The Indian government has introduced the Income Tax Bill, 2025, aiming to replace the long-standing Income Tax Act, 1961. This legislative overhaul seeks to modernize and simplify the country’s direct tax framework. Below is a comparative overview highlighting the key differences and similarities between the two statutes:
1. Structural Simplification
- Income Tax Act, 1961: Comprised 52 chapters spanning 823 pages, with numerous amendments over the decades, leading to increased complexity.
- Income Tax Bill, 2025: Streamlined into 23 chapters and 16 schedules over 622 pages, eliminating obsolete provisions and consolidating related content for clarity. India Briefing
2. Language and Readability
- 1961 Act: Contained intricate and technical language, making it challenging for taxpayers to interpret without professional assistance.
- 2025 Bill: Utilizes plain and straightforward language to enhance understanding and reduce litigation. Economic Times CFO
3. Tax Year Definition
- 1961 Act: Operated on a dual system of ‘Previous Year’ and ‘Assessment Year,’ often causing confusion among taxpayers.
- 2025 Bill: Introduces a unified ‘Tax Year,’ a 12-month period aligning the financial reporting and assessment, simplifying compliance. India Briefing
4. Digital and Electronic Records Access
- 1961 Act: Did not explicitly grant tax authorities access to taxpayers’ digital records during investigations.
- 2025 Bill: Empowers tax authorities to access electronic records, including emails, social media accounts, and online banking during searches, raising concerns about privacy and the need for clear safeguards. Reuters
5. Tax Rates and Slabs
- 1961 Act: Featured multiple tax regimes with various exemptions and deductions, leading to a complex tax structure.
- 2025 Bill: Retains the tax slabs and rates as announced in the Union Budget 2025, with no additional changes, ensuring continuity while aiming for simplification. India Briefing
6. Heads of Income
- 1961 Act: Classified income into five heads: Salaries, Income from House Property, Profits and Gains from Business or Profession, Capital Gains, and Income from Other Sources.
- 2025 Bill: Maintains the same classification, ensuring consistency in income categorization. India Briefing
7. Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)
- 1961 Act: Outlined TDS provisions across various sections, leading to scattered and sometimes overlapping guidelines.
- 2025 Bill: Consolidates TDS and TCS provisions into structured formats, aiming to simplify compliance and reduce ambiguities. India Briefing
8. Presumptive Taxation Scheme
- 1961 Act: Offered a presumptive taxation scheme with specific conditions, but complexities limited its adoption.
- 2025 Bill: Introduces the concept of ‘Profit claimed to have been actually earned’ in computing business income, aiming to make the presumptive taxation scheme more accessible and straightforward for small and medium enterprises. India Briefing
In summary, the Income Tax Bill, 2025 endeavors to modernize India’s tax laws by simplifying language, consolidating provisions, and addressing digital advancements. While it retains several foundational elements of the Income Tax Act, 1961, the proposed changes aim to enhance clarity, reduce compliance burdens, and align the tax framework with contemporary economic realities.
India’s New Income Tax Bill Proposes Broad Access to Digital Records
