Garvita OdiaThe Income Tax Bill, 2025 was tabled in the Lok Sabha on August 11, 2025, following the withdrawal of an earlier draft to incorporate nearly all recommendations from the Parliamentary Select Committee headed by Baijayant Panda. The bill intends to replace the nearly six-decade-old Income Tax Act, 1961 with a modern statute designed for clarity, fairness, and ease of understanding. It aligns legislative language, eliminates contradictory provisions, and adapts the tax framework to today’s digital and economic environment. Its effective date is April 1, 2026, giving taxpayers and authorities time to transition smoothly.
One of the notable structural reforms is the introduction of a standardized concept of the “Tax Year,” replacing the older dual system of “Previous Year” and “Assessment Year.” This unification simplifies tax computation for individuals and businesses, particularly new entrepreneurs who will have their tax year aligned with the start of their business or new income source.
Additionally, the bill reorganizes provisions into a cleaner structure with 536 sections and 16 schedules, all aimed at removing redundant or conflicting language. The Central Board of Direct Taxes (CBDT) is empowered to frame rules using modern technology, enabling faceless assessments and easing administrative burdens. Several important amendments incorporated in response to Select Committee inputs include Late Refund Claims Allowed, Property Income Taxation Clarified, Commuted Pension Deduction Extended, Exemptions for Specific Funds and Scheme & Presumptive Taxation Reforms.
