New Income Tax Bill 2025 to Simplify Laws, Cut Litigation & Reduce Middle-Class Tax Burden

 

The government will introduce a new version of the Income Tax Bill 2025 in Parliament on Monday, incorporating most recommendations from the Select Committee chaired by BJP MP Baijayant Jay Panda. The updated bill aims to replace the decades-old Income Tax Act of 1961, which has undergone over 4,000 amendments and become overly complex.

According to Panda, the new legislation will simplify tax provisions by nearly 50%, making them easier for ordinary taxpayers and MSMEs to understand. The primary beneficiaries will be small business owners and middle-class citizens who often struggle with complicated tax structures and costly legal disputes.

The Finance Act 2025 introduces significant benefits, including raising the income threshold for claiming a tax rebate under Section 87A from ₹7 lakh to ₹12 lakh for residents under the new tax regime (Section 115BAC). The maximum rebate amount will also increase from ₹25,000 to ₹60,000, with marginal relief for incomes slightly above ₹12 lakh.

Key recommendations adopted by the Select Committee include allowing taxpayers to claim TDS refunds after the ITR filing deadline without penalties and continuing tax exemptions on anonymous donations to religious and charitable institutions.

The bill’s core principles focus on simplifying language and structure, avoiding major policy changes, and ensuring predictable tax rates. By reducing middle-class taxes, the government expects to boost household consumption, savings, and investments, creating a fairer and more efficient direct taxation system for India.