Executive Summary on the Comprehensive Simplification of the Income-tax Act, 1961
Introduction
The Income-tax Bill, 2025 has been tabled in Parliament on 13th February 2025, marking a significant step toward simplifying the language and structure of the Incometax Act, 1961.
The simplification exercise was guided by three core principles:
- Textual and structural simplification for improved clarity and coherence.
- No major tax policy changes to ensure continuity and certainty.
- No modifications of tax rates, preserving predictability for taxpayers.
A three-pronged approach was adopted:
- Eliminating intricate language to enhance readability.
- Removing redundant and repetitive provisions for better navigation.
- Reorganizing sections logically to facilitate ease of reference.
Consultative and Research-Based Approach
The Government ensured widespread stakeholder engagement, consulting taxpayers, businesses, industry associations, and professional bodies. Out of 20,976 online suggestions received, relevant suggestions were examined and incorporated, where feasible. Consultations were held with industry experts and tax professionals and simplification models from Australia and the UK were studied for best practices.
Outcomes of the Simplification Exercise
Quantitative Impact
The review has led to a substantial reduction in the Act’s volume, making it more streamlined and navigable. Key reductions are summarized below:
| Item | Existing Income-tax Act, 1961 | Proposed in the Income-tax Bill 2025 | Change (Reduction/Addition) |
| Words | 512,535 | 259,676 | Reduction: 252,859 words |
| Chapters | 47 | 23 | Reduction: 24 chapters |
| Sections | 819 | 536 | Reduction: 283 sections |
| Tables | 18 | 57 | Addition: 39 tables |
| Formulae | 6 | 46 | Addition: 40 formulae |
Qualitative Improvements
- Simplified language, making the law more accessible.
- Consolidation of amendments, reducing fragmentation.
- Removal of obsolete and redundant provisions for greater clarity.
- Structural rationalization through tables and formulae for improved readability.
- Preservation of existing taxation principles, ensuring continuity while enhancing usability.
The Income-tax Bill, 2025 reflects the Government’s commitment to enhancing ease of doing business by providing a tax framework that is simple and clear.
Also Read:
- Guidance Note 2/2024 on provisions of the Direct Tax Vivad se Vishwas Scheme, 2024.
- Cost Inflation Index for Financial Year 2024-25
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