By Salonee Kulkarni
On Monday, the new income tax bill was tabled in the parliament by finance minister Nirmala Sitharaman. The recommendations and reforms developed for the current framework ensure simplification of the tax structure, reduction in tax evasion, and an easier system for businesses to comply with.
Introduced in the February session, the Bill aims to replace the Income Tax Act, 1961, which was subsequently withdrawn. The parliamentary select committee presented 285 recommendations for the Income Tax (No.2) Bill, 2025. The recommendations are incorporated into the new law, which are proposed to take effect on April 1, 2026.
The current framework of the New Income Tax Bill, 2025, is leaner and easier to understand. The number of sections has been reduced from 819 to 536. The unification of the tax period ensures that the income is earned and taxed within the same financial period, marking a significant change in the regime. Furthermore, the bill is expected to incorporate digital compliance through paperless documentation, faster compliance processes, and an updated dispute resolution system.
The recommendations from the select committee include home loan deductions, an exemption for small taxpayers below the taxable threshold, and the rules for R&D and green businesses have been clearly stated.
“The proposals relating to tax benefits for investment by foreign pension funds and sovereign funds in the infrastructure sector are similar to the existing tax law, though the provisions have been drafted in a more structured and concise manner. The government could have considered industry suggestions while drafting the proposals including extension of tax benefits to holding companies setup prior to 2021, allowing reinvestment of dividend income within the group without triggering double taxation of dividend income, extension of tax exemption to indirect share transfers, extension of tax benefit to capital gains from unlisted bonds/debentures as well as removal of withholding tax on exempt income earned by such funds.” said, Rajesh Gandhi, Partner, Deloitte India.