The Lok Sabha on August 11, 2025 has tabled the Income-tax (No. 2) Bill, 2025, marking a sweeping consolidation and amendment of India’s direct tax laws. The legislation, set to come into effect from 1st April 2026, spans 23 chapters and multiple schedules, aiming to streamline definitions, computation, exemptions, deductions, assessments, appeals, penalties, and prosecution procedures under one unified framework.
Key highlights include:
- Wider Tax Scope & Definitions – Clearer rules on residence status, deemed incomes, capital assets, charitable purposes, and treatment of various entities.
- Revised Computation Rules – Detailed provisions on income heads, capital gains, foreign exchange fluctuation, presumptive taxation, and allowable deductions.
- Expanded Deductions & Incentives – Benefits for health insurance, housing loans, electric vehicle purchases, donations, SEZ development, start-ups, and sustainable businesses.
- Anti-Avoidance & Special Provisions – Strengthened general anti-avoidance rules (GAAR), transfer pricing, and measures to curb tax evasion in international transactions.
- Modernised Administration – Introduction of faceless assessments, e-filing, electronic modes for transactions, taxpayer’s charter, and robust data reporting obligations.
- Stricter Enforcement – Enhanced penalties for misreporting, non-compliance, and concealment, alongside special courts for expeditious prosecution.
- Simplified Appeals & Dispute Resolution – Multi-tier appeal structure, alternate dispute resolution committees, and advance ruling mechanisms.
The Bill repeals and replaces significant portions of the Income-tax Act, 1961, signalling a structural shift towards a more transparent, digital, and enforcement-focused tax regime. It now awaits further debate and passage in both Houses before becoming law.
The Complete Bill can be accessed at: https://a2ztaxcorp.com/wp-content/uploads/2025/08/income-tax-2811202521448PM.pdf
