House approves fresh Income Tax Legislation with no discussion
New Income-Tax Bill Streamlines and Simplifies India's Tax Laws
The Indian government has passed the Income Tax (No. 2) Bill, 2025, a comprehensive overhaul of the country's income tax laws. The new bill replaces the Income-tax Act, 1961, which has been subjected to numerous amendments over the years.
The Select Committee on the Income Tax (No. 2) Bill, chaired by BJP MP Baijayant Panda, made over 285 key changes to the bill. These recommendations aim to streamline and simplify India's income tax laws, making them clearer, more digitally-driven, and taxpayer-friendly. The bill is set to come into effect from April 1, 2026.
Key changes and recommendations
The revised bill includes several significant changes. For instance, the definition of "beneficial owner" has been clarified, allowing individuals to carry forward losses even when receiving direct or indirect share benefits during the tax year.
The committee also proposed reinstating the inter-corporate dividend deduction mechanism, absent in the original draft, with a standard 30% deduction after municipal tax deductions. Additionally, pre-construction interest deductions have been extended to let-out properties, which were not initially covered.
The bill's language and drafting have been extensively revised to improve legal clarity, alignment of phrases, and cross-referencing. The committee also proposed adjustments refining the General Anti-Avoidance Rules (GAAR) and other measures to reduce litigation and improve taxpayer compliance experience.
The bill includes provisions for faceless assessments, e-filing, electronic transactions, and robust data reporting to make tax compliance easier and more transparent. Enhanced penalties for non-compliance and a structured appeal system with alternate dispute resolution committees are proposed to address tax disputes efficiently.
Relief for taxpayers
To give relief to taxpayers, the committee suggested changing the provision which disallows refunds if income tax returns are filed beyond the due date.
Continuous disruptions in Parliament
The passage of both bills was amid opposition protests over their demand for debate on Special Intensive Revision (SIR) of electoral rolls in Bihar. Both Lok Sabha and Rajya Sabha have witnessed continuous disruptions since the beginning of the monsoon session of Parliament over the opposition demand.
The committee's work
The 31-member Select Committee headed by BJP MP Baijayant Panda suggested changes to the new Income Tax Bill. The committee made a total of 566 suggestions and recommendations in its 4,584-page report. The report also includes recommendations for amendments in the bill for clarity on advance ruling fees, TDS on provident funds, low-tax certificates, and penalty powers.
For non-profit organizations, the committee asked for clarification over the terms 'income' vs 'receipts', anonymous donations, and the removal of the deemed application concept. The committee also recommended aligning the definition of micro and small enterprises with the MSME Act.
The Government undertook a comprehensive review of the Income-tax Act, 1961 to make it concise, lucid, and easy to understand. The panel's report includes suggestions to tighten definitions, remove ambiguities, and align the new law with existing frameworks. The new bill aims to simplify the Income-tax Act, 1961 to reduce complexity for taxpayers and improve tax administration efficiency.
The Objects and Reasons of the bill state that taxpayers, practitioners, and tax administrators had raised concerns about the complicated provisions and structure of the Income-tax Act 1961. The Government decided to withdraw the Income-tax Bill, 2025 and bring the Income Tax (No. 2) Bill, 2025 due to corrections in the nature of drafting, alignment of phrases, consequential changes, and cross-referencing.
In summary, the Income Tax (No. 2) Bill, 2025 consolidates all changes into a single comprehensive draft to replace the 1961 Act, reflecting a modernized, transparent, and digitally-enabled tax regime. The bill promises to make tax compliance easier, reduce litigation, and improve the overall taxpayer experience.
- The new Income-Tax Bill, passed by the Indian government, intends to make finance-related business matters more transparent and taxpayer-friendly, as it focuses on streamlining and simplifying India's tax laws.
- The bill's proposals also include reforming politics-related tax laws, such as refining the General Anti-Avoidance Rules (GAAR) and other measures to reduce litigation and improve taxpayer compliance experience.
- The revised bill covers various aspects of the business world, including the reinstatement of the inter-corporate dividend deduction mechanism and the extension of pre-construction interest deductions to let-out properties.
- In the realm of news and opinion, the bill's passage has stirred discussions about the impact of these changes on the overall financial health and business environment of India.
