The Indian government is poised to make significant changes to its taxation framework with the introduction of the Income Tax Bill 2025, expected to simplify and modernize the existing tax system.
Finance Minister Nirmala Sitharaman is prepared to present the new bill, which is aimed at replacing the six-decade-old Income Tax Act of 1961. The bill, which has circulated before its official introduction, is intended to make tax laws more digestible for both individuals and businesses, addressing concerns long held by taxpayers and tax professionals alike.
According to reports, the Income Tax Bill 2025 is composed of 622 pages, significantly shorter than the current 823-page tax act. This reduction not only reflects the government's goal of producing clearer legislation but also aims to eliminate redundant provisions and reduce complexity. The proposed changes include the introduction of terms like "tax year" to replace the traditional "assessment year," meant to clarify the tax timeline for individuals and businesses.
“The aim of this new bill is to streamline the law and make it more reader-friendly,” said Lokesh Shah, Partner at IndusLaw, highlighting the bill’s shift to user-centric language. Similarly, CA Anand Bathiya of the Bombay Chartered Accountants’ Society described the bill as largely restructuring existing provisions without introducing substantial changes. "It appears to be more of an editorial work on the existing act rather than transformative legislation," he pointed out.
One of the most notable aspects of the bill is the proposed tax slab revisions. Under the new structure, individuals earning up to ₹4,00,000 will pay no tax; those earning between ₹4,00,001 to ₹8,00,000 will face a 5% tax, up to 10% for earnings between ₹8,00,001 and ₹12,00,000, and 30% for incomes exceeding ₹24,00,000. Employees benefiting from the existing tax rebates for incomes below ₹12 lakh will continue to enjoy these exemptions.
“These changes could provide immediate relief to many taxpayers,” noted financial expert Balwant Jain, expressing optimism about the Government's approach to modernizing India's tax framework. “We needed something clear and uncomplicated, and this bill promises just about the right balance.”
The Income Tax Bill is also seen as relevant to the growing digital economy. The policy explicitly includes virtual digital assets (VDAS), acknowledging the increasing importance of cryptocurrencies and other digital transactions. "Virtual assets, including cryptocurrencies, are now classified as taxable under the same laws governing other assets, reflecting our progress toward modernization," explained Jain.
Despite these updates, industry observers have expressed skepticism over the depth of the changes. Some characterize the new bill as “more of the same,” arguing it lacks the ambitious reforms seen under previous proposals like the Direct Taxes Code of 2010, which were more comprehensive and forward-thinking.
Sitharaman is also expected to speak on the bill’s welfare provisions, with adjustments likely for standard deductions, following the government’s aim to make tax burdens lighter on salaried citizens.
Another important aspect involves taxpayers from Sikkim, who continue to enjoy freedom from income tax on earnings within the state, which has been maintained under the new framework. “It is reassuring to see this exemption, which recognizes the unique economic status of Sikkim,” stated Shetty, adding, “But there’s still more clarity needed on several aspects.”
The proposed changes are expected to usher the taxation processes toward digitalisation and efficiency, addressing the potential friction points between taxpayers and the Income Tax Department, particularly on compliance-related issues. This is important, as according to the current regulatory framework, nuanced language has often led to litigation and disputes.
“With improved clarity, offering tax audit relief for businesses with turnover up to ₹10 crore as those relying on digital transactions, it’s evident the government is focusing on modernizing how we handle taxes,” said Bathiya.
While the new Income Tax Bill’s objectives actionably align with the government's intentions to create easier navigation through tax law, the central question remains: will taxpayers perceive these changes as progressive or merely aesthetic? The process of review by the Parliamentary Standing Committee on Finance is poised to highlight these concerns, as they review the bill post-introduction.
Public feedback suggests ambivalence as stakeholders from various sectors of society assess the anticipated impact. While many favor transparency and simplicity, calls for even more radical tax reforms echo among disappointed advocates hoping for transformative policies rather than incremental tweaks.
It is also noteworthy to mention the historical challenge posed by outdated provisions and language, which have plagued the Income Tax Act over the years. By eliminating past terminologies, the Income Tax Bill 2025 could potentially minimize confusion—a promising endeavor noted by both officials and tax experts.
Before its limited introduction, the bill has attracted significant media coverage, generating spirited debate within legislative circles, particularly as it coincides with deliberations over the Waqf (Amendment) Bill amid growing political tension.
Whether the Income Tax Bill of 2025 will fulfill its promises will depend on its implementation and the receptiveness of the general populace. It is likely set for enactment by April 1, 2026, once Parliamentary scrutiny concludes. Critics and supporters alike will be closely monitoring the legislation’s deployment and its tangible benefits once established as law.