Finance Minister Nirmala Sitharaman will introduce the new Income Tax Bill 2025 in the Lok Sabha on February 13. The Bill seeks to replace the six-decade-old Income Tax Act of 1964 with simplified, clearer tax laws aimed at improving transparency, compliance, and reducing litigation.
The existing Income Tax Act has expanded over the years with multiple amendments, leading to increased complexity. The new Bill does not introduce new taxes but focuses on simplifying the language and structure of the tax code. It is expected to come into effect starting April 1, 2026.
One of the key changes is the replacement of terms like “assessment year” and “previous year” with the simpler concept of a “tax year,” which will span 12 months from April 1. This change aims to make tax rules easier to understand for taxpayers. For example, income earned from April 2024 to March 2025 will now be assessed in the same tax year instead of the current assessment system.
The Bill also eliminates redundant sections, such as those related to the discontinued Fringe Benefit Tax, and removes heavy use of complex terms like “notwithstanding,” which has been replaced with “irrespective” for better readability.
Experts expect that these updates will make tax laws more taxpayer-friendly while reducing disputes and ensuring a more streamlined taxation process.
