Daijiworld Media Network - New Delhi

New Delhi, Aug 12: In a landmark move to overhaul India’s decades-old tax system, Parliament has passed the Income Tax Bill, 2025, replacing the complex and often disputed Income Tax Act of 1961. The Rajya Sabha returned the revised Bill to the Lok Sabha on Tuesday with a voice vote, completing the legislative process. It now awaits Presidential assent to become law.

Finance Minister Nirmala Sitharaman, addressing the upper house, described the original 1961 Act as dense, verbose, and prone to misinterpretation, leading to a surge in avoidable litigations.

“We were subjected to too many litigations. Not so much because of the rate, but because of the language,” she said, adding that the Act had become “very, very tedious” for users.

What’s Changing?

The new Income Tax (No. 2) Bill, 2025 simplifies and updates the entire legal tax framework. Key highlights include:

• Incorporation of 285 recommendations from the Parliamentary Select Committee
• Redrafted clauses to reduce ambiguity and improve cross-referencing
• Streamlined tax slabs and rates to benefit all taxpayers
• Significant tax relief for the middle class
• Focus on reducing legal disputes and compliance burden

Finance Minister Sitharaman noted that the updated bill ensures a “single, updated version” of tax law that better aligns with existing provisions and brings clarity to both individuals and businesses.

The government had formally withdrawn the initial bill introduced in February after the Parliamentary panel flagged numerous drafting errors. A revised version was tabled and passed in the Lok Sabha on Monday.

A Major Step in Legal Reform

BJP MP Baijayant Panda, who chaired the select committee, called the new legislation a “game-changer” for taxpayers and the economy.

“This new Act will turbocharge growth by making taxes easy to understand and comply with,” Panda said. “It cuts the size of the law nearly in half, reducing confusion for individual taxpayers and MSMEs.”

He also linked the reform to a broader government effort under Prime Minister Narendra Modi to modernise Indian governance, including the repeal of over 1,500 outdated laws.

“India is now the world’s fourth-largest economy, and a simpler tax code is a natural step forward,” Panda added.

What It Means for You

For ordinary taxpayers, the revised Income Tax Bill promises:

• Simplified compliance and clearer filing procedures
• Lower tax burden for the middle-income segment
• Reduced legal disputes and faster resolution
• Easier access to the law due to more readable drafting

As it replaces a law that had seen over 4,000 amendments and ballooned to over 5 lakh words, the Income Tax Bill, 2025 is expected to usher in a new era of clarity and fairness in India’s taxation landscape.