Do you know over 9 crore income tax returns (ITR) were filed in FY 2024-25. For them, the Income Tax Bill 2025 may make their life a bit easier. The bill was introduced by Finance Minister Nirmala Sitharaman in the parliament on 13th February 2025; after introduction the bill was referred to Select Committee of the House. The committee submitted its report before the Lok Sabha on 21st July 2025. This Bill is proposed to be enacted with effect from 1 April 2026.
The main objective behind bringing in a new bill to replace the existing Income Tax Act 1961 is, comprehensive simplification to enhance ease of doing business and was guided by the following principles,
1. Textual and structural simplification for improved clarity and coherence.
2. No major tax policy changes to ensure continuity and certainty.
3. No modifications of tax rates, preserving predictability for taxpayers.
For this purpose, a three-pronged approach was adopted: –
1.Eliminate intricate language to enhance readability.
2.Removing redundant and repetitive provisions for better navigation.
3.Reorganizing sections logically to facilitate ease of reference.
The revision exercise was based on widespread stakeholder engagement including study of simplification models from Australia and UK. Inputs and suggestions were asked from stakeholders in the following four categories,
1.Simplification of language
2.Reduction of litigation
3.Reduction of compliance burden
4.Identification of redundant / obsolete Rules and Forms
The simplification exercise resulted in the following changes,
Besides these, the simplification exercise has reduced the number of pages from around 900 in the existing Act to 600 pages for the new Bill. All provisos (about 1200) and explanations (about 900) have been removed.
And, the qualitative improvements are,
- Simplified language
- Consolidation of amendments
- Removal of obsolete and redundant provisions
- Structural rationalization through tables and formulae
- Preservation of existing taxation principles
While the exercise of simplification carried out may not have a direct or immediate effect on revenue collection per se, it is expected that the changes proposed in the structure of the Bill, and efforts undertaken to make the provisions in the Bill concise, lucid, easy to read and understand shall act as a nudge towards increased taxpayer compliance.
A utility to check section of Income-tax Act, 1961 (as amended by Finance Act, 2025) vis-a-vis corresponding Clause of the Income-tax Bill, 2025, an Income-tax Bill, 2025 navigator and Frequently Asked Questions (FAQs) for the Income-tax Bill, 2025 have been made available in the public domain.
The highlights of the new bill are,
Tax Year – For the purposes of this Act, “tax year” means the twelve months period of the financial year commencing on the 1st April. The concept of Previous year and Assessment year has been discontinued.
Personal taxation – No changes in tax rates have been proposed.
Maintenance of Accounts – No changes have been proposed in the current requirements.
Tax Audit – No changes have been proposed in the existing threshold limits.
Presumptive taxation – No changes have been proposed in the existing threshold limits.
In conclusion,
The simplification exercise aims to create a statute of taxation that is accessible to and comprehended by not just tax professionals but informed citizens as well. Ease of paying taxes is an important pillar of ease of doing business. The Bill seeks to retain the basic tax provisions, tax regimes (old and new), tax rates and judicially interpreted terms to provide tax certainty. The annual Finance Act will continue to set tax rates for a particular year.
