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Income Tax Bill 2025: 285 changes, fewer sections, no more Assessment Yr
The report marks a crucial step in overhauling India's direct tax framework, aiming to simplify the law's language and structure without altering underlying policy. The Committee's 285 recommendations largely reflect stakeholder feedback focused on removing ambiguities, correcting drafting inconsistencies, and improving readability.
In a much-anticipated move, the Committee has confirmed that companies opting for the concessional 22% corporate tax rate under Section 115BAA will continue to enjoy tax deduction benefits for inter-corporate dividends in multi-tier structures. This clarity averts potential cascading tax liabilities and aligns with current practices, addressing industry concerns over an apparent omission.
"Key stakeholder recommendations that seem to have made their way through relate to correction in drafting errors, removal of ambiguities arising from languages changes to the extant Act, and coherent presentation of tax provisions In a major relief, the Committee has noted that the benefit of tax deduction relevant to inter corporate dividends in multi-tiered structures must also be extended to companies that elect the 22% tax rate (as is currently the case). While the market had expected this to be an oversight, corporates had begun factoring in the cascading impact of dividend taxes in tiered structure in the absence of any clarification. This is indeed a welcome change. On the other hand, several stakeholders had urged the Parliamentary Committee to reconsider the extent of search and seizure powers in relation to virtual digital space in light of safeguarding privacy and third-party rights, risk of overboard searches, etc.. However, at first blush, no key changes seem to have been recommended," said Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co.
The new bill dramatically reduces the size and complexity of the current Income Tax Act. It cuts the number of effective sections from 819 to 536 and chapters from 47 to 23. The word count has been brought down to 2.6 lakh—almost half of the original 5.12 lakh words. Additionally, over 1,200 provisos and 900 explanations have been removed, and 57 tables have been introduced to streamline TDS, exemptions, and other compliance-heavy provisions.
One of the most user-centric changes is the replacement of the confusing 'previous year' and 'assessment year' concept with a unified 'tax year.' This aims to simplify compliance and align with how taxpayers intuitively track their income and obligations.
While the Bill has welcomed changes that enhance clarity and reduce litigation, it has not recommended significant changes to contentious provisions surrounding search and seizure in the virtual digital space. This omission has raised eyebrows among privacy advocates and legal experts, who had called for tighter safeguards against overreach in digital enforcement.
The Bill now awaits discussion during the ongoing Monsoon Session of Parliament, scheduled from July 21 to August 21, 2025.
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