New Income Tax Bill 2025: Will It Raise Taxes or Simplify Compliance?

The new Income Tax Bill 2025 aims to simplify and modernize India’s tax framework by replacing the 1961 Act with clearer language, reducing litigation, and easing compliance. Experts confirm that the bill will not introduce changes to tax slabs or increase liabilities but will focus on removing outdated provisions and streamlining tax assessments. Key benefits include the introduction of a unified tax year, faster refunds, rationalized penalties, and improved ease of doing business, ultimately enhancing investor confidence and economic growth.

CONTENTS:

• New Income Tax Bill 2025: Aiming for Simplicity and Transparency
• New Income Tax Bill 2025: Focus on Simplification and Certainty
• Will the New Income Tax Bill Increase Tax Burden? What Can Taxpayers Expect?

New Income Tax Bill 2025: Will It Raise Taxes or Simplify Compliance?

New Income Tax Bill 2025: Aiming for Simplicity and Transparency

The new Income Tax Bill, scheduled to be tabled in Parliament on Thursday, February 13, by Finance Minister Nirmala Sitharaman, will span 622 pages and aims to replace the existing Income Tax Act of 1961. Once enacted, it will be known as the Income Tax Act, 2025, and is expected to come into effect in April 2026.

The current tax law has often been criticized for its complexity, leading to frequent legal disputes. Recognizing the need for a more straightforward and transparent tax framework, the government has drafted this new legislation to minimize ambiguities and enhance clarity.

Last week, the Union Cabinet approved the bill. Sitharaman, in her February 1 budget speech, reiterated the government’s commitment to simplifying taxation through various reforms, including faceless assessment, a taxpayers’ charter, faster refunds, and the Vivad se Vishwas dispute resolution scheme. She emphasized a “trust first, scrutinize later” approach to tax administration.

The initiative to overhaul the Income Tax Act was first proposed in the July 2024 Budget, aiming to make tax laws more concise and reduce litigation.

New Income Tax Bill 2025: Focus on Simplification and Certainty

New Income Tax Bill 2025: Will It Raise Taxes or Simplify Compliance? The new Income Tax Bill, which was promised by the Union Finance Minister in last year’s budget, is set to be introduced in Parliament on Thursday, according to sources. The bill aims to simplify tax laws and will later be referred to the Parliament’s Standing Committee on Finance. Notably, it will not alter existing tax slabs or modify current tax rebates.

Sources indicate that making the language clearer and more concise will enhance the Act’s readability, reduce disputes and litigation, and provide taxpayers with greater certainty.

To oversee the review process, the Central Board of Direct Taxes (CBDT) had established an internal committee, along with 22 specialized sub-committees tasked with evaluating different aspects of the proposed legislation, which will replace the six-decade-old Income Tax Act.

Before drafting the bill, the government sought public feedback in four key areas: simplifying legal language, reducing litigation, easing compliance, and eliminating outdated provisions. The Income Tax Department received 6,500 suggestions from various stakeholders as part of this review process.

Will the New Income Tax Bill Increase Tax Burden? What Can Taxpayers Expect?

New Income Tax Bill 2025: Will It Raise Taxes or Simplify Compliance? Many taxpayers are eagerly awaiting the draft of the Income Tax Bill, 2025, which is set to be tabled in Parliament soon. The government has emphasized that the bill aims to simplify tax laws, eliminate outdated provisions, and reduce litigation. However, concerns remain about whether it could lead to changes in tax slabs or increased tax liabilities.

Will the New Bill Lead to Higher Taxes?

Experts believe the new bill is primarily focused on clarity and simplification rather than introducing new tax provisions or altering tax rates.

• Munjal Almoula, Head of Tax at BDO India, asserts that the bill’s goal is to streamline language and remove redundant provisions rather than increase the tax burden. He does not anticipate any changes to existing tax rates.
• Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co., also states that the bill is not intended to modify tax slabs, reinforcing that taxpayers should not expect additional liabilities.

What Can Taxpayers Expect?

According to tax experts, the new bill is expected to introduce several key improvements:

1. Simplified Compliance & Transparency
   • A more straightforward tax filing process with reduced documentation.
   • Enhanced clarity on tax assessments and refund mechanisms to ensure efficiency.
2. Updated Tax Rules for Foreign Entities & Business Reorganizations
   • A single set of clear rules for taxing foreign enterprises, bringing more certainty.
   • Tax-neutral treatment for business restructurings, such as mergers and share swaps.
3. Removal of Obsolete Provisions & Rationalization of Penalties
   • Provisions like Sections 80HHC, 80J, 80JJ, 80K, and 80L, which are no longer relevant, may be eliminated.
   • Clear computational rules on interest for delayed payments and receipts.
   • Prosecution and penalty provisions for minor defaults may be rationalized, reducing taxpayer burden.
4. Alignment with Supreme Court Rulings & New ‘Tax Year’ Concept
   • The law may incorporate key Supreme Court decisions to minimize disputes.
   • A proposal to introduce a single ‘tax year’ instead of the existing ‘financial year’ and ‘assessment year.’

How Will the Bill Benefit Taxpayers?

Experts suggest that these reforms will lead to:

• Easier tax compliance and fewer interpretational issues.
• Improved ease of doing business, fostering economic growth.
• Greater investor confidence, attracting foreign investments.
• Faster resolution of disputes, reducing time and costs associated with litigation.

In summary, while the Income Tax Bill, 2025 will bring significant changes, it is not expected to increase tax rates. Instead, it aims to enhance clarity, simplify compliance, and improve the overall tax framework for individuals and businesses alike.