A more concise and structured Income Tax Bill 2025 with 536 sections and 23 chapters across 622 pages is expected to be introduced in the Lok Sabha on Thursday February 13 2025. This proposed legislation replaces the term previous year used in the Income Tax Act 1961 with tax year and eliminates the concept of the assessment year. Under the current system tax is paid in the assessment year for income earned in the previous year. The new bill removes this distinction and introduces only the tax year.
The Income Tax Bill 2025 consists of 536 sections which is significantly more than the 298 sections in the existing Income Tax Act 1961. The number of schedules will increase from 14 to 16 while the number of chapters remains at 23. Despite these changes the overall size of the legislation has been reduced to 622 pages which is nearly half the length of the current act that has expanded over six decades through various amendments. When the Income Tax Act 1961 was originally introduced it had 880 pages.
This increase in sections reflects a more organized approach to tax administration by incorporating modern compliance mechanisms digital governance and simplified provisions for businesses and individuals. The revised law includes 16 schedules and 23 chapters.
The proposed legislation also provides clearer guidelines on the taxation of stock options or ESOPs to minimize tax related disputes. It incorporates judicial rulings from the past 60 years to ensure a better understanding of tax laws.
A key change from the Income Tax Act 1961 is that previously the Income Tax Department had to seek parliamentary approval for procedural matters tax schemes and compliance frameworks. Under the new system the CBDT has been given the authority to introduce such schemes independently. This change is expected to reduce bureaucratic delays and create a more efficient tax governance system.
The new law empowers the CBDT to establish tax administration rules implement compliance measures and enforce digital tax monitoring systems without requiring frequent legislative amendments. According to Clause 533 this change allows for a more flexible and responsive tax system.
After introduction the bill is likely to be sent to a parliamentary standing committee for further examination. Finance Minister Nirmala Sitharaman had previously announced in the Budget 2025 26 that this new tax bill would be introduced during the current parliamentary session.
The minister first proposed a comprehensive review of the Income Tax Act 1961 during the July 2024 Budget. Following this the CBDT formed an internal committee to oversee the review process with the aim of making the act more concise clear and user friendly. This revision seeks to reduce tax disputes and litigation while ensuring greater tax certainty for taxpayers.
To support this effort 22 specialized subcommittees were set up to examine different aspects of the Income Tax Act. Public feedback was invited under four main categories simplifying language reducing litigation minimizing compliance burdens and eliminating outdated or redundant provisions.
The Income Tax Department has received 6500 suggestions from stakeholders regarding the review of the Income Tax Act.