Income tax bill introduced

India is poised to introduce a significant overhaul of its income tax legislation, aiming to replace the six-decade-old Income Tax Act of 1961 with a more streamlined and comprehensible framework. The new Income Tax Bill, 2025, is scheduled to be presented in the Lok Sabha on Thursday, February 13, 2025.
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Key Features of the Income Tax Bill, 2025:

Simplified Language and Structure:The bill reduces the length of the legislation from over 800 pages to 622 pages by eliminating obsolete provisions and using clearer language. 

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The number of sections has increased from 298 to 536, organized into 23 chapters, to provide more detailed and precise guidelines. 

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Introduction of 'Tax Year':The bill introduces the concept of a 'tax year,' defined as the 12-month period beginning from April 1, replacing the existing terms 'previous year' and 'assessment year. 

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For new businesses or professions, the tax year will commence from the date of establishment and conclude at the end of the financial year.

Enhanced Clarity and Reduced Litigation:By removing numerous provisos and explanations, the bill aims to make tax provisions more straightforward, thereby reducing ambiguities that often lead to disputes.
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Incorporation of judicial pronouncements from the past 60 years provides clearer guidance to taxpayers.

Focus on Virtual Digital Assets:The bill includes provisions to account for virtual digital assets as part of undisclosed income during searches, aligning with the evolving digital economy.
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Background and Rationale:

Finance Minister Nirmala Sitharaman announced a comprehensive review of the Income Tax Act, 1961, in her July 2024 Budget speech, with the objective of making the Act concise, lucid, and easy to understand. This initiative aims to reduce disputes and litigation, providing greater tax certainty to taxpayers. The Central Board of Direct Taxes (CBDT) subsequently set up an internal committee and 22 specialized sub-committees to review various aspects of the Act. Public inputs were also invited, resulting in approximately 6,500 suggestions from stakeholders.
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Implementation Timeline:

Once introduced, the bill is expected to be referred to a parliamentary standing committee for detailed scrutiny. If enacted, the new tax system will take effect from the financial year 2025-26, applying to taxpayers from the assessment year 2026-27.

Global Context:

In the United States, House Republicans have unveiled a $4.5 trillion tax-cut framework aimed at reducing taxes, cutting spending, and allocating funds for border enforcement. The plan proposes $1.5 trillion in spending cuts over ten years and aims for $4.5 trillion in tax cuts while increasing the federal debt limit by $4 trillion. The success of the plan critically hinges on unifying the Republican majority in the House.
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Additionally, Representative Nicole Malliotakis has introduced two bills seeking to provide greater tax cuts for Americans over 65 receiving Social Security benefits. The proposed legislation includes additional deductions and increased income exemptions to alleviate the tax burden on retirees.
nypost.com

Conclusion:

The introduction of the Income Tax Bill, 2025, represents a significant step toward modernizing India's tax system. By simplifying language, restructuring provisions, and introducing new concepts like the 'tax year,' the government aims to create a more efficient and taxpayer-friendly environment. As the bill progresses through the legislative process, stakeholders will be keenly observing its potential impact on compliance, litigation, and overall tax governance in the country. 

India to present new bill in Parliament to replace decades-old income tax law
reuters.com
India to present new bill in Parliament to replace decades-old income tax law
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