The Indian government is poised to introduce the Income Tax Bill 2025 in Parliament on February 13, aiming to overhaul the existing tax framework established by the Income Tax Act of 1961. This initiative seeks to simplify tax laws, reduce litigation, and enhance compliance, thereby making the tax system more accessible to the average taxpayer.
Key Proposed Changes
-
Simplification of Terminology: The bill proposes replacing complex terms with more straightforward language. For instance, ‘Assessment Year’ would become ‘Tax Year’, and ‘Previous Year’ would be termed ‘Financial Year’. This change aligns the tax terminology with the standard financial year, which runs from April 1 to March 31.
-
Reduction in Legal Provisions: By eliminating outdated sections, the bill aims to condense the law from over 800 pages to 622 pages. This streamlining is expected to clarify tax provisions, reduce legal disputes, and foster voluntary compliance among taxpayers.
-
Inclusion of Virtual Digital Assets: The new bill proposes categorizing virtual digital assets discovered during searches as ‘undisclosed income’. Currently, ‘undisclosed income’ includes money, bullion, and jewelry; this addition reflects the evolving nature of assets in the digital age.
-
Empowerment of Tax Authorities: The Central Board of Direct Taxes (CBDT) would gain the authority to establish tax administration rules, implement compliance measures, and enforce digital monitoring systems without requiring frequent legislative amendments. This move aims to create a more responsive and efficient tax administration.
Impact on Taxpayers
The proposed changes are designed to make tax laws more understandable, thereby reducing the reliance on professionals for tax compliance. Simplifying terminology and streamlining provisions can help taxpayers navigate the system with greater ease. Additionally, recognizing virtual digital assets as taxable income ensures that the tax framework remains relevant in the digital era.
Empowering the CBDT to implement rules and compliance measures without legislative delays could lead to more timely and effective tax administration. This agility is expected to enhance compliance and reduce disputes, benefiting both taxpayers and the government.
Filing Deadlines
The new bill retains the existing income tax return filing deadlines:
-
Individuals and Non-Audited Taxpayers: File original Income Tax Returns (ITR) by July 31 of the assessment year.
-
Audited Taxpayers: Submit audit reports by September 30 and file ITR by October 31.
-
Taxpayers with International Transactions: Submit audit reports by October 31 and file ITR by November 30.
If a taxpayer misses the initial deadline or needs to correct errors, they can submit a belated or revised return by December 31. Late filings may incur a penalty of up to ₹5,000 under Section 234F of the Income Tax Act.
Conclusion
The Income Tax Bill 2025 represents a significant step toward modernizing India’s tax system. By focusing on simplification, clarity, and adaptability, the government aims to create a more taxpayer-friendly environment that encourages compliance and reduces legal disputes. As the bill progresses through Parliament, taxpayers should stay informed about these developments to understand how the changes may affect their financial planning and obligations.
