New Income Tax Bill 2025 to be tabled in Parliament: Key changes, impact, benefits, and here's what taxpayers need to know

The Income Tax Bill 2025, set to be tabled in Parliament tomorrow, marks a historic shift in India’s tax landscape as it will replace the Income Tax Act of 1961. According to government sources, the bill, once passed, will likely take effect from April 1, 2026.

Although the new law is expected to come into force next year, a transition period will be implemented, allowing the existing act to remain in effect temporarily.

The bill aims to modernise India’s tax system by removing outdated provisions and streamlining tax laws to enhance transparency, clarity, and taxpayer-friendliness.

Rohinton Sidhwa, Partner at Deloitte India, explains, "By replacing complex provisions with clearer ones, the bill seeks to reduce legal disputes and encourage voluntary tax compliance. A notable change is the shift from the ‘Assessment Year’ to the ‘Tax Year.’"

Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co., adds, "The multiple concepts of the financial year, previous year, and assessment year have often confused taxpayers due to semantic differences, affecting the readability of tax law. A single concept of a tax year is easier to understand and aligns with international practice, even if there is no substantive change."

This overhaul represents a significant transformation in India’s tax system, designed to improve transparency, streamline processes, and enhance efficiency. However, its success will depend on smooth implementation and how well taxpayers adapt. "The bill promises a more streamlined, accessible tax system, making it easier for citizens and businesses to comply while fostering trust in the system," says Sidhwa.

Munjal Almoula, Head of Tax at BDO India, echoes this view: "The new tax bill appears to simplify language and eliminate redundant provisions, making compliance easier and less cumbersome. Accordingly, we can expect a simpler compliance mechanism, greater transparency in tax assessments, and a more efficient refund system."

The bill, expected to be presented in the Lok Sabha tomorrow, is anticipated to include 23 chapters, 16 schedules, and 536 clauses.

However, some experts caution that linguistic changes may lead to fresh litigation. Gautam Nayak, Partner at CNK & Associates LLP, notes, "While simpler language may help taxpayers understand the law more easily, the change in terminology could render past case law inapplicable, potentially leading to new legal disputes. This will depend on the clarity of the new provisions."

Prabhakar KS, Founder & CEO, Shree Tax Chambers said, "Law Reform Commission of Victoria had righty said, ‘the language of the law has been a source of concern to the community’. Sadly, the legal language has always remained the language of the few until today. In the last 75 years, in India, there has also been no change in drafting statutes especially taxing statutes, which are still plagued by jargon, legal and archaic words/phrases."

"Nevertheless, the language of the new Income Tax Bill shows that lawmakers are finally attempting to deliver their job in simple terms and saving everybody’s time and energy," said Prabhakar.