After months of consultation by Parliamentary Select Committee Panel, the new Income Tax Bill is set to be tabled in the Parliament on August 11, according to some reports. The Bill, which would be presented by Finance Minister Nirmala Sitharaman, is being seen as a major tax overhaul which aims to replace the existing Income tax Act, 1961.
Following some reports that the Bill would hike Long-term Capital Gains (LTCG) tax rates for some categories of taxpayers, the Income Tax Department recently clarified the purpose of this Bill is a major rewrite, not a policy overhaul.
At the heart of this new tax legislation, the government is promising a simplification of tax laws, not disruption. The Finance Ministry has maintained that the Bill is focused on cleaning up decades of legal clutter in the Income Tax Act that has outdated language by cutting out redundancies and making the tax law easier to navigate for taxpayers.
What would change with the coming of New Income Tax Bill 2025?
The most visible shift is structural presentation of the income tax laws. The number of chapters is down to 23 (from 47), sections have been trimmed to 536 (from 819), and the word count is nearly half of what the ITA 1961 contains.
In place of complex language, the Bill relies more on tabular presentation of tax rates (57, up from 18), and formula (46, up from 6) to ensure that all the key provisions are visible in clearer and visual format. Over 1,200 provisos and 900 explanations have been scrapped in the new Bill.
The new document presents a similar language by changing a few common terms as well such as:
Scrapping of the “assessment year” and “previous year” dichotomy and replacing it with the concept of ‘tax year’.
The 31-member Select Committee, led by BJP MP Baijayant Panda, had submitted the draft Bill with a detailed (4,500-page) report last month. The panel suggested some 285 changes which intend to both ease compliance and protect taxpayers' rights.
The key recommendations were:
Updating some more outdated definitions to align with other laws like ‘capital asset’ - the definition of which doesn't factor in the updated treatment of foreign institutional investments.
Bringing in more equitable deductions on house property income, and the flexibility for loss carryforwards despite minor changes in shareholding, a benefit that would be especially relevant to small investors.
The panel suggested 32 fixes in the new ITB 2025, including protections for small taxpayers, including a push to waive ITR filing where taxable income is below the threshold, but TDS has already been deducted.
The panel also stressed on the need for contextual interpretation in tax avoidance provisions, suggesting reinstatement of the phrase “in the circumstances of the case” to reduce any instance of aggressive tax scrutiny by the taxmen.
Data Privacy and Transparency
One area where concerns remain is data privacy. As outlined in a recent Outlook Money story, while the new law empowers the tax department to access and use data across multiple sources, it does not yet lay out robust checks and balances on how taxpayer information will be handled. A more detailed data protection framework is still awaited to bring clarity on this issue.
No Tax Rate Changes, For Now
The Ministry has repeatedly reiterated that no changes to tax slabs or rates are part of this Bill. While sections of the media floated speculation around LTCG tax increases, this has been categorically denied. The focus, officials stress, is legislative streamlining and not fiscal policy.
Still, taxpayers and professionals are watching the updates closely. With tax law changes of this scale, the last such rewrite was in 1961, the real impact will depend on how the law is interpreted and implemented on the ground.
For now, as the reports suggest, August 11 is the date when the final draft of the Income Tax Bill, 2025 will be formally tabled for discussion.
