The Select Committee of the Lok Sabha on Monday (July 21, 2025) submitted its long-awaited report on the draft Income-Tax Bill, 2025, a legislative overhaul aimed at simplifying India’s direct taxation framework. The move comes after years of deliberation over updating the country’s complex and outdated tax structure.

The report has received largely positive reactions from tax experts, industry observers and compliance professionals, many of whom welcomed the emphasis on clarity, digitisation, and reduced litigation. However, the applause is tempered with caution, as professionals continue to seek greater transparency and specificity in several critical areas.

A Step Towards Simplification

The new Income-Tax Bill is being positioned as a clean-slate rewrite of the existing Income-Tax Act, 1961, with the goal of eliminating outdated clauses, reducing interpretational disputes, and aligning with global best practices.

The Select Committee’s report has recommended:

• Simplified income slabs and a merged structure for salaried and self-employed individuals

• Unified treatment of capital gains, eliminating arbitrary holding period distinctions

• Clear timelines for assessments, refunds, and appeals

• Digitally driven compliance systems to reduce interface with tax authorities

Tax experts said the intent to simplify and improve ease of doing business was evident, especially in clauses that propose curbing retrospective taxation and streamlining refund processes.

Concerns Remain on Capital Gains and Exemptions

Despite its broad positives, the report has not fully addressed concerns around capital gains taxation, particularly regarding:

• Indexation benefits on long-term gains

• The ambiguity surrounding transfer of digital assets

• Lack of clarity on exemptions for start-ups and ESOPs

• Treatment of agricultural income under capital investment income

Senior tax advisor Neha Jain noted, “While the committee has moved in the right direction, lack of precision on capital asset classification and minimum alternate tax rules could lead to fresh disputes.”

Corporate Sector Seeks Greater Predictability

From a corporate perspective, firms have welcomed moves like deduction uniformity, loss carry-forward simplification, and de-criminalisation of minor offences. However, industry associations have sought clarity on the General Anti-Avoidance Rules (GAAR), transfer pricing provisions, and the applicability of advance tax rulings.

The report also hints at an eventual phasing out of several exemptions and deductions in favour of lower headline tax rates, a move that could benefit larger corporations but may impact MSMEs and specific sectoral investments.

Digital Push and Litigation Reduction

The committee strongly backed a technology-led framework, where tax filings, refunds, and hearings are conducted through a centralised e-assessment platform.

This includes:

• Enhanced use of AI-driven risk profiling to reduce scrutiny

• Consolidation of all notices and communications on a single dashboard

• Strict timelines for disposal of appeals and rectifications

Experts believe this will reduce arbitrariness and harassment, but flagged the need for data security measures and capacity building within the tax department to handle new digital protocols.

Need for Wider Stakeholder Consultations

One recurring theme from the tax fraternity is the need for detailed implementation roadmaps. While the government has not announced a firm timeline for the Bill’s enforcement, there are expectations that it will be tabled in the Winter Session of Parliament and come into effect from April 1, 2026, if passed.

Tax bodies, industry chambers and legal forums have urged the Finance Ministry to:

• Release a consultation paper before the final draft is tabled

• Provide sector-specific guidance notes

• Clarify transitional provisions for ongoing assessments under the old Act

Conclusion: A Welcome Move, But Not the Final Word

The Select Committee’s report on the Income-Tax Bill, 2025 is a significant milestone in India's long-delayed tax reform process. By focusing on simplification, consistency, and digitisation, it lays the groundwork for a more modern tax ecosystem.

However, for a nation of 140 crore people and millions of tax-paying entities, clarity and communication remain essential. As tax experts cautiously cheer this progress, they await the government’s next move with keen interest — one that could shape India’s fiscal landscape for decades to come.

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