The Central Government is set to introduce the new Income Tax Bill 2025 in the Lok Sabha today, incorporating all 285 amendments recommended by the 31-member Select Committee led by BJP MP Baijayant Panda. This marks a significant step toward creating a simplified, clearer, and more taxpayer-friendly legal framework for India’s income tax system.
From Draft to Final Bill: The Legislative Journey
The original Income Tax Bill 2025 was first introduced in the Lok Sabha on February 13, 2025. Following its introduction, a Select Committee was formed to meticulously review and refine its provisions. This bipartisan committee conducted a detailed examination, leading to 285 recommended changes aimed at improving clarity, reducing ambiguities, and ensuring legislative accuracy.
On July 21, 2025, the committee submitted its final report to the Lok Sabha. Finance Minister Nirmala Sitharaman will now present the revised bill, which incorporates all these recommendations, in the House today.
Parliamentary Affairs Minister Kiren Rijiju stated that the government decided to withdraw the earlier version and introduce a fresh bill, as is standard procedure when a draft undergoes such extensive amendments. He affirmed that the six months of deliberation and the committee’s detailed work will be fully reflected in this updated legislation.
Why the New Bill Matters
The Income Tax Bill 2025 seeks to replace the Income Tax Act of 1961, which has long been criticized for its complex structure, dense legal language, and excessive provisions that often led to interpretation disputes. By simplifying the law, the government aims to:
Reduce litigation and scope for multiple interpretations.
Improve compliance through simplified wording and structure.
Enhance taxpayer confidence by providing greater legal certainty.
A Leaner and Clearer Tax Law
One of the most notable features of the new bill is its concise structure, nearly half the size of the existing law:
Word count reduced from 5.12 lakh in the 1961 Act to 2.6 lakh in the new bill.
Sections reduced from 819 to 536.
Chapters reduced from 47 to 23.
Tables increased from 18 to 57 for better clarity and quick reference.
Additionally, the bill removes 1,200 provisions and 900 explanations that were considered outdated, redundant, or unnecessarily complicated. This significant pruning is expected to make the law more accessible and easier to navigate.
Key Reforms Introduced in the Income Tax Bill 2025
1. Abolition of the Assessment Year Concept
The traditional system of differentiating between a “previous year” and an “assessment year” has been removed. Instead, the bill introduces the concept of a “tax year”, aligning the tax reporting and payment period with the year in which the income is earned.
This change eliminates the long-standing confusion where, for example, income earned in 2023–24 would be taxed in the 2024–25 assessment year. Now, the income and its tax will be recorded in the same tax year.
2. Simplified TDS/TCS Provisions
The rules for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) have been streamlined and presented in an easy-to-read tabular format, making it far simpler for taxpayers and businesses to understand rates, thresholds, and obligations.
3. Comprehensive Framework for Non-Profit Organizations
For the first time, the law dedicates a separate, fully developed chapter to non-profit entities. Written in plain, accessible language, this section clearly outlines conditions for registration, exemption criteria, and compliance requirements, reducing legal uncertainty for charitable organizations.
4. Language Simplification and Clarity
By cutting 34,547 words of legal text, the bill reduces interpretational ambiguities. It replaces overly complex legislative phrasing with direct, clear sentences—helping taxpayers, legal experts, and even new entrants to the tax system understand their obligations more easily.
Impact on Taxpayers
The reforms are expected to deliver multiple benefits to individual taxpayers:
Greater clarity on tax obligations without relying heavily on professional interpretation.
Easier compliance through structured tables and plain language.
Lower chances of disputes with the Income Tax Department due to reduced ambiguity.
For businesses, especially small and medium enterprises (SMEs), this could mean less compliance burden, fewer legal disputes, and greater predictability in tax planning.
Select Committee’s Role in Shaping the Bill
Led by Baijayant Panda, the Select Committee examined every clause with input from stakeholders and industry experts. The 285 amendments included in the new bill address:
Legal harmonization with other financial statutes.
Clear definitions to avoid multiple interpretations.
Updated provisions for the digital economy and e-governance.
Balanced anti-evasion measures that don’t overburden genuine taxpayers.
The committee’s collaborative approach ensured that the bill was not only legally sound but also practical and fair in its application.
Comparison: Old Act vs. New Bill
| Feature | Income Tax Act 1961 | Income Tax Bill 2025 |
|---|---|---|
| Word Count | 5.12 lakh | 2.6 lakh |
| Sections | 819 | 536 |
| Chapters | 47 | 23 |
| Tables | 18 | 57 |
| Provisions Removed | — | 1,200 |
| Explanations Removed | — | 900 |
| Assessment Year Concept | Yes | No (Tax Year Only) |
Additional Legislative Agenda for Monsoon Session
The Monsoon Session of Parliament, lasting a month, will see the introduction of eight new bills alongside the Income Tax Bill 2025. Several pending bills from previous sessions are also scheduled for discussion, signaling a busy legislative period focused on economic, legal, and administrative reforms.
A Step Toward Modernizing India’s Tax Framework
The Income Tax Bill 2025 is not just a replacement for the 1961 Act; it is a complete overhaul aimed at building a tax system that is simpler, transparent, and predictable. The government’s decision to integrate all 285 Select Committee amendments reflects a consensus-driven approach to lawmaking, where feedback from experts, MPs, and stakeholders is fully considered.
By cutting down legal complexity, improving the structure, and introducing modern concepts like the tax year, the new bill positions India to meet the demands of a rapidly evolving economy.
Conclusion
The introduction of the Income Tax Bill 2025 in its revised form marks a milestone in India’s legislative history. It reflects the government’s resolve to modernize tax administration, reduce litigation, and create a system that is both efficient and equitable.
If passed, the bill will not only replace a six-decade-old tax framework but also pave the way for a more transparent, taxpayer-friendly era in India’s fiscal governance.
