Income Tax Bill 2025

Summary

This episode of Samad features Shatarupa Mishra interviewing SRI VK Gupta, Chief Commissioner of Income Tax, about the newly introduced Income Tax Bill in Parliament. The bill aims to simplify and consolidate the complex 1961 Income Tax Act, which has undergone over 4,000 amendments. The discussion covers the global best practices used in the simplification process, including the removal of redundant provisions, clearer language, and the introduction of the 'Tax Year' concept. The new bill is more concise, making it easier for taxpayers and administrators to understand, and is expected to streamline tax processes in India.

Takeaways

• 😀 The Income Tax Act of 1961, which was introduced in 1962, has undergone over 4,000 amendments in its 65-year history.
• 😀 The main concern with the current Income Tax Act is its complexity, with issues arising from numerous amendments making it difficult for tax practitioners and administrators to apply the provisions.
• 😀 The Income Tax Act is a dynamic document, requiring annual amendments based on socio-economic needs, unlike static laws such as penal codes.
• 😀 Previous simplification efforts were made in 2009 and 2019, which contributed to the current amendments and ongoing improvements.
• 😀 The simplification process was influenced by global best practices, particularly from Australia and the United Kingdom, which underwent similar exercises.
• 😀 The aim of the simplification exercise is to make the Income Tax Act more concise, lucid, easy to read, and to remove redundant provisions, resulting in a significant reduction in word count.
• 😀 A major change includes replacing the terms 'assessment year' and 'previous year' with the simpler 'tax year', making it easier for the public to understand when taxes and assessments are applicable.
• 😀 Over 20,000 suggestions were received from stakeholders, with 1,800 of them being considered for the simplification process.
• 😀 The new bill aims for tax certainty, with no changes to tax rates or policy, and maintains the settled legal language to avoid disruption in legal interpretations.
• 😀 The new bill has reduced the number of sections from 819 in the previous act to 536, with provisions now more organized in tables for ease of reference.

Q & A

When was the Income Tax Act of 1961 introduced?

The Income Tax Act of 1961 was introduced in 1961 and came into effect from 1962.

How many amendments has the Income Tax Act of 1961 undergone?

The Income Tax Act of 1961 has undergone approximately 4,000 amendments over its 65 years.

What was the main concern with the current form of the Income Tax Act?

The main concern was the complexity of its provisions, with numerous amendments making it difficult to understand and apply.

Why is the Income Tax Act regularly amended?

The Income Tax Act is regularly amended because it needs to adapt to the socio-economic and political needs of the country, as tax laws are dynamic.

Have there been any previous simplification exercises for the Income Tax Act?

Yes, simplification exercises were carried out in 2009 and 2019, where several changes were suggested and incorporated into the 1961 Act.

What global best practices were considered during the current simplification exercise?

The committee looked at simplification projects carried out by the UK and Australia. Both countries simplified their tax codes, although this increased the length of their laws.

How were stakeholders involved in the simplification process?

Stakeholders, including institutions, taxpayers, and professionals, were consulted. Over 20,000 suggestions were received, and 1,800 of those were considered relevant for the simplification.

What were the main objectives of the simplification exercise for the new Income Tax Bill?

The objectives were to make the Income Tax Act concise, lucid, easy to read, and understand, while eliminating redundant and obsolete provisions.

What key changes were made to ensure the new Income Tax Bill is simpler?

The new bill reduces the length of the Act significantly, eliminates obsolete provisions, uses straightforward language, and consolidates complicated explanations into simpler clauses or tables.

What major simplification was introduced regarding the assessment year and previous year?

The concept of 'assessment year' and 'previous year' has been replaced with a simpler 'tax year,' which corresponds directly to the financial year, making it easier for taxpayers to understand.

How many sections does the new Income Tax Bill have compared to the previous Act?

The new Income Tax Bill has 536 sections, down from over 800 sections in the previous Act, which had become overburdened with amendments and redundancies.

What is the current length of the new Income Tax Bill compared to the old one?

The new bill is approximately 260,000 words long, significantly shorter than the old Act, which had over 512,000 words.

Will the mapping between the old and new sections be available for the taxpayers?

Yes, a mapping of the old and new sections will be made available on the department's website to assist taxpayers in navigating the changes.

What is the next step after the bill is placed in Parliament?

After the bill is placed in Parliament, it will be reviewed by parliamentary committees, while the department will continue working on related rules, forms, and systems for implementation.