New Income Tax Bill 2025: FAQs Explained

Reduction of Length

• The new bill removes unnecessary provisions, making it almost 50% shorter than the previous Income Tax Act, 1961.

Clear & Simple Drafting

• Uses a straightforward writing style for better understanding.
• Increases the number of tables from 18 to 57 to simplify complex information.
• Uses sub-sections and clauses instead of confusing explanations and provisos.

Removal of Complex Provisions

• Eliminates 1,200 provisos and 900 explanations, making the law easier to read and interpret.

Simplified Section References

• The old law had complicated cross-references (sections within sections).
• The new bill reduces confusion by allowing sections to be cited directly.
• Example: Instead of 133 (1)(b)(ii), you simply refer to Section 133.

Removal of ‘Previous Year’ & ‘Assessment Year’

• Before 1989, taxpayers had different 12-month financial periods for different income sources.
• From 1989, the previous year was aligned with the financial year, but the assessment year still caused confusion.
• The new bill removes assessment year to make tax compliance simpler and uniform.

Q9: Whether any consultations have been done with stakeholders, while drafting new bill?

✅ Extensive Consultations Conducted

• A detailed consultation process was undertaken to simplify the Income Tax Bill.

✅ Massive Public Participation

• 20,976 online suggestions were received from taxpayers, professionals, and experts.
• Suggestions were categorized into policy changes, language simplification, and removal of outdated provisions.

✅ Industry & Expert Discussions

• Meetings were held with industry leaders, professional associations, and tax practitioners.
• Internal brainstorming sessions were conducted within the Income Tax Department.

✅ Global Best Practices Considered

• Consultations took place with tax authorities from Australia and the UK, who had undertaken similar simplification exercises.

✅ Reference to Previous Efforts

• Documents from 2009 and 2019 tax simplification efforts were reviewed.

✅ Legal & Drafting Guidelines Followed

• Guidance from the ‘Drafting Guide for Simplification of Laws’ (issued by the Ministry of Law & Justice) was used to ensure clear and simple legal language.

Q10: What processes were followed in conducting the simplification exercise?

✔ Suggestions were taken from taxpayers, industry experts, and professional associations.
✔ Field-level officers from the Income Tax Department also provided inputs.
✔ A committee of 150 officers worked on drafting the new Bill.
✔ The draft was carefully reviewed by the Legislative Department of the Ministry of Law and Justice.
✔ After necessary approvals, the final version of the Bill was prepared.
✔ The team spent over 60,000 man-hours to finalize the new Income Tax Bill.

Q11: How has the readability improved in the new Bill?

✅ Simpler Language: The tax law now uses easy-to-understand language instead of complex legal terms.

✅ Organized Sections: Provisions covering multiple situations are now clearly listed in an orderly manner.

✅ Use of Tables: Wherever possible, tax rules are shown in table format for better clarity.

✅ TDS Provisions in Tables: The rules for TDS (Tax Deducted at Source) are now presented in a tabular format for quick reference.

✅ Section 10 Simplified: Earlier, Section 10 had around 150 clauses, which are now grouped into Schedules and presented in table form.

✅ Reduced Size of the Bill: The overall size of the new Income Tax Bill has been cut down by nearly half.

✅ User-Friendly Structure: The new Bill organizes provisions in a way that is easy to read and understand.

Q12: What is the treatment of numerous ‘provisos’ and ‘explanations’ and procedural aspects in the existing Act?

✅ 1,200+ Provisos and 900+ Explanations Removed

• Earlier, many tax provisions had additional explanations and special conditions (provisos), making them complex.
• These have now been removed for better readability.

✅ Simplified Structure with Sub-sections & Clauses

• Instead of complicated explanations, the rules are now directly included as sub-sections or clauses.
• This makes it easier to understand tax laws without cross-referencing multiple sections.

✅ Procedural Details Moved to Rules

• Technical and procedural aspects (such as compliance steps) will now be included in separate tax rules instead of the main Act.
• This ensures flexibility, as rules can be updated easily without frequent changes to the law.

