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The new Income Tax Bill is set to overhaul India's six-decade-old tax structure, aiming to simplify tax provisions and foster economic growth, particularly for MSMEs (Micro, Small, and Medium Enterprises). The Institute of Chartered Accountants of India (ICAI), a key stakeholder in tax matters, has welcomed the bill and announced the formation of a five-member group to examine its provisions in detail.

Key Highlights of the New Income Tax Bill

Simplification of Tax Framework

  • The bill removes outdated references and streamlines provisions, making tax laws easier to understand.
  • Replaces the traditional "previous year" and "assessment year" terms with "tax year" and "financial year succeeding the tax year".
  • Provisos and explanations have been removed to create a clearer legal framework.

Boost for MSMEs & Employment Generation
ICAI President Charanjot Singh Nanda emphasized that the bill will simplify tax compliance, benefiting businesses and promoting job creation.

"This bill is a strong step toward strengthening employment generation and MSME growth, simplifying India’s tax structure, and boosting the economy," Nanda said.

Consolidation of Tax Provisions

  • Charitable trust regulations, previously scattered across different chapters, have been consolidated into a single chapter.
  • TDS (Tax Deducted at Source) provisions are now grouped into one section, presented in a table format.
  • Presumptive income provisions for both residents and non-residents have been organized into single clauses, improving clarity.

Reduction in Complexity & Word Count

  • The extensive use of tables has helped reduce the word count by almost 50% compared to the Income Tax Act, 1961.
  • This is expected to improve readability and comprehension, making tax laws more accessible to taxpayers.

Proposed Changes in the Finance Bill 2025 & New Tax Bill

Higher Salary Threshold for ‘Specified Employees’ – Adjustments in salary limits for perquisite valuation.
Simplified Regime for Small Trusts & Institutions – Making compliance easier for smaller charitable organizations.
Lower Long-Term Capital Gains Tax for Business Trusts – Proposed taxation at 12.5% instead of the Maximum Marginal Rate (MMR).

ICAI's Role in Examining the Bill

The ICAI has been advocating for a comprehensive review of tax laws and has recommended various reforms. The proposed removal of obsolete sections aligns with ICAI's previous suggestions for modernizing the tax code.

A Step Towards a Transparent & Efficient Tax System

With a focus on clarity, ease of compliance, and modernization, the new Income Tax Bill aims to enhance India's tax efficiency while supporting economic growth. The changes are expected to benefit businesses, professionals, and individuals, making tax laws more transparent and predictable.

As the Finance Bill 2025 progresses, further discussions and refinements will shape the final implementation of the new tax framework. 

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