New bill to replace outdated framework
Income Tax Reform Revamp 2025: The Income Tax Bill 2025 seeks to replace the Income Tax Act of 1961, a law that has undergone over 4,000 amendments over the decades. Introduced in the Lok Sabha, the bill aims to modernise India’s tax system and bring clarity to tax procedures. The law is set to come into effect from April 1, 2026, giving sufficient time for transition.
Simplified language and legal clarity
The Lok Sabha Select Committee recommended 285 changes, the majority focused on simplifying language to ensure better understanding by both taxpayers and tax officials. Reducing jargon and ambiguous phrases is expected to cut down litigation and lower compliance burdens.
Static GK fact: The Income Tax Act, 1961, was first introduced by Finance Minister Morarji Desai and came into effect on April 1, 1962.
Refund rights for late filers reinstated
A controversial clause in the draft bill denied refunds to taxpayers who filed returns after the due date. The committee strongly recommended dropping this no-refund clause, calling it unfair and litigation-prone. This change brings the new bill in line with current refund practices.
Relief for corporates on dividend income
The original draft omitted Section 80M, which provides deductions for inter-corporate dividends, especially for companies under the special tax regime of Section 115BAA. The committee advised restoring this deduction to avoid double taxation and protect corporate entities from unintended financial strain.
Static GK Tip: Section 115BAA allows domestic companies to be taxed at 22% (effective 25.17%) without claiming certain exemptions or deductions.
Better provisions for TDS certificates
The bill initially limited Tax Deducted at Source (TDS) certificates to only lower deduction certificates. The Select Committee has now proposed including NIL TDS certificates, particularly to assist loss-making companies and charitable trusts. This prevents unnecessary fund blockages when no tax liability exists.
Timeline and expected outcomes
The proposed law is expected to roll out in the financial year 2026-27, replacing a law in use for over six decades. By clarifying definitions, restoring key provisions, and reducing taxpayer hardship, the new bill hopes to usher in a more predictable and equitable tax regime.
Static Usthadian Current Affairs Table
Income Tax Reform Revamp 2025:
| Topic | Detail |
| Implementation Date | April 1, 2026 |
| Existing Law Being Replaced | Income Tax Act, 1961 |
| Number of Amendments Suggested | 285 |
| Committee Type | Lok Sabha Select Committee |
| Key Section for Dividend Deduction | Section 80M |
| Corporate Taxation Section | Section 115BAA |
| Refund Clause Issue | Denial of refund for late filers (now removed) |
| New Provision Added | NIL TDS Certificate |
| Primary Goal | Language simplification and legal clarity |
| Targeted Beneficiaries | Companies, loss-making units, charitable institutions |
