New Income Tax Bill simplifies language, eases compliance: Experts

The Income-Tax Bill, 2025, likely to be introduced in Parliament on February 13, largely sticks to simplifying the language and easing the compliance burden on taxpayers, experts have said.

The Centre has avoided making any changes to direct taxes in terms of levies, as the aim was to offer a more readable piece of legislation, say experts.  The new bill will replace the six-decade old Income Tax Act, 1961.

"The directionality of the new tax bill seems to be simply the language and to do away with redundant tax provisions making compliances simpler and less cumbersome for taxpayers, Munjal Almoula, Head of Tax, BDO India, said.

It would be reasonable to expect a simpler compliance mechanism, greater transparency “as regards approach and directionality on tax assessments, and a quicker and more efficient refund mechanism”, Almoula said.

Presenting the Budget for 2025-26, finance minister Nirmala Sitharaman on February 1 promised a new, simpler and easy to comply with a new I-T bill as she announced a sew of tax rejigs.

The new bill also significantly reduces the length of the law from 823 pages to 622 pages even as the number of chapters remain the same at 23.

Vivek Jalan, Partner at Tax Connect Advisory Services LLP, said the proposed act has approximately 931 sections and 14 schedules.

"The new bill has significantly reduced the number of sections to 536, with 16 schedules. The above is in line with the government's determination to simplify the statute," he said.
 

The new bill, set to reduce 50 percent of the current provisions, marks a significant step towards simplifying tax laws. The bill is expected to make compliance easy for taxpayers and administrators alike, ultimately helping to cut down on tax-related litigation, Sandeep Agrawal, director and founder of Teamlease Regtech, said.

The most notable change is a proposal to introduce the concept of "tax year", doing away with "assessment year”.

The tax year, like the financial year, will be the 12-month period from April 1 to March 31, simplifying compliance and reporting requirements.

Tax year refers to the period during which income is earned and reported for taxation purposes. This change ensures that the terminology is consistent with the financial year.

This flows from a two-layered concept of the previous year – the year in which income is earned – and assessment year – the year following the previous year during which the previous year's income is assessed and taxed.

"Multiple concepts of financial year, previous year and assessment year often caused confusion amongst taxpayers because of the semantics: this impacted the readability of tax law,” said Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co.

A single concept of a tax year would be easy to understand and in line with international practice, she said.

Rohinton Sidhwa, Partner, Deloitte India, said by replacing complex provisions with clearer regulations, the bill aims to reduce legal disputes and encourage voluntary tax compliance.

This is significant given that money involved in tax disputes has seen a sharp rise — Rs 12.21 lakh crore as on FY23 compared to Rs 5.03 lakh crore in FY14.

Direct tax accounts for the lion’s share with Rs 6 lakh crore worth litigation in corporate tax matters and another Rs 4.5 lakh crore in litigation under the "taxes on income other than corporate tax" head.

This simpler bill, coupled with the relief offered in the Budget for 2025-26 for income of up to Rs 12 lakh, is expected to significantly ease the burden on tax-abiding salaried class, say experts.
 

Source:- Money Control