Income Tax Bill 2025 : Govt released Section-wise comparison table and FAQs

Government releases section-wise comparison table and FAQs on the Income Tax Bill 2025

Download FAQs and section wise compariosn of new income tax bill 2025

The document provided is a comprehensive overview of the proposed Income Tax Bill 2025, including comparisons to the Income Tax Act, 1961. It outlines the goals of the new bill, the simplification efforts undertaken, and specific changes across various sections of the tax code. Here are the key points:

Overall Goals and Approach:

• The primary goal of the new Income Tax Bill is to create a tax law that is concise, lucid, and easy to understand.
• The bill aims to reduce the length of the existing act by nearly half by eliminating redundant provisions.
• It introduces a more straightforward drafting style and incorporates over 57 tables compared to the 18 in the 1961 Act.
• The new bill aims to minimize cross-references and conflict, aggregating applicable provisions related to a single scenario in one place.
• Provisos and explanations have been removed and replaced with sub-sections and clauses for clarity.
• The bill also seeks to reduce the scope of litigation and fresh interpretations.
• The new bill has been drafted with simpler language, reducing traditional legal jargon.

Key Changes and Simplifications:

• Definitions: The new bill simplifies language in definitions, maintains alphabetical order, and consolidates terms defined in multiple places.
• Tax Year: The term “tax year” replaces “previous year” and “assessment year,” aligning the tax period with a 12-month period contained within a financial year.
• Charging Section: The charging section has been simplified into smaller and simpler sentences.
• Non-Profit Organizations (NPOs): Provisions related to NPOs have been consolidated into a single part of the bill, using the term “registered non-profit organization” and “registration” to avoid confusion. Redundant provisions were removed and some provisions were tabulated for easier understanding.
• Exemptions: Exemptions for specific incomes and persons are moved to separate schedules for easier reference and simpler compliance. Section 10 of the Income Tax Act, 1961, with its numerous clauses and provisos, has been restructured into schedules with tables.
• Salary and House Property: All provisions related to salary are consolidated in one place, and the language has been simplified to improve readability. Deductions, like gratuity and leave encashment, are now part of the salary chapter. Similarly, changes to provisions related to house property are minimal since those are considered to be already simple.
• Profits and Gains of Business or Profession: The flow of sections has been revised for better coherence. Similar sections, such as those on presumptive taxation, have been merged, and provisions on employee welfare have been grouped together. Formula-based explanations have been added and provisions involving multiple scenarios have been organized into tables.
• Deeming Provisions: These provisions have been simplified and made more certain, with the rate of taxation specified in the chapter itself.
• Set-off and Carry-forward of Loss: The bill includes amendments from Budget 2025 pertaining to capping carry forward loss. Redundant sections like 71A and 75 have been removed.
• Chapter VIA Deductions: Existing provisos and explanations have been integrated into the main sections and complex sections like 80C have been simplified and moved to Schedule XV. Sections 80TTA and 80TTB have been merged.
• Advance Tax, Refunds, and Interest: Formulas are provided for the computation of advance tax liability and interest in different situations. Tables are used to clarify start and end dates for interest computation.
• Tax Rates: The new tax regime is now a separate part of the bill dedicated to special rates of taxation. Tables have been introduced to list special types of income attracting special rates under the act.
• Tax Treaties: The bill clarifies India’s tax treaty position concerning the interpretation of terms.
• Tax Administration: The four parts under Income Tax Authorities in the 1961 Act have been merged to create only two parts in the new bill.
• Assessment Procedure: The sections providing limitation for making assessments and reassessments have been converted into tabular format for ease of readability. Sections relating to faceless assessment have been simplified and consolidated.
• Return of Income: All assessees required to file returns of income are consolidated into one place in the bill. Exempt entities are also still required to file returns if their income exceeds the maximum not chargeable to income tax.
• Tax Deduction and Collection at Source (TDS/TCS): The bill merges the numerous TDS sections into one section with three tables for residents, non-residents, and any person. A separate table provides for cases where TDS is not required. Provisions relating to TCS have also been merged into a single section. Furthermore, provisions relating to Certificates, Compliance, and Consequences of failure have also been merged and placed as independent sections.

Reduction in Size and Complexity:

• The new bill reduces the number of chapters from 47 to 23 and sections from 819 to 536.
• The bill has reduced the number of words from 5.12 lakhs to 2.60 lakhs.
• The simplification has also removed approximately 1200 provisos and 900 explanations.
• The provisions related to NPOs have been reduced from 12,800 to 7,600 words.
• The word count for exemption related provisions has been reduced from approximately 30,000 to 13,500.
• The word count for TDS/TCS has been reduced from 27,453 to 14,606.
• The number of sections in the chapter on ‘Profits and gains of business and profession’ has decreased from 65 to 41, while the word count has been reduced by more than half.

Implementation:

• After the bill is passed by Parliament, new rules and forms will be notified.
• Software development will be undertaken to establish systems and processes for administrative functions.
• The new bill includes a repeal and savings clause to safeguard rights and liabilities under the old law.

In summary, the proposed Income Tax Bill 2025 represents a significant effort to simplify and modernize India’s tax code. It aims to reduce complexity, enhance clarity, and improve compliance through a variety of changes, including the elimination of redundant provisions, the use of tables, and the consolidation of related sections.