🚀 Result: Tax law is now shorter, clearer, and easier to follow for taxpayers and professionals.

Q13: Have the redundant provisions of the Income-tax Act 1961 been removed in the new Income-tax Bill?

• Over the years, many tax provisions became outdated due to frequent amendments and policy changes.
• These redundant provisions made the Income Tax Act longer and more complex.
• Example: Section 10A, which provided tax benefits for new industries in free trade zones, was discontinued from the Assessment Year 2012-13.
• Such obsolete provisions have now been removed from the new Income Tax Bill 2025.
• However, past cases related to old provisions will still be valid under Repeal and Savings provisions.

Q14: What other steps have been taken to enhance clarity in the new Bill?

✅ Removal of Complex Legal Terms:

• Provisos, explanations, and redundant provisions have been eliminated to make the law simpler and more readable.

✅ Use of Tables & Formulae:

• Important tax calculations and provisions are now presented in tables and structured formats for better clarity.

✅ Grouping of Similar Provisions:

• Sections covering the same topics, which were earlier scattered across different chapters, have now been combined for easy reference.

✅ Simplification of Definitions:

• Common definitions appearing multiple times in different sections have been merged into a single, clear definition.

✅ Better Clarity for Non-Profit Organisations (NPOs):

• All rules related to NPOs have been organized into 7 structured sub-parts, covering:
  1. Registration
  2. Income
  3. Commercial Activities
  4. Compliance Requirements
  5. Violations & Penalties
  6. Eligibility for Donations & Exemptions
  7. Interpretations & Legal Clarity

These changes make tax laws easier to understand, comply with, and apply in real-life scenarios. 🚀

Q15: How have principles of Tax Certainty followed in drafting of the new Income Tax Bill?

• ✅ Shorter & More Organized: The new Bill is about half the length of the old Income-Tax Act, 1961, making it easier to understand.
• ✅ Clearer Language: Complicated legal terms have been replaced with simpler words and shorter sentences to improve readability.
• ✅ Easy-to-Read Tables: Sections have been converted into tables for better clarity and fewer words.
• ✅ Minimized Disputes: The law is now more precise to reduce legal confusion and unnecessary litigation.
• ✅ Court Rulings Retained: Important legal terms used in past court cases have been kept unchanged to avoid misinterpretation.
• ✅ International Taxation Simplified: Provisions related to foreign transactions and global tax rules have been streamlined.
• ✅ Better NGO Rules: The chapter on Non-Profit Organizations (NGOs) is now more structured and written in plain language.
• ✅ Exemptions Made Simple: Sections related to tax exemptions (like Section 10) are now grouped in schedules for easier reference.
• ✅ Use of Formulae & Tables: Mathematical formulas and tables have been used wherever possible to improve clarity.
• ✅ Consolidated Provisions: Similar rules and definitions spread across different chapters have been merged to avoid repetition.
• These changes aim to make tax compliance simpler, more transparent, and less confusing for taxpayers. 🚀

Q16: How does the new Bill compare to the Income-tax Act, 1961 in terms of numbers of Chapters, sections and words?

• ✅ Fewer Chapters – Reduced from 47 in the 1961 Act to 23 in the new Bill.
• ✅ Fewer Sections – Decreased from 819 effective sections to 536 in the new Bill.
• ✅ Shorter Text – The total word count has come down from 5.12 lakh words to 2.60 lakh words.
• ✅ Simpler Language – Nearly 1200 provisos and 900 explanations have been removed to improve clarity.
• ✅ More Concise & Easy to Understand – The law is now structured in a way that avoids unnecessary complexity, making tax compliance easier for everyone. 🚀

Q17: What is the basis of the statement that the Income tax Act, 1961 consists of 819
sections, while the text of the Act only mentions sections till 298?

✅ The Income Tax Act, 1961 has undergone many amendments over time.

✅ New policy decisions were added as separate provisions instead of modifying existing sections.

✅ Many new provisions were linked to existing sections, continuing their numbering.

✅ For example, tax provisions on special cases were added as section 115 series (e.g., 115AC, 115AD, 115JB, 115VP, etc.).

