New-Income Tax Bill 2025 – Simplification ~Consolidation ~ Clarity

Income Tax Bill 2025 – Key Changes

The proposed Income Tax Bill, 2025 is a comprehensive revamp of the Income-tax Act, 1961, focusing on simplification, clarity, and structural reorganization while retaining the core taxation principles.

Key Changes:

  1. The term “previous year” has been replaced with the expression “tax year”
  2. The term “Non-Profit Organisation (NPO)” has been used instead of “trust,” and there are more than 20 provisions for the registered NPO
  3. Business Income: The combined provision now allows fair and proportionate deductions when premises, machinery, plant or furniture are partially used for business or professional purposes.
  4. Clubbing of Income: As per Income Tax Act, 1961, the clubbing provisions do not apply if the spouse possesses ‘technical or professional
    qualifications’, and the income is solely attributable to the application of his or her technical or professional knowledge and experience. The ITB proposes to remove the first condition and include the term “qualification” in the second condition alongside knowledge and experience. Thus, income could be attributable to the application of technical or professional knowledge, experience, and qualifications.
  5. Assessments: Section 144C(6) of the ITA lists specific elements the DRP must consider when issuing directions. The ITB, instead of listing out specific items to consider, focuses on the structure and content of the directions. It requires that the directions be in writing and must state the points of determination, the decision on each point, and the reasons for those decisions.
  6. Certificate for Lower TDS: The ITB broadens this provision, enabling a person to seek a lower TDS certificate for all types of payments, against specific payments prescribed under IT Act 1961.
  7. Opportunity of being heard before Penalty: The mandatory requirement of giving an opportunity of being heard to the assessee before imposing a penalty has been proposed to be removed in the ITB.
  8. Search and Seizure: The expression “any books of account or other documents” has been changed to “any books of account or other documents or any information stored in any electronic media or a computer system” in the ITB

The following is Summary of overall changes in structure:

  Income Tax Act 1961 Income Tax Bill 2025
Sections

298

536
Chapters

51

23
Schedules

14

16
No. of Pages

823

622
Word Counts

5.2 Lakhs

2.6 Lakhs

Key changes include consolidation of scattered provisions, elimination of redundant sections, reduction of legal jargon, and improved readability through tabular formats and formula-based explanations. The Bill significantly reduces word count across chapters, restructures provisions for logical flow, and merges overlapping sections to enhance compliance ease. Complex provisions like exemptions, presumptive taxation, clubbing of income, and TDS/TCS have been streamlined, while new definitions, such as “Tax Year,” replace outdated terminology. The Bill does not introduce major policy shifts but ensures a taxpayer-friendly approach by making tax law easier to interpret, reducing ambiguities, and aligning with modern tax administration practices.

Simplification – Consolidation – Clarity

The changes are divided into mainly 3 attributes for ease of understanding:

1.  Simplification

Sr. No. Chapter Name Point of Change Income Tax Act, 1961 New Income Tax Bill, 2025
1 Preliminary Simplification of definitions Terms defined at multiple places Definitions consolidated in Section 2
2 Preliminary Introduction of “Tax Year” Used “Previous Year” and “Assessment Year” “Tax Year” replaces both terms
3 Charging Section Simplification of structure Long sentences, complex sub-sections More sub-sections, shorter sentences
4 Exemptions (Section 10) Word reduction and readability improvement ~30,000 words, lengthy sections ~13,500 words, structured schedules
5 Non-Profit Organisations Simplified language and redundant provisions removed Lengthy explanations with multiple provisos Concise wording and structured format
6 Salaries & House Property Language simplified for better taxpayer understanding Complex legal wording Clear and easier-to-read provisions
7 Profits & Gains of Business Word reduction and better readability ~40,000 words ~20,000 words
8 Presumptive Taxation Simplified language Multiple sections for different categories Unified and made concise
9 Advance Tax & Interest Formula-based computation introduced Text-heavy explanations Formulas for advance tax & interest
10 Special Rate Taxation Clearer wording, easier comprehension Scattered and detailed provisions Tables & separate sections for clarity
11 TDS & TCS Simplification of tax deduction rules 69 sections, complex clauses 13 structured sections with clear tables

