Income-tax Bill2025: A game changer or just a structural update?

Union Finance Minister Nirmala Sitharaman introduced the Income-tax Bill, 2025 in the Lok Sabha on February 13, aiming to modernize and streamline India's six-decade-old direct tax system. The bill seeks to enhance clarity, remove outdated provisions, and create a more accessible legal framework for taxpayers. If approved by Parliament and signed by the President, the new legislation is expected to be implemented on April 1, 2026.
Key Changes and Their Impact
One of the most notable structural changes in the new bill is the introduction of the 'tax year' concept, which replaces the traditional 'assessment year.' Under this provision, the tax year will begin on April 1 and end on March 31, ensuring better alignment between tax assessments and actual economic activities. This modification is expected to simplify compliance for businesses and individual taxpayers alike.
Furthermore, the bill does not propose any alterations to tax slabs and rates, maintaining stability for taxpayers. The government has emphasized that the objective of the new legislation is not to introduce policy-level changes but to improve readability and ease of compliance. By consolidating various provisions, the bill has reduced the length of the tax law from 823 pages to 622 pages, making it significantly more concise.
Implications for Taxpayers
The bill has retained the existing five heads of income—salaries, income from house property, business and profession, capital gains, and other sources. Despite earlier expectations of structural changes, the government has opted to maintain consistency. Salaried employees will also see the consolidation of salary-related exemptions and deductions into a single section, enhancing clarity when filing returns, according to information.
The bill further refines Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions by reorganizing them into a more structured, tabular format. This move is expected to make tax compliance easier for businesses and financial institutions handling such deductions. Additionally, penalties for failure to comply with TDS/TCS requirements remain largely unchanged, with defaulters facing interest penalties and being treated as non-compliant taxpayers.
Presumptive Taxation and Finance Bill Alignment
For small businesses and professionals, the presumptive taxation regime under sections 44AD, 44AE, and 44ADA has been revised, with turnover limits increased to Rs 5 crore for businesses and Rs 75 lakh for professionals. This change is aimed at reducing the compliance burden for small taxpayers while encouraging formalization of income reporting.
Moreover, the bill incorporates all amendments made in the Finance Bill, 2025, ensuring continuity and stability in direct tax policies. While the overall tax structure remains intact, the codification of these amendments ensures that the new bill remains updated with recent policy shifts.
The Income-tax Bill, 2025 marks a significant step toward simplifying India’s direct tax framework, improving compliance, and reducing ambiguities. While the core structure remains unchanged, the reorganization of provisions, elimination of outdated clauses, and introduction of structured tables make the law easier to navigate for taxpayers and professionals. However, with no major tax rate revisions or new exemptions, the bill primarily focuses on enhancing clarity and reducing complexity, rather than altering taxation policies, noted experts. The final impact will depend on its implementation and how effectively it eases compliance for businesses and individuals alike.
The Income-tax Bill, 2025, is a structural overhaul rather than a fundamental policy shift, opined experts. While it does not introduce significant changes in tax rates or major exemptions, its focus on simplification and modernization aims to make tax compliance more efficient. Experts believe that eliminating outdated provisions, consolidating tax-related tables, and enhancing readability are positive steps. However, the lack of substantial changes in penalty or compliance provisions raises questions about whether the bill will truly reduce administrative burdens for businesses and individual taxpayers.
As the bill moves forward for parliamentary approval, its long-term impact on India’s tax ecosystem will depend on how effectively these changes translate into ease of compliance and reduced litigation.

(Business Correspondent)