Prachi Pallavi
The Income Tax Act, 1961, came into force with effect from 01.04.1962. Fiscal legislation, which is ancient, it has been constantly amended through Finance Acts with countless amendments to suit the ever-evolving economic and financial requirements of the nation and its citizens. As a matter of fact, the Income Tax Act is updated on an annual basis, which reflects the economic needs of the citizens and the priorities of the government by way of bringing new fiscal policy.
Last year, the Hon’ble Finance Minister announced in the budget speech of July 2024 regarding a comprehensive review of the Income Tax Act, 1961. The objective behind this move was to make the Act concise, lucid, and easy to read and understand. The Income Tax Bill, 2025, has been tabled before the Parliament on 13th February, 2025. Once this bill is passed by the Parliament, it will become the Income Tax Act, 2025.
The bill in order to become user-friendly and readable, has used simple language as opposed to the traditional legal language and jargon used in the current Act. The sections have been made enumerative, and wherever possible, tables have been used for easier understanding. The Income Tax Bill, 2025, is significantly shorter as compared to the Income Tax Act but has not compromised on the core essence of the Act. It is shorter primarily because it has eliminated the redundant and omitted provisions of the Act.
The bill has replaced 911 sections and 11 schedules of the Act with 536 sections and 16 schedules. The bill has done away with provisos or explanations as was contained in the Act. Instead, the provisos and explanations have been replaced with sub-sections or clauses for easy understanding. The procedural aspects shall be provided by way of rules. The provisions involving the same issues that were present in different chapters in the Act have now been consolidated in the bill, placing them at one place. The most talked about aspect of the bill is the introduction of ‘Tax Year’ in place of ‘previous year’ and ‘assessment year’. Another significant aspect in the bill is, “assessment” includes reassessment and recomputation. The Act only included reassessment and not recomputation. The reassessment proceedings have been a source of non-ending litigation since the department would indulge in reassessment proceedings without recording any reasons whatsoever, causing great hardship to the assessees. One wonders, with the addition of word recomputation along with reassessment in the bill, would it lead to a similar fate, or a much worse fate, opening a Pandora box!
The Act provided for an additional period of 24 months from the end of the relevant assessment year to file an updated tax return. The bill proposes to extend this deadline to 48 months from the end of the financial year subsequent to the relevant tax year. Those who had opted for the New Tax regime under the Income Tax Act, 1961, will continue to remain intact, and any pending refund under the Act shall be made in accordance with law. The changes made in the recent budget have been incorporated in the bill by way of changes in the slab rates and related rebate for individual tax payers. As far as offences and prosecution is concerned, there is no increase in the punishment for any offence under the bill, and no new prosecution section has been introduced for any of the provisions of the bill.
The Income Tax Bill, 2025, has surely tried to achieve its objective of being clear and unambiguous with linguistic simplification and structural rationalization.
(The author is an advocate at Patna High Court and a prominent media speaker, known for in-depth legal analysis and insights.)
