Effective Streamlining

The proposed Income Tax Bill 2025 aims to simplify India's tax laws by removing redundant provisions, reducing litigation, and enhancing clarity, ensuring a smoother transition while maintaining continuity in tax policies

- JINESH S VANZARA

In the Budget presented in July, 2024, the Finance Minister announced that the current Income Tax Act, 1961 will be reviewed and scrutinised in order to make it "concise, lucid, easy to read and understand".

In her 2025 Budget speech, Finance Minister Nirmala Sitharaman asserted "I reaffirm the commitment of the tax department to 'trust first, scrutinise later".

The Government is encouraging taxpayers for proper compliance and reposed faith in the taxpayers. Such an approach of the Government is visible over the last couple of years where we are witnessing lesser scrutinies being conducted by the department.

With such progressive policies and reforms, the Government is determined to promote 'ease of doing business' by replacing the old model of 'fear of doing business'.

Sitharaman also pointed out that for attaining the vision of 'Viksit Bharat', taxation reforms play a crucial role.

With this background, the new Income Tax Bill, 2025 ("the Bill") was tabled on February 13, 2025.

The new bill is likely to replace the current Income Tax Act, 1961 ("the Act") and may come into force from April 1, 2026.

The Bill aims to streamline various scattered provisions under the existing Act by removing obsolete and redundant provisions, provisos, explanations, clauses, references, and creating a crisper and simpler income tax framework.

Over the years, the Act of 1961 had been extensively subjected to amendments and modifications every year vide the Finance Acts.

The introduction of new sections, sub-sections, provisos, explanations, references, etc. had changed the Act of 1961 so much so that it barely resembled the form it had when it was enacted for the very first time.

The conflicting provisions gave rise to innumerable litigations which, in turn, required further additional clarifications and explanations.