Parliament Approves New Income Tax Bill 2025, Aiming To Simplify Tax Compliance For All

Parliament has approved the New Income Tax Bill, 2025, with the Rajya Sabha passing it through a voice vote and sending it back to the Lok Sabha. This legislation aims to replace the outdated Income Tax Act of 1961 by simplifying tax procedures and reducing compliance burdens without introducing new tax rates.

The bill was initially passed in the Lok Sabha and includes suggestions from the Parliamentary Select Committee. Finance Minister Nirmala Sitharaman expressed gratitude for the committee's efforts, highlighting that over 75,000 person-hours were dedicated to drafting this legislation.

Key Features of the New I-T Bill

The proposed law reduces text volume and sections by about 50%, making provisions more straightforward. It introduces a unified "tax year" concept, eliminating the complex distinction between assessment year and previous year.

Taxpayers can now claim refunds even if returns are filed late, offering relief to those who miss deadlines. The bill retains provisions for carrying forward losses and provides tax relief on anonymous donations to religious trusts.

The legislation also shortens the TDS correction window from six years to two years, aiming to reduce disputes. It clarifies deductions applicable to commuted pension and gratuity payments received by family members.

Opposition's Reaction

Sitharaman criticised opposition parties for not participating in debates on crucial bills like this one. Despite agreeing to a 16-hour debate in each House, opposition members staged a walkout during discussions.

Some parts of the old Income Tax Act had become outdated, necessitating a new law. The bill incorporates changes suggested by the panel, including adjustments to MSME classifications in line with the MSME Act.

The Finance Minister assured that while simplifying language, no new tax rates have been introduced. The aim is to modernise outdated provisions while maintaining existing beneficial measures for taxpayers.

This legislative change is expected to make tax compliance easier for individuals and businesses alike. By streamlining processes and updating provisions, it seeks to align with current economic realities.