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Polity & Governance
Mahesh

14/02/25 09:41 AM IST

Income Tax Bill, 2025

In News
  • The Income-tax Bill, 2025, which was introduced in Lok Sabha, intends to simplify India’s six-decade-old structure of direct taxation by streamlining provisions, removing obsolete references, and creating a crisper and simpler legal framework.
Major Provisions
  • It is shorter — all provisos (about 1,200) and explanations (about 900) have been removed, the word count almost halved to 2.60 lakh from 5.12 lakh, and all redundant provisions, including those for capital gains, deductions, and dispute resolution that have seen amendments over the years, omitted.
  • The Bill is 622 pages long, about 24% shorter than the 823-page Income-tax Act (updated until 2024). There is a focus on simpler language.
  • There are 23 chapters, fewer than half the 47 chapters in The Income-tax Act. There are 16 schedules, two more than in the Act.
  • There are 536 sections in the Bill, compared to the 819 effective sections in the Act. The Act mentions only 298 sections, however; over the years, new sections were numbered in continuation with existing sections. For example, provisions relating to tax in special cases were inserted as part of the 115 series, viz., 115 AC, 115AD, 115JB, 115VP, etc.
  • The Bill introduces the concept of “tax year”, which has been defined as the 12-month period beginning April 1.
  • In case of a business or a newly-set-up profession, the tax year will begin from the date it was set up, and will end with the said financial year. Income tax will be levied on the basis of the economic activity and income earned in a tax year.
  •  At present, income tax has the concept of “assessment year” (AY), which assesses tax on income earned in the “previous (financial) year”. For instance, income earned in the financial year (FY) 2024-25 (April 1, 2024 to March 31, 2025) is assessed in AY 2025-26 (beginning April 1, 2025).
  • Prior to 1989, the concepts of “previous year” and “assessment year” were there because taxpayers could have different 12-month previous years for each source of income.
  • From April 1, 1989, the previous year was aligned to the FY in all cases. However, AY continued to be used for various proceedings under the Act. Thus, a taxpayer had to track two different periods, the previous year and the AY.
  • “Virtual digital space” has been defined in the powers to call for information by income tax authorities during surveys, searches and seizures to include email servers, social media accounts, online investment, trading and banking accounts, remote or cloud servers, and digital application platforms.
  • Virtual digital assets such as cryptocurrencies have been included in the definition of property to be counted as a capital asset of the assessee along with existing categories of immovable property such as land and building, shares and securities, bullion, jewellery, archaeological collections, drawings, paintings, sculptures, and any work of art.
  • The Income Tax Department said there is no change in the scope of ‘virtual digital assets’ under the Income-tax Bill, 2025. The definition under the Bill incorporates the amendment already proposed under the Finance Bill, 2025.
  • The section on Dispute Resolution Panel (DRP) in the Bill provides the points of determination, decision, and the reasons behind it, marking a shift from the earlier section, which lacked clarity on the manner of issuing DRP directions.
  • Section 54E of the Act, which details exemptions for capital gains on transfer of capital assets prior to April 1992 has been removed in the Bill. Deductions have been streamlined, and outdated exemptions removed.
  • Deductions from salary such as standard deduction, gratuity, and leave encashment have been detailed in tabular form.
Source- Indian Express

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