Why Section mapping was required for Income Tax Bill 2025 and Income-tax Act 1961

Why Section mapping was required for Income Tax Bill 2025 and Income-tax Act, 1961

Section mapping is needed to understand how the provisions of the Income-tax Act, 1961 correspond to the Income-tax Bill 2025 because the new bill aims to replace the old act with a more concise and lucid tax law. The simplification exercise involves renumbering and restructuring the sections.

Here are some examples of why section mapping is necessary:

• Relocated Provisions: Many provisions from the Income-tax Act, 1961 have been moved or consolidated in the new Income-tax Bill 2025. For example, provisions related to NPOs have been consolidated into Part B of Chapter XVII. Similarly, TDS/TCS provisions have been merged into one section. Without section mapping, it would be difficult to locate the corresponding provisions in the new bill.
• Renamed Sections: Some sections have been renamed in the new bill. For example, Section 68 in the Income-tax Act, 1961, which deals with ‘cash credits’, has been renamed to ‘unexplained credits’ in the Income-tax Bill 2025  Section mapping would help in identifying these renamed sections and understanding their new context.
• Redundant Provisions: The new bill seeks to remove redundant provisions of the Income-tax Act, 1961. Section mapping would help identify which sections have been removed and are no longer applicable.
• Modified Content: While the core principles of taxation are retained, the content of some sections has been modified . For example, the new bill expands the scope of “information” to initiate reassessment. Similarly, Section 69D is expanded to include negotiable instruments. Section mapping will help understand the changes made to existing provisions.
• Faceless Schemes: To reduce interface, provisions relating to various faceless schemes have been consolidated into one proposed section, namely Section 532.
• Understanding the Terminology: To avoid confusion, the new bill introduces new terms such as “registered non-profit organization” and “tax year”. Section mapping helps in understanding how these terms relate to the provisions in the old act.
• Compliance: Section mapping is essential for taxpayers, tax professionals, and assessing officers to ensure compliance with the new tax law. It helps in accurately interpreting and applying the new provisions based on their understanding of the old act.
• Smooth Transition: With section-wise mapping, rights and liabilities under the old law are safeguarded. The Income-tax Act, 1961 remains applicable until March 31, 2026.

To facilitate this transition, the Income Tax Department will provide a section-wise mapping of the old and new sections on its official website.

Key Points:

• Introduction to the New Income-tax Bill, 2025
  • The Income-tax Bill, 2025 was tabled in Parliament on February 13, 2025.
  • The Bill seeks to replace the Income-tax Act, 1961, aiming for a more concise, lucid, and easily understandable tax law.
  • The new bill will come into effect from April 1, 2026.
• Reasons for the New Bill
  • The Income-tax Act, 1961 has been amended numerous times over the past 50 years, resulting in a complex and overburdened structure.
  • The amendments increased compliance costs for taxpayers and hampered the efficiency of tax administration.
  • The goal is to simplify the language and structure of the Income-tax Act, 1961.
• Overall Structure and Key Changes
  • The new Income-tax Bill, 2025 contains 536 sections and 16 schedules, compared to the Income-tax Act, 1961, which had 298 sections and 14 schedules.
  • The proposed Bill aims to eliminate provisos and explanations to sections.
  • The new Bill has 2.60 lakh words compared to 5.12 lakh words in the Income-tax Act, 1961.
• Core Principles Retained
  • The new Bill preserves existing taxation principles.
  • The foundations of the old Act, including the basis of charge, incomes not included in total income, the five heads of income, loss set-offs, deductions, rebates, and reliefs, are maintained.
  • Assessment and appellate procedures remain consistent with the previous Act.
• Key Definitions and Concepts
  • Tax Year: A period of twelve months contained in a financial year, replacing the term “previous year”.
  • Financial Year: Retained for compliance timelines and procedural issues.
  • Registered Non-Profit Organization: A common term used for entities registered under sections 12A, 12AA, or 12AB or section 10 (23C) of the Income-tax Act, 1961.
• Specific Section Mapping and Changes
  • Section 1 and 2: Section 1 of the Income-tax Act, 1961 corresponds to section 1 in the new draft, relating to the short title, extent, and commencement, while section 2, pertaining to definitions, also remains section 2 in the new draft.
  • Section 4: Deals with the charge of income tax.
  • Section 5: Covers the scope of total income.
  • Section 6: Relates to residence in India.
  • Section 10: Exemption-related provisions, with clauses placed in Schedules.
  • Section 68: Renamed from ‘cash credits’ to ‘unexplained credits’.
  • Section 132: Search and seizure.
  • Section 133A: Power of survey.
  • Section 139: Return of income.
  • Section 144B: Faceless assessment.
  • Section 149: Reassessment provisions incorporated in the new corresponding section 282.
  • Section 295: Requires CBDT to frame rules for carrying out the purposes of the Act.
• Schedules in the New Bill
  • Schedule II: Lists incomes exempt, such as agricultural income.
  • Schedule III: Specifies persons eligible for exemptions on certain incomes.
  • Schedule V: Provides exemptions to business trusts and sovereign wealth funds.
  • Schedule XV: Lists investment and expenditure deductions.
• Simplification and Redundancy Removal
  • Redundant provisions have been removed to shorten the Bill.
  • The concepts of ‘previous year’ and ‘assessment year’ are replaced with the ‘tax year’.
  • Provisos and explanations have been removed and their content integrated into subsections or clauses.
• Non-Profit Organizations (NPOs)
  • All provisions related to registered NPOs are consolidated into Part B of Chapter XVII.
  • The term “registered non-profit organization” is used to avoid confusion.
• Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)
  • TDS and TCS provisions are simplified and presented in tables for residents and non-residents.
• Practical Implementation
  • The new Bill is expected to be more reader-friendly, with no major difficulties anticipated in its implementation.
  • The Income Tax Department will provide a section-wise mapping of the old and new sections on its official website.
  • The new rules and forms will be notified, and software development will be undertaken to set up systems and processes for administrative and quasi-judicial functions.
• Continuity and Transition
  • All rights and liabilities under the old law are safeguarded.
  • The Income-tax Act, 1961 remains applicable until March 31, 2026.
• Examples of Specific Changes
  • Salary and House Property: Simplified language and structure, with a reduction in the number of sections and words.
  • Profits and Gains of Business or Profession (PGBP): Grouping similar provisions, consolidating employee welfare deductions, and simplifying bad debt provisions.
  • Depreciation: Conversion of provisos and explanations into subsections/clauses.
• Conclusion
  • The Income-tax Bill, 2025 is a welcome step towards making the Income-tax Act more lucid and reader-friendly.
  • The key is to ensure that the new Bill does not become overly complex through future amendments.