Union Finance Minister Nirmala Sitharaman presented the new Income Tax Bill, 2025, in the Lok Sabha on Thursday. The bill aims to simplify the language of tax laws by eliminating jargon and unnecessary provisions, and replacing complex terms like ‘Previous Year’ and ‘Assessment Year’ with the more straightforward term ‘Tax Year’.

Sitharaman had previously announced the introduction of the bill during her Budget speech on February 1, as part of the ongoing Budget Session. When introducing the bill, she urged Speaker Om Birla to refer the draft legislation to a select committee, which will submit its report by the first day of the next session. She also requested the Speaker to decide on the composition and rules of the proposed committee.

The primary goal of the bill is to make tax laws more accessible by simplifying the legal language, ensuring that taxpayers can easily understand the provisions. While the bill will not impose any new taxes, it focuses on streamlining the tax code, reducing legal complexities, and easing compliance for taxpayers. According to the finance secretary, the bill aims to make the tax system more efficient, with clearer explanations, shorter sentences, and fewer provisos. The new law is expected to be 50% shorter than the current Income Tax Act, with a significant focus on minimizing litigation.

Additionally, the bill may introduce reduced penalties for certain offenses, creating a more taxpayer-friendly environment. The proposed law will also eliminate unnecessary amendments and sections, presenting a straightforward, accessible language that does not require professional tax advice to understand.

The new Income Tax Bill spans 622 pages, comprising 536 sections, 23 chapters, and 16 schedules. In contrast, the existing Income Tax Act, 1961, has 298 sections, 23 chapters, and 14 schedules. If the bill is approved, the new tax system will come into effect in the 2025-26 financial year, applying to taxpayers starting from the 2026-27 assessment year.