New income tax bill cuts half the sections; report with 285 changes to be tabled Monday

A major overhaul of India’s tax law is set to move forward as the report of the parliamentary committee scrutinising the new Income Tax Bill, 2025 will be tabled in the Lok Sabha on Monday. The bill seeks to replace the six-decade-old Income Tax Act, 1961 with a simplified framework aimed at clarity, reduced litigation, and streamlined compliance.

The 31-member Select Committee, chaired by BJP leader Baijayant Panda, was appointed by Lok Sabha Speaker Om Birla after the Bill was introduced by Finance Minister Nirmala Sitharaman on February 13 in the Lok Sabha. The committee adopted its report at a meeting held on July 16, and it will now be tabled in the House for further action.

The Committee has made 285 suggestions to the draft Bill. It was mandated to submit its report by the first day of the next session, which begins with the Monsoon Session on July 21 and runs through August 21, 2025.

The Income Tax Bill, 2025, according to FAQs issued by the Income Tax Department, is about half the size of the current Act, with a word count of 2.6 lakh, down from 5.12 lakh in the 1961 law. The number of sections has been brought down to 536 from 819, and the number of chapters halved to 23 from 47.

A key objective of the draft is to achieve tax certainty by minimising the scope of litigation and fresh interpretation. The new Bill also introduces 57 tables, compared to just 18 in the existing Act, and removes 1,200 provisos and 900 explanations to simplify and declutter the law.

“Substantial changes have been made in the Bill. The number of words have been halved from 5.12 lakh, and sections reduced from 819 to 236,” Sitharaman had said while introducing the Bill.

The government said this rewriting of the tax code uses plain language throughout and presents provisions related to exemptions and TDS/TCS in tabular format, making them easier to understand. The chapter for not-for-profit organisations has been made comprehensive and updated for clarity. As a result of these changes, the word count has come down by 34,547, the I-T department noted.

In a move aimed at improving taxpayer understanding, the Bill replaces the term ‘previous year’ from the old Act with ‘tax year’, and also does away with the concept of assessment year. Currently, tax is paid in the assessment year following the previous year in which income is earned — for example, income earned in 2023–24 is assessed in 2024–25. The simplified law will now apply taxation to the same tax year, eliminating this dual structure.