Why in news?
The Finance Minister tabled the revised Income Tax Bill 2025 in the Lok Sabha. The bill incorporates recommendations from a Parliamentary Select Committee and aims to replace the decades‑old Income Tax Act 1961 with a modern, simplified law.
Background
India’s current direct tax law has been amended hundreds of times, making it complex for taxpayers and administrators. A new Direct Tax Code has been under discussion for years. The revised bill of 2025 seeks to consolidate existing provisions, remove redundant clauses and align tax rules with digital economy practices.
Main features of the bill
- Single tax year: The proposal replaces the terms “previous year” and “assessment year” with a single tax year to simplify understanding for taxpayers.
- Rationalised tax slabs: Streamlines income slabs and reduces surcharges to make taxation fairer and easier to comply with.
- Digital administration: Encourages electronic filing, faceless assessments and paperless communication between taxpayers and the Income Tax Department.
- Dispute resolution: Establishes a time‑bound mediation mechanism to settle disputes outside courts, thereby reducing litigation.
- Global transactions: Updates rules on digital services taxes and cross‑border income to capture revenue from the digital economy and bring certainty to multinational companies.
Significance
A simplified and transparent tax law is expected to improve voluntary compliance, reduce administrative costs and enhance investor confidence. By modernising definitions and leveraging technology, the bill seeks to balance revenue mobilisation with ease of doing business.
