New Income Tax Bill 2025: For common man, better understanding of law and smoother tax compliances expected

New Income Tax Bill: Largely, there are not any modifications to the definition of residency and even wage associated provisions for that matter.

By Parizad Sirwalla
New Income Tax Bill 2025: Representing a historic milestone in India’s tax panorama, Hon. Finance Minister – Madam Nirmala Sitharaman has introduced the Income Tax Bill, 2025 (Bill) within the Parliament on 13 February 2025.
The present Income tax law – Income Tax Act, 1961 (the present Act) was enacted greater than six a long time in the past. With passage of time there have been a number of amendments made to the law. Many believed this resulted within the present Act turning into troublesome to learn, complicated to interpret and resulted in unwarranted litigation as nicely. Hence, it was certainly an opportune time to embark on an train to simplify the identical. While an try was made to this impact a decade in the past with the draft Direct Tax Code (DTC) – it by no means turned laws.
Globally as nicely, nations just like the UK, Australia and so on., had undertaken comparable workouts to boost readability and compliance of their taxation legal guidelines. Hence, a brand new simplified earnings tax law in India was positively the necessity of the hour.
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The Bill is ready by investing greater than 60,000 man-hours and has 23 chapters and 2.6 lakh phrases compared to 46 chapters and 5.12 lakh phrases respectively in comparison with the Current Act. The quantity of Sections has additionally dramatically decreased from 800 plus sections to 536 Sections solely.
Secondly the language used within the Bill at many locations is extraordinarily lucid and is reader pleasant because it has tables and formulation as in opposition to the standard verbose model.
One of probably the most important features of the Bill is the elimination of the ideas of ‘previous year’ and ‘assessment year’. India is attempting to affix the league of comparable tax jurisdictions through the use of one single time period ‘tax year’. The present phrases of earlier 12 months and evaluation 12 months was apparently resulting in errors by taxpayers whereas submitting varieties/ challans and so on. With now just one time period “tax year” it would hopefully keep away from confusion.
Largely, there are not any modifications to the definition of residency and even wage associated provisions for that matter. In truth the selection of the 2 tax regimes continues to be out there to particular person taxpayers. There isn’t any change to the tax charges and capital positive factors tax regime additionally stays the identical.
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TDS and TCS provisions have been made simpler to understand by offering tables as a substitute of the present provisions which have prolonged texts which might be open to interpretation points and very often obscure. The Bill now additionally offers the power for people to use for a Lower or NIL price of TCS whereas they buy a automotive, pay for overseas tour, or make remittance overseas underneath the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India.
It can also be fascinating to notice that elaborate provisions have been enunciated for coping with transition from the present Act to the brand new law.
There is a transparent concentrate on encouragement of compliance with the mantra of “Trust first, scrutinize later” – as acknowledged by Hon. FM in her latest Feb 2025 Budget speech.
As and when the Bill is enacted, the executive measures for implementing them will probably be made operational (e.g., publishing of guidelines, IT infrastructure revamp and so on.), retaining in thoughts the comfort of taxpayers and all stakeholders. For the common man, it’s anticipated that the Bill will assist in simple understanding of law and smoother tax compliances.
(The creator is Partner and Head, Global Mobility Services, Tax, KPMG in India)