Parliament Passes Income Tax (No 2) Act 2025 - Understanding the Implications for Taxpayers under the New 'EASY' Law

Parliament Passes Income Tax (No 2) Act 2025 - Understanding the Implications for Taxpayers under the New 'EASY' Law

India's Income Tax Bill 2025: A Comprehensive Overhaul of the Direct Tax Regime

The Lok Sabha has approved the Income Tax (No 2) Bill, 2025, and the Taxation Laws (Amendment) Bill, marking a significant step towards modernizing India's direct tax regime. These bills, once they receive Presidential assent and come into force as law, will replace the complex Income-tax Act, 1961.

The Income Tax Bill 2025 aims to create a simpler, fairer, and more future-fit direct tax regime. It seeks to replace complex wording with straightforward language, remove obsolete or redundant provisions, and streamline administrative processes to reduce interpretational ambiguities and disputes.

One of the key proposals is the introduction of revised income tax slabs with increased progressivity. For instance, the new slab system may include 0% tax up to ₹3 lakh, 5% for ₹3–6 lakh, and up to 30% above ₹15 lakh. This revision is expected to reduce the tax burden on middle-income earners.

The Bill also introduces the concept of a "Tax Year," replacing the older "Assessment Year" terminology for improved conceptual clarity. Furthermore, it recognizes Virtual Digital Assets (VDAs) like cryptocurrencies and NFTs as taxable capital assets, integrating them into the mainstream tax system.

In terms of administrative reforms, the Bill proposes streamlined TDS processes, assessment procedures, and dispute resolution mechanisms to reduce bureaucratic delays and compliance costs. The aim is to encourage voluntary compliance through clarity and simplification, thereby reducing litigation and boosting ease of tax filing and payment.

The Bill also embraces India’s digital economy goals by enhancing digital tax reporting and opening up scrutiny of digital transactions. However, this move has raised some privacy concerns.

Other notable changes include the abolition of wealth tax, updating property valuation rules to use the higher of expected or actual rent, and restoring deductions for commuted pensions from specified funds and inter-corporate dividends under Section 80M.

The revised bill also offers relief for late filers by allowing taxpayers to claim refunds even when filing returns late and by removing penalties for late TDS submissions. It reinstates provisions for anonymous donations to mixed-object trusts and extends anonymous donation exemptions to religious and mixed-purpose trusts.

Moreover, the bill grants direct tax benefits to Saudi Arabia's public investment funds and aligns MSME definitions with the MSME Act. The Finance Ministry states that the revised bill aims to "simplify taxation with a clear, modern framework."

The revised bills will head to the Rajya Sabha before seeking a Presidential assent. Once signed, they will come into force as law, ushering in a new era of transparency, equity, and investment-friendliness in India's direct tax regime.

1. Mumbai news reported that the Lok Sabha approved the Income Tax (No 2) Bill, 2025, and the Taxation Laws (Amendment) Bill, aiming to modernize India's direct tax regime.
2. The Income Tax Bill 2025, once enacted, will replace the outdated Income-tax Act, 1961, and introduce a simpler, fairer, and more future-oriented direct tax structure.
3. The bill will introduce revised income tax slabs with increased progressivity, expected to reduce the tax burden on middle-income earners, but also recognizes Virtual Digital Assets (VDAs) as taxable capital assets.
4. The revised bills will further simplify taxation by streamlining TDS processes, assessment procedures, and dispute resolution mechanisms, promoting voluntary compliance and boosting ease of tax filing and payment.

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