Simplified Laws Guide to Taxation and Legal Concern The Income-Tax Act, 1961, has long been a key pillar of India’s tax system. Enacted on 1st April 1962, the Act has been amended over 4,000 times through Finance Acts to adapt to the evolving economic landscape. However, the accumulation of amendments, complex language, and a bulky structure have made tax compliance increasingly challenging. To address these concerns, the Income-Tax Bill, 2025, seeks to simplify and modernize tax law while preserving its core principles.
One of the biggest structural changes in the new Bill is eliminating redundant provisions thereby reducing the text by nearly half. The number of chapters has been reduced from 47 to 23, and sections from 819 to 536. The drafting style has also been improved, replacing complicated references with a more straightforward format. The cumbersome alphanumeric cross-referencing has been removed, making the Act easier to follow.
A major question taxpayers have is whether tax rates increase or decrease under the new Bill. The government has not proposed any changes in tax rates, including depreciation and capital gains tax rates. The budget changes made in 2025 remain applicable, and all policy decisions already incorporated in the existing Act have been carried forward.
Several misleading messages have been circulating, creating confusion. Contrary to rumours, there is no reintroduction of wealth tax, no inheritance tax, and no tax on agricultural income. The tax structure remains unchanged, and such proposals are not part of the new Bill. The old tax regime is not being removed, and taxpayers can continue choosing between the old and new regimes.
Structural Reforms for Easier Compliance
One significant simplification in the new Bill is the replacement of the terms ‘Previous Year’ and ‘Assessment Year’ with ‘Tax Year’. This ensures that tax-related activities are aligned with the financial year, simplifying compliance for taxpayers. Additionally, provisions related to salary, deductions, and exemptions have been consolidated into dedicated chapters, making it easier for individuals to understand their tax liabilities. Similarly, provisions for Non-Profit Organizations (NPOs) have been compiled into a single chapter for better clarity.
With nearly five lakh appeals pending at various judicial levels, one of the key aims of this simplification is reducing litigation. By removing ambiguities, consolidating provisions, and streamlining tax laws, disputes between taxpayers and tax authorities are expected to be reduced substantially.
What Happens to Refunds and Past Assessments?
One important question relates to income tax refunds due from the government. The new Bill ensures that pending refunds will be processed under the provisions of the existing Act. Similarly, scrutiny assessments for the financial year 2025-26 and earlier years will continue under the old law, even if assessments happen after three years. The transition provisions in the Bill clarify that all transactions and compliance for FY 2025-26 will be assessed under the old Act, with the new Act coming into force from 1st April 2026.
The Income-Tax Bill, 2025, is not just a revision but a major step towards making tax laws more transparent, accessible, and efficient while maintaining legal and policy continuity. As it awaits parliamentary approval, it marks the beginning of a new era in taxation, where clarity and simplicity drive compliance, ultimately benefiting both taxpayers and the economy at large.
