In a major step toward direct tax reform, the Parliamentary Select Committee has approved the Income Tax Bill 2025 with a record 285 recommendations. The revised version of the Bill is expected to be tabled in Parliament during the Monsoon Session, which begins this month.

The Income Tax Bill, 2025, which was introduced in the Lok Sabha on February 13, 2025, seeks to replace the existing Income Tax Act, 1961, with a modernised, technology-driven, and simplified tax regime. The Bill was referred to a Select Committee the same day, with a deadline to submit its report by the beginning of the Monsoon Session.

What Does the Income Tax Bill 2025 Aim to Do?

The new Bill proposes a complete overhaul of the Indian income tax system, which has remained largely unchanged for over six decades. According to the Finance Ministry, the proposed law seeks to:

• Modernise tax administration using digital tools and real-time reporting

• Rationalise tax slabs and deductions to ensure equitable taxation

• Introduce a simplified return filing mechanism, especially for salaried and small business taxpayers

• Curb tax evasion and plug loopholes by redefining income categories and tax triggers

• Ensure greater transparency and ease of doing business

What Are the 285 Suggestions All About?

According to sources from the Select Committee, the panel reviewed over 1,500 representations from industry associations, tax experts, law firms, economists, and civil society organisations. Based on the consultations, the 285 suggestions cover:

1. Taxpayer Rights Charter: Stronger provisions for taxpayer protection and accountability of the Income Tax Department.

2. Small Business Compliance Relief: Raising turnover thresholds for audit exemptions and reducing TDS requirements.

3. Capital Gains Tax Simplification: Uniform holding periods and tax rates across asset classes.

4. Digital Tax Administration: Use of AI-driven notices, blockchain records for asset verification, and pre-filled returns.

5. Dispute Resolution: A new ‘National Tax Tribunal’ structure for appeals, reducing dependency on High Courts and ITATs.

6. Anti-Abuse Provisions: Safeguards against aggressive tax planning, including GAAR-like clauses.

7. Clarity on Crypto and Digital Assets: A dedicated chapter defining taxability and reporting norms.

The report also suggests clear definitions and removal of ambiguous clauses, which have often led to litigation.

Committee Observations

The Parliamentary Select Committee, chaired by former Finance Secretary and MP N.K. Singh, acknowledged that the 1961 Income Tax Act had become too complex and fragmented.

In its report, the committee stated:

“The new Income Tax Bill presents a historic opportunity to reset the relationship between the taxpayer and the state. The Committee recommends that tax laws should be built on simplicity, stability, and fairness.”

It also praised the Finance Ministry for attempting a “bold reform” and urged timely implementation through robust capacity-building of field officers and better public awareness campaigns.

Political Reactions

The Bharatiya Janata Party (BJP) welcomed the panel’s approval, calling the reform “the most ambitious tax overhaul since liberalisation”.

Finance Minister Nirmala Sitharaman, speaking informally to reporters, said:

“This is not just a change of law; this is a change in the tax culture of India. We are moving from suspicion to trust, and from complication to compliance.”

The Indian National Congress and several opposition parties raised concerns about whether the changes might over-centralise tax enforcement powers. They plan to raise these issues during the Monsoon Session.

What Happens Next?

• The revised Income Tax Bill 2025 will be tabled in Parliament during the Monsoon Session, expected to begin later this month.

• After Parliamentary debate, it could be passed in the current session or by winter 2025, paving the way for its rollout in FY 2026–27.

• The Finance Ministry will then initiate drafting rules, capacity training, and system upgrades.

Conclusion

With the Parliamentary panel’s approval and 285 considered recommendations, the Income Tax Bill 2025 is now closer to reality. If passed in its final form, the Bill could fundamentally transform India’s direct taxation landscape, aiming for greater simplicity, equity, and digital efficiency.

As India seeks to become a $5 trillion economy, such tax reforms will play a critical role in attracting investment, encouraging compliance, and reducing litigation — thereby fostering a more transparent and modern economic environment.

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