Income Tax Bill

The Income Tax Bill 2025, tabled by Finance Minister Nirmala Sitharaman in Parliament, marks a significant attempt at overhauling India’s six-decade-old tax law. It aims to simplify tax compliance, reduce litigation and make tax laws more accessible. However, while the Bill makes notable improvements, it also raises concerns that require careful scrutiny. One of the Bill’s key positives is the simplification of tax terminology. The introduction of the “tax year” to replace the confusing “assessment year” and “previous year” is a welcome change. The restructuring of provisions into clear tables and the elimination of redundant sections will also make tax laws easier to navigate. Moreover, the reduction in word count and consolidation of scattered clauses provide greater clarity, addressing long-standing taxpayer grievances over complex and convoluted legal language.

Despite these positive steps, the Bill stops short of fundamental tax reform. Many of the structural inefficiencies of the old law remain intact, merely repackaged in a more readable format. Provisions related to deductions, exemptions and penalties continue to be complex. Also, multiple cross-references to the 1961 Act still exist, which may cause confusion rather than simplify compliance. Another contentious issue is the expansion of tax authorities’ powers. The Bill allows officials to access electronic records, including emails and social media accounts, during investigations. While this is aimed at tackling tax evasion in the digital age, it raises concerns about privacy and potential misuse, necessitating strong safeguards.

The formation of a 31-member select committee to review the Bill is a prudent step, ensuring that all concerns are addressed before it becomes law. While the Income Tax Bill represents a move in the right direction, meaningful tax reform must go beyond simplification — it should focus on reducing compliance burdens, ensuring fairness and protecting taxpayer rights.