[Opinion] Income Tax Bill 2025 – A Great Opportunity?

Vivek Raju P – [2025] 171 taxmann.com 527 (Article)

The Income Tax Bill 2025 (ITB 2025) has been tabled in parliament on 13th February 2025, with an objective to repeal the current Income Tax Act 1961 (ITA 1961) and is expected to come into effect from 1 April 2026.

Over the past 64 years since its legislation, the ITA 1961, has undergone over 4,000 changes through amendments by inserting new sections, chapters, amended sections, clauses, subclauses, provisos, explanations and heavily litigated to get some landmark decisions favoring both the assessee and the revenue.

As per the government,the aim of the ITB was to make the Act concise, lucid and easy to understand. The ITB proposes to eliminate redundant provisions and reduce the length of the act by nearly half.

Some of the major changes in the structure of the ITB are

1. All provisos and explanations totaling 1900 have been removed.
2. Subsections and clauses to section have been used instead of relying on provisos and explanations.
3. All meanings of specific terms are consolidated at one place in Clause 2, instead of the ITA 1961 where some meanings were given along with the respective sections. However, there are still cases like Clause 99 the word property again gets defined with reference to that section only.
4. Removal of the much needed “Previous year” and “Assessment year” concept.

The attempt of the government to simplify the tax legislation is commendable, in the opinion of the author, this however could have been a great opportunity to completely overhaul the act and make it more taxpayer friendly incorporating the global best practices.

The ITA 1961 was drafted soon after independence and the requirements of government and the business practices at the time have been a lot different, subsequent changes in the Act were made regularly but these changes have been based on requirements rather than giving it a fresh perspective altogether. The ITB 2025 was a great opportunity to push more business-friendly provisions, reduce compliance, aim at ease of doing business, promotion of India as an attractive investment destination and reduce litigation.

With due respect to the professionals involved in drafting the act, there are some international best practices which would have really helped in greater ease of doing business and attracting fresh investments. While there are a lot more features if we are to examine the tax laws of most Organization for Economic Cooperation and Development (OECD) countries. We can note a few that could have been incorporated to help the tax payers and help boost economic activity, job creation, reduction of compliance and facilitate ease of doing business.

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