Income-tax Bill, 2025

The new IncomeTaxBill, 2025 represents a significant overhaul of India's tax legislation, marking a pivotal shift towards simplification and modernisation of the Income-tax Act of 1961 (‘the 1961 Act’). The Bill, which spans into 622 pages, reduces the complexity of the 1961 Act and replaces intricate legal jargons with clear and straightforward language. Another notable aspect of the Bill is the strategic use of tables and formulas, which will help simplify interpretation of the provisions. The Bill aims to minimize disputes and litigation while enhancing taxpayer certainty. Notably, the Bill introduces a "trust first, scrutinise later" philosophy, aligning with the government's ideology of "minimum government and maximum governance." Unlike the 1961 Act, the Bill empowers the CBDT to establish tax administration rules and implement digital tax monitoring systems, thereby increasing efficiency without frequent legislative changes. Scheduled to take effect on April 1, 2026, the Bill is set to foster a more transparent and taxpayer-friendly environment, representing a historic milestone in India's tax landscape.

Naveen Aggarwal

Office Managing Partner - Delhi NCR | India Global - U.S. Corridor Leader
KPMG in India

The process to repeal an over six decades old tax code is underway, which over the years had become complex as tax laws were amended to keep pace with emerging business realities.

The FAQs issued clearly reflect the intent of the new bill - make it more concise, reader friendly and importantly, mitigate the risk of variance in interpretation of explanations and provisos by replacing them with sub-sections and clauses. With an effective start date of April 1, 2026 (tax year replacing the previous year/assessment year concept), taxpayers have been given sufficient time to adapt to the changes that may be required in their internal tax departments to give effect to the proposed changes.

Perhaps, the expectations that the proposed bill would also herald a new era of dispute resolution mechanism may not have been addressed, however the door is not closed considering this government’s repeated acknowledgement of the need to address burgeoning taxdisputes.

During the interactive discussion, we delved into the latest trends shaping the tax landscape in India, highlighting key developments surrounding the India-Mauritius tax treaty and the complexities surrounding Permanent Establishment (PE) issues, especially in the context of secondment of personnel. We also explored the intricacies of profit attribution to PE and examined the issues surrounding technical violations in passing tax orders. These critical topics reflect the dynamic nature of India's tax environment and underscore the importance of staying abreast of the developments to ensure compliance and strategic business planning.

Income Tax Bill 2025 is an important step towards “Viksit Bharat 2047”. While it takes care of its objectives around simplification which can help in minimising future litigation but doesn’t include any transformational changes on settlement of past disputes. This area requires a relook before the Bill is finalized.