✅ Due to these additions, the total number of effective sections in the Income Tax Act, 1961 reached 819, even though the section numbers only go up to 298.

Q18: Why does the new Bill still contain 536 sections and 2.6 lakh words?

✅ More Sections Than Numbered Ones:

• The old Income-tax Act had 298 numbered sections, but 819 effective sections due to additional alphanumeric sections (e.g., 115A to 115WM).

✅ Covers More Than Just Taxes:

• The Act is not just about tax collection; it includes:
  • Rules & Roles for tax officials, taxpayers, and professionals.
  • Income assessment, tax filing procedures, penalties, and appeals.
  • Impact of tax laws on the economy, businesses, and foreign investments.

✅ New Bill with 536 Sections:

• The new Income-tax Bill has 536 sections, keeping only necessary provisions.

✅ Retaining Important Provisions:

• Some sections remain to honor past commitments, like:
  • Minimum Alternate Tax (MAT)
  • Existing deductions & exemptions
• These will be phased out over time (sunset clauses).

✅ Ensuring a Smooth Transition:

• The goal is to simplify the law while ensuring policy and legal continuity during the transition to the new system.

Q19: Whether the simplification exercise has led to no ‘material’ change?

Unnecessary Provisions Removed 🗑️

• Old and redundant sections that were no longer useful have been removed.

Clearer Structure with Sub-Sections & Clauses 📖

• Instead of long and confusing explanations, the law now uses simple sub-sections and clauses.

Easier Cross-Referencing 🔄

• Finding related sections is now simpler, with a more organized numbering system.

More Tables & Formulas for Clarity 📊

• Tax rules and calculations are presented in tables and formulas for easy understanding.

Similar Provisions Grouped Together 📌

• Related tax rules, previously scattered across multiple chapters, are now consolidated in one place.

Latest Amendments Incorporated 📅

• All tax changes up to the Finance Bill 2025 are included, ensuring an updated tax law.

No Major Policy Changes, Just Better Clarity ✅

• While tax rates and policies remain the same, the law is now easier to read and apply.

Q20: Whether any mapping of old and new sections will be available?

✅ A section-wise mapping of the new Income Tax Bill and the old Income Tax Act will be provided.
✅ This mapping will help taxpayers easily compare the old and new provisions.
✅ It will be available on the official website of the Income Tax Department.
✅ Taxpayers, professionals, and businesses can use it to understand changes quickly.
✅ This ensures smooth transition from the old tax system to the new one.

Q21: How has ‘previous year’ and ‘assessment year’ been dealt with in the new bill?

The New Income Tax Bill 2025 has simplified and reduced the number of words compared to the Income Tax Act 1961. Here’s a comparison of major reductions:

Topic	Income Tax Act, 1961 (Words)	Income Tax Bill, 2025 (Words)	Reduction
Exemption-related Provisions	30,000	13,500	16,500
TDS/TCS Provisions	27,453	14,606	12,847
Non-Profit Organization Provisions	12,800	7,600	5,200
Total Word Reduction	5.12 lakh words	2.6 lakh words	Approx. 2.52 lakh words removed

Key Takeaways:

• The new bill is nearly half the size of the old Act.
• Simplification was achieved by removing redundant words, cross-references, and unnecessary legal jargon.
• Easier to read and understand for taxpayers, professionals, and businesses.
• More provisions are now presented in tables and structured formats for clarity.

The new Income Tax Bill aims to enhance clarity, simplicity, and compliance by consolidating provisions, reducing redundancies, and presenting critical information in structured tables. Key changes, such as streamlined salary provisions, TDS/TCS rules, and Non-Profit Organization regulations, make it easier for taxpayers to understand and adhere to tax laws.

With improved readability and logical structuring, these reforms ensure that individuals and businesses can file returns more efficiently without navigating complex and scattered sections.

📢 Stay Updated & File Taxes Smartly!

✅ Stay informed about the latest tax changes.
✅ Ensure compliance by referring to updated tax provisions.
✅ For professional assistance, consult a tax expert or visit our Income Tax Updates section.