I-T bill to simplify tax framework: FM in LS

Union finance minister Nirmala Sitharaman on Thursday introduced the Income-Tax Bill, 2025 in the Lok Sabha aiming to abridge the bulky direct tax act and make it simple

Union finance minister Nirmala Sitharaman on Thursday introduced the Income-Tax Bill, 2025 in the Lok Sabha aiming to abridge the bulky direct tax act and make it simple, and urged the speaker to refer it to a select committee of the house, a request that the Opposition objected to because it wants the bill to be referred to a standing committee.

Union finance minister Nirmala Sitharaman requested the speaker to determine the terms of reference for the committee and proposed that the panel should present its report by the first day of the next session (Sansad TV)

The minister requested the speaker to determine the terms of reference for the committee and proposed that the panel should present its report by the first day of the next session. Unlike regular standing committees, select committees are appointed for a specific purpose and cease to exist when they finish the task assigned to them and submit a report.

Refuting charges that the proposed legislation is bulkier than the existing one, Sitharaman said that the Income-Tax Act, 1961 initially came to affect in 1962 with only 298 sections, but that over a period of six decades, “many more sections” were added in it, taking the total to 819 sections (along with about 1,200 provisos and 900 explanations that have been removed in the new bill).

Citing number of words reduced from 512,535 in the existing act to 259,676 in the bill, the FM rejected the Opposition’s charges that the proposed bill involved only mechanical changes. “They are not mechanical changes. Substantial changes are being made,” she said citing number of chapters trimmed from 47 in the existing law to 23 in the bill.

Some of the key changes in the bill include reorganising major tax exemptions into distinct schedules for better clarity, elimination of the concepts of ‘previous year’ and ‘assessment year’ in favour of ‘tax year’ and a clear definition of virtual digital assets (VDAs) along with taxability on income from crypto-assets, including cryptocurrencies.

On VDAs, the Central Board of Direct Taxes (CBDT) on Thursday clarified that there is no change in the scope of ‘virtual digital asset’ under the Income Tax Bill, 2025. The definition under the bill incorporates the amendment already proposed under the Finance Bill, 2025, it said. Commenting on the matter, Vikram Subburaj, CEO at Giottus Crypto Platform said that the “formalisation” by the Union government is a significant milestone as it is indicative of “bringing crypto within the ambit of the Indian financial framework”.

In a statement, the finance ministry said that the Income-tax Bill, 2025 reflects the government’s commitment to enhancing ease of doing business by providing a tax framework that is simple and clear. “The simplification exercise was guided by three core principles: textual and structural simplification for improved clarity and coherence, no major tax policy changes to ensure continuity and certainty, no modifications of tax rates, preserving predictability for taxpayers.”

The statement added that the government adopted a consultative and research-based approach to frame the bill. “Out of 20,976 online suggestions received, relevant suggestions were examined and incorporated, where feasible. Consultations were held with industry experts and tax professionals and simplification models from Australia and the UK were studied for best practices,” it said.

In a note accompanying the bill, the finance minister said the Income Tax Act passed in 1961 has been subjected to numerous amendments since its passage sixty years ago. As a result of these amendments the basic structure of the Income-tax Act has been overburdened and language has become complex, increasing cost of compliance for taxpayers and hampering efficiency of direct-tax administration. Tax administrators, practitioners and taxpayers have also raised concerns about the complicated provisions and structure of the Income-tax Act, she said.

“Therefore, the Government in the budget in July 2024 announced that a time bound comprehensive review of the Income-tax Act, 1961 would be undertaken to make the Act concise, lucid, easy to read and understand. Accordingly, the Income-tax Bill, 2025 has been prepared which proposes to repeal and replace the Income-tax Act, 1961,” she added.

Sumit Singhania, partner at Deloitte India said: “The overall architecture of the new legislation as proposed is underpinned by three important principles, i.e. modernization of tax policy such that the new law can keep pace with evolving business dynamism, clarity in taxation principle such that the outcomes are minimally litigious and finally, bringing about simplicity in tax compliance processes to encourage wider voluntary compliance across the board.”

“The move sends a strong signal to trade and industry, both domestic and global inbound, that the government is willing to walk the extra mile in ensuring ease of doing business through legislative reforms in tax matters,” he added.