In a significant overhaul aimed at streamlining tax legislation, the government has proposed a new Income-Tax Bill, 2025, which features simplified language and structural changes. This new bill, spanning 622 pages, is set to replace the previous, more cumbersome legislation which was 823 pages long. The key highlight of this bill is the introduction of the ‘tax year’ concept, which simplifies the way income is reported and taxed.
Under the new system, the ‘tax year’ will start on April 1 and end on March 31, aligning with the financial year. This change is particularly noteworthy for businesses and professionals who start their operations during the year, as their tax year will commence on the day their business or profession is established and will conclude at the end of the financial year. This shift is designed to align tax obligations more closely with actual income earned during the year, moving away from the previous system that focused on assessing income in the following year.
Currently, taxes are calculated based on the ‘assessment year,’ which evaluates the income of the previous financial year. For example, income earned from April 1, 2024, to March 31, 2025, would be assessed in the 2025-26 assessment year. The new terminology and approach aim to create a more straightforward and timely process for income reporting.
The bill also addresses the complexities of digital finance, tightening tax provisions concerning virtual digital assets. These assets will now be considered in searches for undisclosed income, alongside traditional categories such as money, bullion, and jewellery.
Despite the reduction in the overall length of the legislation, the number of chapters remains unchanged at 23. However, the sections have increased significantly from 298 to 536, and the schedules have also risen from 14 to 16. This restructuring suggests an effort to cover more areas comprehensively while making the language and provisions clearer and more accessible.
