Tax certainty and ease of paying taxes have been given consistent priority by govt in the last few years. In keeping with these principles, the new Income Tax Bill, 2025 sets out to achieve the fundamental objectives of simplification in language, reducing litigation, weeding out redundant provisions and lowering compliance burden. A preliminary study of the bill shows that it proposes many positive features to meet these goals.The bill offers a shorter legislation with section count reduced from over 800 to 536, and word count cut by 40-50%. New schedules are organised in a reader-friendly way and the proposed law will have sixteen schedules instead of the current fourteen. To maintain stability, the new bill continues with the current structure of twenty-three chapters and heads of income. The substantive provisions and the assessment and appeal procedures are also the same. Tax rates will be determined by the Finance Act each year.The bill has positive simplification aspects. It introduces the concept of ‘tax year’ of twelve months in place of complicated terms like ‘previous year’ and ‘assessment year’ to provide greater clarity about the period for tax payments, income tax return filing, and other tax compliances. Generally, the tax year will begin from April 1 and end on March 31 of the following year. The language has been simplified by removing the numerous ‘provisos’, ‘explanations’, and old legal jargons. For instance, the bill replaces the phrase ‘notwithstanding anything contained’ by ‘irrespective of anything contained’ to make it easier for taxpayers to read the law. Where required, formulas and tables have been introduced to crisply present the provisions. Especially for subjects like salary perquisites, presumptive taxation, and withholding tax rates and thresholds, this approach would be helpful in clearly understanding the requirements. The detailed/multiple sub-sections under main sections in the current law have been shifted to distinct schedules. For example, existing Section 10 that lists out all types of exempt incomes has been moved to seven different schedules in the bill. Removal of outdated sections, like provisions for investment allowances on new plant and machinery, has also helped clean out the legislation.The bill allows a taxpayer to apply for lower withholding tax certificate under all TDS/TCS provisions instead of only a select few under the current law. This will reduce compliance for taxpayers at large. In another positive, the bill proposes an option to non-resident shipping and airline companies to offer lower income than presumptive computation by maintaining tax audited books. The bill would be examined by a Parliamentary Committee. We hope, the opportunity would be used for consultation and debate on some aspects. The bill seems to withdraw the current deduction for inter-corporate dividends for companies that opt for concessional tax rate of 22%. This may bring back the cascading impact of tax on dividends, that the current law addresses. Surely, basis consultations some of these aspects will be reviewed now, and over time some other issues persisting in the existing Act would be dealt with. It is well-acknowledged that economies with simple and well-designed tax systems can incentivise compliance and boost businesses activity, ultimately resulting in higher economic growth, investments and employment. Income Tax Bill, 2025 reflects govt’s sincere commitment towards creating a more transparent and conducive tax environment that will help save time and costs for both the tax administration and the taxpayers. It is an imperative step in govt’s continuing focus on reforms, and the momentum must continue. (Gupta is India tax leader and Mathur is tax director, EY. Views are personal)
Focus on simplification & lower compliance burden
