more taxpayer-friendly. The Bill ensures that taxpayers can navigate it with greater ease and confidence, ultimately fostering a more transparent and efficient tax environment. The approach also aligns with the government’s ideology of minimum government and maximum governance.
Badala is head of tax and Parekh is partner tax, KPMG India
The Bill approved by the Union cabinet on February 7 was presented in Lok Sabha today. (Express Photo by Praveen Khanna) 
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