Structural Change in the Income-Tax Bill, 2025
The Income-Tax Bill, 2025 is a proposed new legislation aimed at replacing the Income-Tax Act, 1961, which has been amended multiple times over the years.
Key Differences Between the Two Acts
1. Structural Changes
The Income-Tax Bill, 2025 presents a more organized and streamlined structure with well-defined chapters and clauses, possibly to improve clarity and ease of reference.
The Income-Tax Act, 1961, on the other hand, has evolved over time with multiple amendments, making it more complex and less coherent.
2. Introduction of New Concepts
The Income-Tax Bill, 2025 introduces “Tax Year” as a formally defined term (Clause 3).
It incorporates modern taxation concepts like electronic payments, faceless assessments, and transfer pricing more comprehensively.
Specific provisions for presumptive taxation, international transactions, and digital economy taxation have been enhanced.
3. Changes in Taxable Income Definitions
The new bill includes updated definitions of taxable income, particularly for:
Income from digital transactions
Taxation of cryptocurrency and virtual digital assets
Tax treatment of stock and securities transactions
4. Revised Set-Off and Carry Forward Provisions
The carry forward and set-off of business losses and depreciation have been revised for greater clarity. Loss treatment under restructuring or business mergers has been restructured.
5. Enhanced Provisions for Political Contributions and Non-Profits
The Income-Tax Bill, 2025 clearly separates incomes of political parties, electoral trusts, and non-profits for tax treatment, potentially tightening scrutiny. It introduces more detailed rules on deductions for donations and CSR (Corporate Social Responsibility) contributions.
6. Taxation of International Transactions
More stringent Transfer Pricing regulations and new measures for cross-border tax avoidance (like BEPS provisions) are included. Revised rules for taxation of foreign institutional investors, offshore banking units, and non-residents.
7. Simplified Tax Computation and Filing
Provisions for faceless assessments, electronic records, and AI-based scrutiny.
More automated processing and self-assessment mechanisms to reduce litigation and tax disputes.
8. Anti-Tax Avoidance and Penalty Provisions
Introduction of General Anti-Avoidance Rules (GAAR) with detailed provisions for impermissible avoidance arrangements.
Increased penalties for misreporting, tax evasion, and failure to comply with digital compliance requirements.
9. Implications
If the Income-Tax Bill, 2025 is passed, it will replace the Income-Tax Act, 1961, making tax compliance more digital, streamlined, and transparent.
It aims to reduce ambiguities, improve tax administration, and enhance revenue collection while ensuring that taxation aligns with global best practices.
The Income-Tax Bill, 2025 will be applicable from 1st April, 2026
