New Delhi: A crispier and simplified Income Tax Bill 2025, having 536 sections, and 23 chapters running into 622 pages, is likely to be introduced in the Lok Sabha on Thursday. The Bill once enacted will replace the six-decade Income Tax Act 1961, which over the years became bulkier and complex with amendments.
The proposed law replaces the term 'previous year' as mentioned in the Income Tax Act, 1961 with 'tax year'. Also, the concept of assessment year has been done away with. Currently, for income earned in the previous year (say 2023-24), tax is paid in the assessment year (say 2024-25).
This previous year and assessment year concept has been removed and only tax year under the simplified bill has been brought in. The Income Tax Bill, 2025 comprises 536 sections, higher than 298 sections of the current Income-Tax Act, 1961. The existing law has 14 schedules which will increase to 16 in the new legislation.
However, the number of chapters has been retained at 23. The number of pages has been reduced substantially to 622, almost half of the current voluminous Act which includes amendments made over the last six decades. When the Income Tax Act, 1961, was brought in, it had 880 pages.
"This increase in sections reflects a more structured approach to tax administration, incorporating modern compliance mechanisms, digital governance, and streamlined provisions for businesses and individuals. The new law introduces 16 schedules and 23 chapters," AMRG & Associates Senior Partner Rajat Mohan said.
As per the proposed law, clearer tax treatment on stock options (ESOPs) have been included for reduced tax disputes and includes judicial pronouncements of the last 60 years for more clarity.
"A key departure from the Income-Tax Act, 1961, is that previously, the Income Tax Department had to approach Parliament for various procedural matters, tax schemes, and compliance frameworks. Now, CBDT has been empowered to introduce such schemes independently, significantly reducing bureaucratic delays and making tax governance more dynamic," he said.
As per new law, the CBDT can now frame tax administration rules, introduce compliance measures, and enforce digital tax monitoring systems without requiring frequent legislative amendments as per Clause 533. After introduction, the bill is likely to be sent to a parliamentary standing committee for scrutiny.
Finance Minister Nirmala Sitharaman announced in Budget 2025-26 that the new tax bill will be introduced during the ongoing session of Parliament. Sitharaman had first announced a comprehensive review of the Income-tax Act, 1961 in the July 2024 Budget.
The CBDT had set up an internal committee to oversee the review and make the Act concise, clear, and easy to understand, which will reduce disputes, and litigations, and provide greater tax certainty to taxpayers. Also, 22 specialised sub-committees have been established to review the various aspects of the Income Tax Act.
Public inputs and suggestions were invited in four categories: simplification of language, litigation reduction, compliance reduction, and redundant/obsolete provisions. The income tax department has received 6,500 suggestions from stakeholders on review of the Income Tax Act.
