Income Tax Bill 2025 next week: Major overhaul set to reshape India’s tax landscape

India is on the brink of a historic tax reform, with the Union Finance Minister Nirmala Sitharaman expected to table the Income Tax Bill, 2025 in Parliament on August 11, according to a CNBC TV18 report. This new Bill aims to replace the existing Income Tax Act of 1961, which has governed the country’s taxation system for over six decades.

First introduced in the Lok Sabha on February 13, 2025, the Bill has been widely viewed as a landmark move to modernise India’s tax administration. The government’s key objectives include simplifying tax laws, reducing litigation, and making compliance more accessible for individuals and businesses.

Simpler tax code

One of the most notable features of the new Bill is its significant reduction in length and complexity. The new law comprises 2.6 lakh words, compared to 5.12 lakh words in the existing Act. The number of sections has been cut from 819 to 536, while chapters have been trimmed from 47 to 23.

While the updated version includes 57 tables (up from 18), it also removes over 1,200 provisos and 900 explanations, making the document more readable and user-friendly. The aim is to eliminate legal jargon and present a cleaner, more streamlined law that taxpayers can understand without relying heavily on expert help.

Key reforms and proposals

A major change for taxpayers is the introduction of a unified “tax year”, which will replace the current system of “previous year” and “assessment year.” This is expected to simplify return filing by aligning the income-earning and tax-filing timelines into a single financial year.

The Bill also supports digitisation and modern compliance, offering clearer documentation rules, e-filing processes, and faster dispute resolution mechanisms—key steps toward building a more efficient tax ecosystem.

Select Committee's recommendations

The draft has been shaped by a Select Committee of the Lok Sabha, chaired by BJP MP Baijayant Panda. After a detailed review, the committee submitted a 4,500-page report with 566 recommendations, many of which have been incorporated.

Some key proposals include:

Tax relief for homeowners, including fairer deductions for pre-construction interest on let-out properties.

Exemption for small taxpayers from filing returns solely to claim TDS refunds.

Support for green businesses, with tax relief for biodegradable waste management and R&D incentives.

Lower litigation risk by reintroducing terms that offer broader legal safeguards.

Next steps

While the tax slabs and rates remain unchanged, the emphasis on clarity, accessibility, and reduced compliance burden could mark a turning point in India’s tax regime. If passed, the Income Tax Bill, 2025 is expected to come into effect from April 1, 2026.