Income-tax Act, 2025: Why the Change May Be More in Perception Than in Policy
The Income-tax Act, 2025 has naturally generated discussion, particularly where familiar provisions appear to be rewritten with stronger language and new section numbers. On closer reading, however, the Act appears less about altering tax policy and more about restructuring and simplifying an already complex law.
A good example is the treatment of unexplained income. Under the Income-tax Act, 1961, sections 68 to 69C dealt with unexplained credits, investments, money and expenditure, using the word “may”, thereby recognising discretion with the Assessing Officer based on facts and circumstances. In the Income-tax Act, 2025, these provisions now appear as sections 102 to 105, with the word “shall” replacing “may”. At first glance, this appears to make additions mandatory. This change, however, should not be read mechanically. The intent appears to be clearer drafting rather than the withdrawal of long-settled judicial principles which recognise that deeming provisions must operate fairly and contextually. Discretion supported by jurisprudence does not disappear merely because of a change in wording.
Similar concerns arise around reassessment. Under the 1961 Act, reassessment notices were governed by section 148, with limitation periods counted from the end of the assessment year. In the 2025 Act, the corresponding provisions are sections 280 and 282, and timelines are now linked to the end of the tax year. On a plain reading, this looks like an extension of time limits. However, once the shift from “assessment year” to “tax year” is properly understood, the effective reopening window remains broadly unchanged. What has changed is the reference point, not the reach of the power.
Overall, the Income-tax Act, 2025 reflects a conscious effort to improve readability, reduce interpretational clutter and align the statute with present-day realities. That said, clearer drafting alone does not eliminate disputes; much will depend on how these provisions are applied by tax authorities and interpreted by courts.
What is required is measured analysis rather than immediate apprehension. The law may look new, but its foundations remain familiar.
