The Income Tax Bill 2025, which proposes a historic overhaul of India’s direct tax regime, is moving closer to implementation. A Select Committee report on the bill is scheduled to be presented in the Lok Sabha on 21 July, the opening day of the Parliament’s Monsoon session. This marks a significant step toward replacing the six-decade-old Income Tax Act of 1961 with a modern, streamlined, and taxpayer-friendly framework.

About the Select Committee

The 31-member Select Committee, led by BJP leader Baijayant Panda, was constituted by Speaker Om Birla to closely examine the Income Tax Bill 2025. The bill, introduced by Finance Minister Nirmala Sitharaman on 13 February 2025, underwent months of scrutiny, with the committee putting forward 285 recommendations to refine and improve the draft legislation.

Key Features of the Income Tax Bill 2025

  1. A Leaner, Clearer Law

    • The new bill reduces the word count to approximately 2.6 lakh, nearly half the length of the current act.

    • Sections have been trimmed from 819 to 536, while chapters have been reduced from 47 to 23.

    • Complex technical provisions have been consolidated for better clarity.

  2. Simplified Tax Framework

    • The traditional terms ‘previous year’ and ‘assessment year’ will be replaced by a single ‘tax year’ to avoid confusion and simplify tax filing.

    • Exemptions, as well as TDS and TCS provisions, have been reorganized into table formats for better accessibility.

  3. User-Friendly Language

    • The chapter on not-for-profit organizations has been rewritten in plain and simple language, making compliance easier.

  4. Reduced Litigation and Interpretation Issues

    • The bill has been carefully designed to minimize disputes and unnecessary interpretations, ensuring smoother implementation.

The Controversial Clause on Digital Data

One of the most debated provisions in the bill is the clause granting tax officers access to digital data during investigations involving suspected tax evasion. This includes access to:

  • Emails

  • Messages on WhatsApp and other apps

  • Cloud storage and other digital records

While this provision is justified by the Ministry of Finance as a necessary measure to modernize tax enforcement in the digital era, privacy advocates and some lawmakers have raised concerns about potential misuse and privacy violations. The government, however, has assured that these powers will be used strictly within the framework of law and only for tax-related investigations.

What Happens Next?

Once the Select Committee report is tabled on 21 July, the government will:

  • Review the recommendations of the panel.

  • If needed, seek Cabinet approval for any modifications.

  • Present the final version of the bill for debate and passage in the Lok Sabha.

Impact of the Income Tax Bill 2025

If enacted, the Income Tax Bill 2025 will significantly modernize India’s direct tax system, offering:

  • A simpler structure for taxpayers with fewer sections and clear guidelines.

  • Greater accessibility and ease of compliance due to plain language drafting.

  • Improved efficiency in tax administration by consolidating overlapping provisions.

However, the privacy-related provisions could remain a flashpoint of debate, both in Parliament and among the general public.

Conclusion

The tabling of the Income Tax Bill 2025 report represents a historic moment in India’s tax history, with the government aiming to replace an outdated law with a transparent, taxpayer-centric, and modern tax framework. As the Monsoon session begins, all eyes will be on how the Lok Sabha responds to the committee’s 285 suggestions and the controversies surrounding digital data access.