The Select Committee of the 18th Lok Sabha has finalized the Income-Tax Bill, 2025, as amended and reported in July 2025. Once enacted, the new law will come into force from April 1, 2026, replacing the archaic Income-tax Act of 1961. This sweeping overhaul introduces comprehensive changes across the spectrum of income tax laws, aligning them with contemporary economic realities, technological advances, and global best practices.
Key Objectives of the New Income-Tax Bill
- Simplify tax administration and assessment procedures
- Enhance transparency and ease of compliance
- Incorporate digital processes and faceless assessments
- Introduce clear definitions and reduce ambiguity
- Rationalize deductions and exemptions
- Curtail tax evasion and avoidance through GAAR and TP rules
Major Highlights
1. Broadened Definitions and Clarity
The bill offers precise definitions for terms like "assessee," "capital asset," "amalgamation," "demerger," "business trust," "electoral trust," and "non-profit organisation," removing interpretational ambiguities and enhancing legal certainty.
2. Revamped Income Classifications
Income is categorized under heads such as:
- Salaries
- House Property
- Profits and Gains from Business or Profession
- Capital Gains
- Other Sources
New provisions cover emerging areas like crypto-assets, global depository receipts, and tonnage taxation for shipping.
3. Capital Gains & Deductions Overhaul
The bill specifies various exemptions on capital gains, particularly for investments in residential properties, infrastructure bonds, and SEZs. It also rationalizes deductions under sections for life insurance, health insurance, electric vehicle purchase, interest on education loans, and donations.
4. General Anti-Avoidance Rule (GAAR)
GAAR provisions are now codified to detect and counteract "impermissible avoidance arrangements," granting tax authorities the power to deny tax benefits for artificial transactions.
5. Special Provisions for Non-Residents and NRIs
Taxation of dividends, interest, royalties, and capital gains for foreign entities and individuals has been explicitly detailed, ensuring better compliance and global investor confidence.
6. Faceless Assessments and Appeals
To eliminate subjectivity and corruption, the bill mandates:
- Faceless assessments
- Faceless information gathering
- Digital hearings and notices
- Expansion of Dispute Resolution Committees
7. Enhanced Digital Compliance
Digital recordkeeping, Aadhaar-based verification, and mandatory electronic submissions are integral, making the new regime tech-enabled and user-friendly.
8. Updated Penal and Prosecution Framework
Stringent penalties and prosecution guidelines have been set for:
- Underreporting or misreporting of income
- Failure to maintain documentation
- Non-compliance with digital reporting obligations
9. Provisions for Non-Profit Organisations
A dedicated chapter outlines registration, income application rules, permissible commercial activities, audit and compliance for trusts and NGOs.
What's Next?
The bill, as amended by the Select Committee, is scheduled for debate and passage in the ongoing Monsoon Session of Parliament. Once enacted, it will mark a historic shift in India's approach to direct taxation, promoting efficiency, accountability, and trust.
Official copy of the Amended Bill as proposed by the Lok Sabha Select Committee has been attached
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