India’s new income tax bill: It’s more concise and makes for a friendly tax law

Its key proposals highlight the government’s commitment to ensure a transparent and business-friendly tax environment.

A more concise and structured law: One of the most notable aspects of the Bill is its reduced volume. The legislation cuts the section count from 819 effective ones to 536, significantly reducing the word count by half. This comes as a refreshing change as the current bulky and complex income tax law can be daunting even for the best of minds.

Also Read: India’s Income Tax Bill sets the stage for significant reforms

The structure of the legislation largely remains intact to ensure stability. The Bill retains the 23 chapters and the existing heads of income while retaining the substantive provisions and assessment and appeal procedures. Tax rates too will continue to be determined by the Finance Act each year.

Tax simplifications and rationalization: The Bill introduces several key changes aimed at easing tax compliances and reducing ambiguity:

a) Streamlining withholding tax (TDS/TCS) provisions: It proposes allowing taxpayers to apply for lower withholding tax certificates across all TDS/Tax Collected at Source (TCS) provisions rather than a select few, as in the current law. This step is expected to ease cash flow challenges for businesses and reduce compliance burdens.

TDS and TCS provisions have also been structured by providing tables, making them easier to understand. For instance, the Bill provides separate tables for payment to residents and non-residents, and where no deduction at source is required.

b) Consolidating the scattered provisions in a structured way: The provisions governing non-profit organisations are scattered under different sections in the current law. The Bill simplifies and consolidates all the relevant provisions under a single chapter for Registered Non-Profit Organisations.

Also Read: Mint Quick Edit | Finally, a tax law we may be able to grasp

Similarly, the provisions for tax exemptions e.g. under Section 10 of the current law, that are spread across multiple sections have now been reorganized into seven separate schedules. Additionally, outdated provisions such as investment allowances on new plant and machinery have been removed, further simplifying compliance.

c) Support for non-resident businesses: A positive proposal in the Bill is that non-resident shipping companies, including cruise operators and airline businesses, will now have the option to report lower income than presumptive taxation by maintaining tax-audited books, offering greater flexibility in tax compliance.

Enhancing readability and compliance: To make the tax law more comprehensible, the Bill eliminates around 1,200 provisos and 900 explanations, replacing legal jargon with clearer terminology. For instance, the phrase “notwithstanding anything contained" has been replaced with “irrespective of anything contained" for better readability.

Additionally, the cross-reference system has been simplified, making it easier for businesses and tax professionals to navigate the law.

Transitioning to the new law: The Bill includes provisions to ensure a smooth transition from the existing tax framework. For certain tax holidays such as deductions under Section 10AA for eligible Special Economic Zone (SEZ) units, the Bill maintains references to the existing Act instead of introducing entirely new provisions.

Additionally, the central government has been granted the power to resolve transitional difficulties for up to three years after implementation.

Areas that may require further deliberation: While the Bill brings significant improvements, certain areas may require reconsideration. One notable concern is the withdrawal of the intercorporate dividend deduction for companies opting for the 22% concessional corporate tax rate.

This could lead to the re-emergence of cascading taxation on dividends, which the current law mitigates.

In due course, other complex areas in the law should also be reviewed such as the residency rules for individuals, multiplicity of TDS rates, rationalization of penalties and the absence of an effective alternative dispute resolution framework.

Also Read: Andy Mukherjee: India has slashed income tax but still needs to snip red tape

A step forward in tax reform: The Income Tax Bill 2025 is a significant and forward-looking step in India’s tax reform agenda. The effort put in by the tax authorities—over 60,000 man-hours dedicated to finalizing the Bill and reviewing more than 20,000 online suggestions—demonstrates a strong commitment to creating a transparent and efficient tax system.

As the Bill undergoes review by a Parliamentary Standing Committee, constructive stakeholder consultations will be important in refining the provisions to ensure a balanced and effective law that supports both economic growth and the ease of doing business.

The authors are, respectively, partner and national leader, business tax services, EY India; and director—tax, EY India