New Delhi: The Income Tax Bill will drop several obsolete provi sions, decriminalise many offen ces, introduce the concept of ‘tax year’ and provide a “Taxpayer’s Charter’, kicking off the biggest rewrite of the direct tax law to make it taxpayer-friendly and re-duce disputes.
The Income Tax Bill 2025, likely to be tabled in Parliament on Thursday, is expected to reduce litigation, and improve compli ance, experts said.
Spread over 23 chapters, 536 sec tions and 16 schedules, the 622-page Bill is almost half of the current law. It has no new taxes and is proposed to be implemen ted from April 1, 2026.. In the July 2024 budget, the go-vernment had announced a time-bound comprehensive review of the Income Tax Act to make di-rect tax law concise, lucid, easy to read and understand. The “Taxpayer’s Charter’ outlines the rights and obligations of the taxpayer. The Bill has several new sec tions that clearly articulate tax law for some of the contentious issues such as revenue recogni tion for service contracts, accor dingtosources privy to details.
The Bill puts forward clearly what may constitute “income”, to ensure that more transac tions are taxed domestically, of ficials said. It clearly defines virtual digital assets and fore ign income. The new tax fram-ework proposes a ‘tax year’con-cept 12 months beginning April 1. This would replace the current concept of assessment and previous year. The Bill proposes to retain the old tax regime and does not tin ker with the capital gains regi me for businesses and indivi duals, or tax rates. “There will be no fresh tax liability or in creased compliance burden on taxpayers and there may be a well-defined structure on pe nalties and compliance, empo wering assessing officials to re-solve litigations at their end, making it easier for taxpay-ers,” a senior official told ET.
Other changes include pre-sumptive taxation for non-resi-dents, a revised treatment for business and professional in-come, strengthened General Anti-Avoidance Rules (GAAR) and a revised penalty and compliance framework.
In another simplification, it ta bulates deductions from salari es such as standard deduc tion and gratuity at one place and introduces a formula-based approach for calculating depre ciation to reduce any ambiguity in the computation of taxation. These provisions are spread
across several sections in the current Income Tax Act, 1961.
“Aimed at overhauling the na tion’s tax system, the Bill seeks to eliminate obsolete sections that have accumulated over de cades and its primary objective is to simplify the tax laws, ensu ring they are more transparent, casier to interpret and taxpayer friendly,” said Rohinton Sidwa, tax partner, Deloitte.
The Bill consolidates all tax de ducted at source (TDS) sections under a single clause with simp le tables for ease of understan-ding. The Bill also includes spe cific provisions for taxation of forex fluctuations, bringing cla-rity to international business transactions. There are also spe cial provisions added for mar ket-linked debentures and taxa-tion of slump sale transactions.
“As the Bill is likely to be effec tive April, 2026; we will still ha-ve time to remove any difficul ty if pointed out by the taxpay ers,” the senior official said.
Another significant change is the newly introduced Section 275(6), which mandates that the Dispute Resolution Panel (DRP) must provide detailed direc tions, explicitly stating the po ints of determination, its deci sion and the reasons behind it.
“With this amendment, DRP orders will now be well-reaso ned and adequately explained, ensuring transparency and re-ducing reliance on past ru lings,” said Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm.
