The new Income Tax Bill 2025, set to be tabled in Parliament on Thursday, marks a historic moment in India’s tax landscape, as it will replace the current year legislation introduced way back in 1961. The bill, once passed, will come into effect from April 1, 2026.
“Aimed at overhauling the nation’s tax system, the bill seeks to eliminate obsolete sections that have accumulated over decades. Its primary objective is to simplify the tax laws, ensuring they are more transparent, easier to interpret, and taxpayer-friendly. By replacing complex provisions with clearer provisions, it aims to reduce legal disputes and encourage voluntary tax compliance,” said Rohinton Sidhwa, Partner, Deloitte India.
A notable change introduced by the bill is the shift from the ‘Assessment Year’ to the ‘Tax Year’.
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Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co, says, “At first blush, the code does not present any policy changes. As promised, the new tax law seems to focus primarily on simplification and consolidation such as introducing the concept of ‘tax year’ in place of ‘assessment year’ in line with international parlance.”
Multiple concepts of financial year, previous year, and assessment year often caused confusion amongst taxpayers because of the semantics: this impacted the readability of tax law. “A single concept of a tax year is easy to understand and in line with international practice (even though there may not have been any substantive change),” adds Puri.
This tax reform is a significant step towards modernizing India’s tax framework, bringing greater clarity and efficiency. However, “its success hinges on smooth implementation and how well taxpayers adapt to the changes,” says Sidhwa.
Whatever be the case, the bill promises a more streamlined, accessible tax system, making it easier for citizens and businesses to fulfill their obligations while fostering trust in the system.
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