The government has approved significant reforms to the country’s tax system with the passage of the new Income Tax Bill 2025, set to replace the Income Tax Act of 1961. The updated law aims to simplify tax compliance, reduce legal complexity, and introduce a modern, digital-first approach to assessments.
Major Changes in New Bill to Ease Compliance
Key changes include a reduction in sections from 819 to 536 and a cut in the number of chapters to 23, making the law more concise and easier to understand. The bill retains the ₹12 lakh annual exemption, providing relief to middle-income taxpayers, and introduces faceless assessment procedures to curb corruption and speed up processing.
Other provisions focus on improving the refund process, with faster disbursals and fewer penalties, as well as clear deductions for house property income, including a standard 30% deduction and pre-construction interest benefits for rented properties.
The government has emphasised that these reforms will not only make the tax system more transparent and efficient but also strengthen trust between taxpayers and the administration.
Other measures include faster processing of tax refunds, reduced penalties for late compliance in certain cases, and clear guidelines for deductions related to house property income. The provisions include a standard 30% deduction as well as pre-construction interest benefits for properties given on rent.
The provisions include a standard 30% deduction
Experts believe the changes will encourage voluntary compliance, improve efficiency in tax administration, and boost confidence among taxpayers. The reforms are also seen as a step towards aligning India’s tax framework with global best practices, making it easier for both domestic and foreign businesses to operate in the country.
The government has indicated that these updates are part of a larger effort to modernise the taxation system, enhance revenue collection, and promote economic growth while safeguarding the interests of honest taxpayers.
