On February 13, 2025, Finance Minister Nirmala Sitharaman 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 simplify the tax framework, reduce litigation, and make the law more accessible to taxpayers.

Key Highlights of the Income Tax Bill, 2025:



1. Simplification and Streamlining:

• Reduction of Obsolete Provisions: The new bill proposes the removal of over 300 outdated and redundant laws, such as Section 80CCA (deduction for investment in the National Savings Scheme) and Section 80CCF (deduction for investment in long-term infrastructure bonds).
• Introduction of 'Tax Year': Replacing the concepts of 'previous year' and 'assessment year' with 'tax year' to eliminate confusion and align terminology with international standards.

1. Structural Changes:

• Reorganized Framework: The bill is structured into 23 chapters, 536 sections, and 16 schedules, condensing the law to 622 pages from over 800. This reorganization aims to make the legislation more concise and user-friendly.
• Elimination of Provisos and Explanations: The new structure avoids the use of provisos and explanations scattered throughout the text, opting instead for sub-sections and clauses presented cohesively.

1. Tax Rates and Slabs:

• No Major Changes: To provide certainty to taxpayers, the bill does not introduce significant alterations to tax laws, including income tax slabs, rates, or filing deadlines.

1. Enhanced Access for Tax Authorities:

• Digital Access During Searches: The bill grants tax authorities the power to access taxpayers' electronic records, including emails, social media accounts, and online banking during searches. While intended to modernize tax enforcement, this provision has raised concerns about potential privacy infringements, underscoring the need for clear safeguards.

Implications for Taxpayers:

The Income Tax Bill, 2025, aims to simplify tax compliance and reduce disputes by clarifying provisions and removing ambiguities. However, the expanded access granted to tax authorities necessitates a balanced approach to protect taxpayer rights and privacy.

Next Steps:

The bill is currently under review by a parliamentary select committee. Taxpayers and stakeholders are encouraged to stay informed about its progress and potential impacts on their financial planning.