2.  Consolidation

Sr. No. Chapter Name Point of Change Income Tax Act, 1961 New Income Tax Bill, 2025
1 Preliminary Sections merged for efficiency Multiple scattered sections Consolidated into single section
2 Exemptions (Section 10) Provisions placed in schedules Single lengthy section Exemptions structured into 6 schedules
3 Non-Profit Organisations All provisions grouped into one chapter Spread across multiple chapters Chapter XVII-B for all NPO provisions
4 Salaries & House Property Relevant provisions grouped together Scattered across different sections Single part covering both categories
5 Profits & Gains of Business Merging of similar provisions 65 sections 41 sections, structured better
6 Presumptive Taxation Combined different presumptive tax schemes Separate sections for business, profession, and transport Single section covering all cases
7 Clubbing of Income Provisions simplified with formulas Lengthy text-based explanations Mathematical formula-based approach
8 Deeming Provisions (S.68-69D) Redundant sections merged Scattered sections with repetitive content Sections merged, and tax rate clarity added
9 Loss Set-Off & Carry Forward Outdated and irrelevant provisions removed Multiple complex sections Only relevant provisions retained
10 Chapter VIA Deductions Streamlined and structured better Complex and lengthy deductions Placed in schedules for better clarity
11 TDS & TCS Sections combined into simplified tables Scattered across 69 sections Merged into 13 sections

3.  Clarity

Sr. No. Chapter Name Point of Change Income Tax Act, 1961 New Income Tax Bill, 2025
1 Preliminary Defined “Tax Year” for consistency Used “Previous Year” and “Assessment Year” “Tax Year” replaces both terms
2 Clubbing of Income Introduction of formula-based approach Complex text-based explanations Clarity through structured formulas
3 Deeming Provisions (S.68-69D) More specific definitions and tax rate reference Ambiguous explanations Clearer tax rate application
4 Advance Tax & Interest Clear formula for calculating interest General wording and explanations Mathematical formulas for easy calculation
5 Special Rate Taxation Clearer tables for different tax rates Scattered provisions with multiple explanations Tables to organize special tax rates
6 Double Taxation Relief Defined interpretation of tax treaties Ambiguous definitions of key treaty terms Specific rules for treaty interpretation
7 Tonnage Tax Reorganized for clarity Scattered sections No policy change, but better readability
8 Tax Administration Authorities’ roles clearly defined Overlapping roles and multiple sections Distinct responsibilities defined
9 Offences & Prosecution No major policy changes, but better structure Lengthy and complex wording Simpler wording, no new prosecution rules
10 Assessment Procedure Faceless assessment procedure clarified Overlapping sections Simplified and structured format
11 Return Filing Due dates and obligations presented clearly Scattered references Tabular format for better understanding

This new tax law revision ensures Simplification by reducing complexity, Consolidation by grouping related provisions together, and Clarity by using formulas, structured tables, and well-defined terms. These improvements make compliance easier, more transparent, and taxpayer-friendly without introducing major policy changes.

Resources:

  1. New Income Tax Bill 2025 related documents uploaded on Government Website:
    * Income Tax Bill 2025
    * Corrigenda to Income Tax Bill 2025
    * Nevigator – New Income Tax Bill
    * General FAQs and Broad Scope
    * FAQs on Income Tax Bill 2025

Click https://incometaxindia.gov.in/Pages/income-tax-bill-2025.aspx

2. Taxmann’s Analysis of ITA to ITB: 50+ important Changes

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Chintan Patel is CA, CPA(USA), CISA(USA), DISA, DIRM(ICAI) and certified Ind AS and FAFD by ICAI. He is Regional Council Member of WIRC of ICAI. He is partner of Naresh J. Patel & Co. having more than 18 years of post-qualification experience in Ind AS, IFRS, Companies Act, GST. He is an author of books Quick Guide to Ind AS, ICDS published by Taxmann and Speaker at more than 500 presentations.

4 Comments

  2. Like Simple New tax bill, Chintanbhai has simply classified/ identify changes between two acts.

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