New Income Tax Rule 2025: Tax Reforms to Simplify Compliance and Enhance Trust, Say Experts

The new Income Tax Bill 2025, set to be implemented from April 1, 2026, aims to make India’s tax system simpler, more transparent, and taxpayer-friendly. Experts believe this marks a historic milestone in modernising tax laws, reducing legal disputes, and streamlining compliance.

Finance Minister Nirmala Sitharaman introduced the Bill in the Lok Sabha, and it will now be reviewed by the Select Committee of Parliament before final approval. The Bill replaces the Income-Tax Act of 1961 with a more structured and simplified approach, making it easier for individuals and businesses to understand tax provisions.

Simplifying the Income Tax Act of 1961

The new Income Tax Rule 2025 is a 622-page Bill that removes complex legal jargon and replaces it with clear and simple language. It aims to eliminate confusion, making tax laws more accessible.

According to Himanshu Parekh, Partner, Tax, KPMG India, “Another notable aspect of the Bill is the strategic use of tables and formulas, which will help simplify interpretation of the provisions. The Bill aims to minimise disputes and litigation while enhancing taxpayer certainty.”

The introduction of tables and formulas is expected to make tax calculations more straightforward and reduce legal conflicts, ensuring a smoother tax compliance process.

"Trust First, Scrutinise Later" Approach

One of the major highlights of the new Income Tax Rule 2025 is its "trust first, scrutinise later" principle. This aligns with the government’s vision of “minimum government and maximum governance”, aiming to build greater trust between taxpayers and authorities.

Unlike the 1961 Act, the new Bill gives the Central Board of Direct Taxes (CBDT) the power to establish tax administration rules and implement digital tax monitoring systems. This will improve efficiency without requiring frequent legislative changes.

Key Language Changes for Better Clarity

To make tax laws more accessible, the Bill introduces simpler terminology. For example, the term "assessment year" will now be replaced with "tax year". Many outdated clauses have been removed, reducing complexity and making it easier to understand tax obligations.

According to Rohinton Sidhwa, Partner, Deloitte India, “This reform is a significant step towards modernising India’s tax framework, bringing greater clarity and efficiency.”

A More Transparent and Taxpayer-Friendly System

Experts believe the new Income Tax Rule 2025 will make the tax system more transparent, accessible, and efficient. The removal of complex provisions, use of digital monitoring, and simpler language will ensure a hassle-free tax experience for Indian taxpayers.

As Rohinton Sidhwa further emphasised, “The Bill promises a more streamlined, accessible tax system, making it easier for citizens and businesses to fulfil their obligations while fostering trust in the system.”

With these reforms, the government aims to create a modern tax system that not only improves compliance but also enhances the overall taxpayer experience.