BJP Member of Parliament and Chairman of the Finance Select Committee Baijayant Jay Panda has stated that the proposed Income Tax Bill, 2025 aims to significantly reduce complexity in India's tax system without altering existing tax policies or rates.
Presenting the Select Committee report on the new Income Tax Bill in Lok Sabha on Monday, Panda revealed that the draft legislation cuts the word count of the Income Tax Act nearly in half, from approximately 5 lakh words to 2.5 lakh, making the law more readable and compliance-friendly for taxpayers.
"Our mandate was not to change tax rates or policy but to simplify the Income Tax Act," Panda said, emphasizing the government's focus on making the system easier to navigate.
He also noted that this initiative aligns with the broader legal reforms pursued under Prime Minister Narendra Modi's leadership over the past 11 years, where many outdated laws have been repealed or restructured.
Key Features of the Income Tax Bill, 2025
- Word count reduced by 50% to improve clarity and comprehension
- Simplified formulae and tables to guide taxpayers
- No changes to tax rates or core tax policy
- The aim is to make compliance less burdensome, particularly for individuals and small businesses
The Income Tax Bill, 2025, which was introduced in Parliament in February 2025, had been referred to a Select Committee for in-depth examination. After extensive stakeholder consultation and analysis, the committee has submitted a 4,584 page report outlining 566 suggestions and recommendations.
These include:
- Tightening definitions
- Eliminating ambiguities
- Ensuring alignment with existing legal and tax frameworks
Simplification Without Policy Disruption
Mr Panda reiterated that the objective is to modernize and simplify tax law, not disrupt the current framework. The new bill, once enacted, will replace the Income Tax Act of 1961, marking the first comprehensive legislative overhaul of India's direct tax code in over six decades.
"This is not just a rewriting of the law; it's a restructuring for clarity, accessibility and ease of compliance," a senior finance official involved in the drafting noted.
Next Steps
With the Select Committee report now tabled, the government is expected to review the recommendations before moving forward with the bill's passage in Parliament. If approved, the new law is likely to come into effect in AY 2026-27.
The overhaul is being viewed as a key milestone in India's efforts to modernize its tax administration, support digital compliance, and enhance ease of doing business, especially for small taxpayers and startups.
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