The government of India today introduced the much-anticipated Revised Income Tax Bill, 2025, in the Lok Sabha. This new legislative proposal, a follow-up to the previously withdrawn draft, is poised to be one of the most significant overhauls of India's direct tax system since the Income Tax Act of 1961. The move signals the government's commitment to creating a modern, transparent, and taxpayer-friendly tax regime that aligns with the nation's economic aspirations. The revised bill aims to address longstanding complexities and streamline the legal framework, promising considerable relief for middle-class taxpayers and simplifying compliance for businesses.
The introduction of this bill is the culmination of extensive stakeholder consultations and a review of the previous draft, which was pulled back to incorporate key recommendations from a select parliamentary committee. Finance Minister Nirmala Sitharaman, while tabling the bill, underscored its twin objectives: to enhance taxpayer trust and to simplify the labyrinthine provisions of the current law. The central theme of the bill is a shift towards a more trust-based system, where compliance is encouraged through clarity and ease of process, rather than being enforced through a maze of regulations and potential litigation.
A cornerstone of the proposed reforms is a significant enhancement of taxpayer relief, primarily through the restructuring of Section 87A of the Income Tax Act. Under the new regime, the rebate limit has been substantially increased, providing a major financial boost to a vast section of the country's population. The previous limit for a tax rebate under the new tax regime, which was available for a taxable income of up to ₹7 lakh, has been raised to an impressive ₹12 lakh. For salaried individuals, this is even more beneficial, as the standard deduction of ₹75,000 means they can now have a gross income of up to ₹12.75 lakh and still pay zero income tax. This change is a direct response to the long-standing demand for a higher tax exemption threshold that accurately reflects contemporary living costs and inflation.
The revised bill also seeks to put an end to the confusion and litigation surrounding the applicability of the Section 87A rebate on special-rate incomes, such as certain capital gains. By clarifying the language and scope, the new law aims to ensure that the rebate is applied correctly, reducing instances where taxpayers are denied this benefit due to ambiguities in the legislation.
Beyond taxpayer relief, the core purpose of the Revised Income Tax Bill, 2025, is simplification. The existing Income Tax Act of 1961 has been amended numerous times over the decades, leading to a fragmented and often contradictory legal framework. The new bill aims to replace this with a concise and logically structured code. It will be approximately 50% shorter than the current act, with provisions written in simpler, more accessible language. The focus is on consolidating similar deductions, removing over 300 obsolete provisions, and presenting the law in a manner that is easy for a common citizen to understand, thereby reducing reliance on tax consultants for basic filings.
For businesses, the simplification extends to a number of key areas. The revised bill streamlines the provisions related to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source), aiming to reduce the compliance burden for both deductors and deductees. Furthermore, the new legislation introduces clearer guidelines for the depreciation of assets and the taxation of house and commercial properties. The parliamentary committee, in its review, had flagged ambiguities in the previous draft regarding the taxation of temporarily vacant business properties. The revised bill explicitly addresses this by aligning the language with the existing law, ensuring that such properties are not unfairly taxed as "house property" income.
Another notable reform is the introduction of a unified "tax year" concept. This change seeks to eliminate the current distinction between the financial year and the assessment year, a common source of confusion for taxpayers. By harmonizing these timelines, the government aims to create a more straightforward and intuitive tax filing process, especially for new businesses and professionals.
The bill's philosophy is rooted in good governance and ease of doing business. By proposing a reduction in penalties for certain offences, the government is signalling a more lenient and supportive approach towards taxpayers who demonstrate good-faith compliance. The new framework also gives greater autonomy to the Central Board of Direct Taxes (CBDT) to implement digital monitoring systems, which will further enhance transparency and efficiency.
The introduction of the Revised Income Tax Bill, 2025, is just the first step in a long legislative process. The bill is now open for parliamentary debate and scrutiny, and it is expected to be referred to a select committee for further review. The government's proactive engagement with stakeholders and its willingness to revise the previous draft based on feedback indicates a strong intent to create a robust and enduring tax code. If passed, the new law is projected to come into effect from April 1, 2026, ushering in a new era of tax administration in India.
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