Central Board of Direct Taxes (CBDT) solicits comments and suggestions on the Income Tax Bill for the year 2025
The Central Board of Direct Taxes (CBDT) has introduced the Income Tax Bill, 2025, with the aim of modernizing and simplifying the six-decade-old Income Tax Act, 1961. The bill seeks to replace the current law with a more straightforward, clearer, and modern tax law that reduces complexity and enhances compliance.
One of the key objectives of the bill is the simplification of tax laws and provisions. The number of sections in the act will be reduced from 819 to 536, and the language will be made clearer and more organized, making it easier for taxpayers to understand their obligations without legal expertise.
The bill also retains and simplifies the new tax regime announced in Budget 2025, which offers lower and more progressive tax slabs. Taxpayers can choose between the old and new tax regimes. The new tax slabs are 5% for income between ₹4,00,001 and ₹8 lakh, 10% for ₹8,00,001 and ₹12 lakh, 15% for ₹12,00,001 and ₹16 lakh, 20% for ₹16,00,001 and ₹20 lakh, 25% for ₹20,00,001 and ₹24 lakh, and 30% for income above ₹24 lakh.
The bill also clarifies the taxation of property income. Property income from buildings or land will be taxed as 'Income from House Property' based on the higher of notional or actual rent, but properties used for business purposes will be taxed under business income. This aims at fairness and clarity in property tax treatment.
The bill also aligns the Unified Pension Scheme (UPS) with the National Pension System (NPS) for taxation purposes. Up to 60% of the pension corpus at retirement will be tax-exempt, with the rest taxable when used for annuity. This removes disparities and encourages better retirement planning.
The bill also introduces more taxpayer-friendly provisions, such as the removal of restrictions on refunds for late filers. Now, refunds will be allowed even if filings are delayed due to genuine reasons.
The bill also maintains key existing mechanisms and powers, such as faceless assessment, search, and seizure processes, dispute resolution panels for eligible assessees, and granting authorities expanded powers to access "virtual digital space" (like emails, social media accounts) with appropriate safeguards to enhance enforcement efficiency.
The bill also replaces the "Previous Year" and "Assessment Year" concepts with a single "Tax Year" to align with international practice, reducing taxpayer confusion about the timing of income assessment and filing. The bill also removes redundant provisions and archaic language, making for a leaner act that facilitates easier implementation and less litigation.
Overall, the Income Tax Bill, 2025 emphasizes transparency, ease of compliance, and modernization of the direct tax system while retaining crucial safeguards and providing relief to key taxpayer groups. It is expected to be effective from April 1, 2026.
The CBDT has launched a utility on the e-filing portal to facilitate the submission of inputs and suggestions from stakeholders. Stakeholders are encouraged to continue submitting their suggestions on the provisions of the Income Tax Bill, 2025. The Finance Minister will place the new Income Tax Bill in the Lok Sabha on Monday. A committee formed to review the rules and forms invites inputs and suggestions from stakeholders in four categories, including simplification of language and reduction of litigation and compliance burden. The objective of the CBDT's initiative is to enhance clarity, reduce the compliance burden, and eliminate obsolete rules, making tax processes more accessible for taxpayers and other stakeholders.
The Income Tax Bill, 2025, introduced by the Central Board of Direct Taxes (CBDT), aims to streamline the taxation process in a broader context that includes business, politics, and general-news. Specifically, it seeks to simplify the taxation of property income, aligning the Unified Pension Scheme (UPS) with the National Pension System (NPS) for taxation purposes, and introducing more taxpayer-friendly provisions such as the removal of restrictions on refunds for late filers.
In the political landscape, the bill retains and simplifies the new tax regime announced in Budget 2025, offering lower and more progressive tax slabs, providing relief to certain taxpayer groups while emphasizing transparency and modernization of the direct tax system. The Finance Minister will present this bill in the Lok Sabha, inviting suggestions from stakeholders to enhance clarity, reduce the compliance burden, and eliminate obsolete rules, thereby making tax processes more accessible for all.
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