India Says Goodbye to 60-Year-Old Tax Law! Parliament Set to Embrace Game-Changing Income Tax Bill, 2025 — No More Assessment Year, Half the Size, Double the Simplicity!

New Delhi: In a major legislative overhaul, the Parliament is set to witness the tabling of the much-anticipated report on the Income Tax Bill, 2025, which aims to replace the complex and litigation-heavy Income Tax Act of 1961. The 31-member Select Committee, chaired by BJP MP Baijayant Panda, has submitted its final report containing 285 suggestions, paving the way for one of the most significant reforms in India’s direct taxation system.

Finance Minister Nirmala Sitharaman, who introduced the bill on February 13, 2025, had earlier described it as a substantial step toward simplifying tax laws and reducing compliance burdens. The new bill comes with a dramatically reduced size and structure compared to the six-decade-old law.

Key Features of the Income Tax Bill, 2025

Shorter and Simpler

• The new bill has a word count of 2.6 lakh, down from 5.12 lakh in the current Act.
• 536 sections replace the 819 effective sections in the 1961 law.
• 23 chapters, instead of the existing 47, make navigation and understanding significantly easier.

Cleaner Format

• 57 tables are included to simplify interpretation, replacing 1,200 provisos and 900 explanatory clauses.
• Provisions related to exemptions, TDS, and TCS have been moved to tables, eliminating scattered legal language.

Major Shift in Tax Terminology

• The bill abolishes the concept of ‘assessment year’, replacing it with a single ‘tax year’, making the tax filing process more aligned with the actual income year.
• Previously, income earned in one financial year was taxed in the following assessment year. Under the new system, taxation will occur in the same year the income is earned.

Simplified Rules for Not-for-Profits

• The bill includes a fully rewritten chapter for charitable and not-for-profit organisations, using plain language and improving clarity around compliance.

Why This Matters

The Income Tax Act, 1961, had grown increasingly complicated with hundreds of amendments, leading to heavy litigation and confusion. The new bill is designed to minimize ambiguity, reduce the need for judicial interpretation, and enhance tax certainty for individuals and businesses alike.

What Happens Next

The Select Committee finalised the report on July 16. It will now be formally tabled in the Lok Sabha during the Monsoon Session of Parliament (July 21 to August 21, 2025). The government may push for passing the bill in the current session, after which it will replace the existing tax regime entirely.