India's six-decade-old income tax law is about to undergo a major overhaul. On Monday, the Lok Sabha will consider a new Income Tax Bill, 2025, which promises to make tax payment simpler and clearer.

The new Bill aims to replace the old Income Tax Act of 1961 with a much shorter and easier-to-read legislation. The parliamentary committee has made 285 suggestions for the new draft bill. The report will be presented in Parliament at the start of the Monsoon Session, which lasts from July 21 to August 21.

Key Highlights

• Bill streamlines Income‑Tax Act: sections halved from 819 to 536, chapters from 47 to 23, simplified wording. 
• Select Committee tables report with 285 recommendations, including time‑bound litigation, clearer definitions, inter‑corporate dividend relief.

What is changing?

The government claims that the new tax law is roughly half the size of the previous one. The number of sections decreases from 819 to 536, and the chapters are reduced from 47 to 23.

The Bill's wording has also been simplified; it now contains approximately 2.6 lakh words, as opposed to 5.12 lakh words in the 1961 law.

Less confusion and fewer legal disputes

One major goal of this redesign is to reduce confusion and end endless court cases. The Bill eliminates 1,200 provisos and 900 explanations, which made the previous Act difficult to understand.

Instead, the new version uses plain language and includes 57 additional easy-to-read tables, up from 18 previously.

Also Read: Tax Season 2025: Important ITR Changes to Note for AY 2025-26 Filing

Use 'tax year' instead of 'assessment year'

For ordinary taxpayers, the most significant change is how income is taxed each year. The new Bill eliminates the concepts of a 'previous year' and 'assessment year' in favor of a single 'tax year'.

You currently earn income in one year and pay taxes on it the following year. The new law, however, requires you to pay taxes in the same year you earn them.

A Big Step Towards Tax Clarity

The Bill also clarifies the rules for exemptions, TDS, TCS, and non-profit organisations. All of this, the government hopes, will reduce confusion while saving everyone time and trouble.

Finance Minister Nirmala Sitharaman, who introduced the Bill in February, stated that the new law will provide tax certainty and make things easier for honest taxpayers. If Parliament approves it, this could be one of the most significant changes to India's tax system in decades.