This week in Indian law: The Income-Tax Bill, 2025 was introduced in Lok Sabha on 13 February, proposing to replace the six-decade-old Income-tax Act, 1961 with a simplified framework. The NCLAT ruled that uninvoked corporate guarantees cannot constitute financial debt under the IBC. The Budget session is now in full swing with two major legislative items before Parliament. 4 significant legal developments this week across legislative policy and insolvency law.
Top story
Income-Tax Bill 2025 Introduced to Replace Six-Decade-Old Act
Category: legislative-policy | Date: 13 February 2025 | Source: PIB
The Income-Tax Bill, 2025 was introduced in the Lok Sabha on 13 February 2025, proposing to replace the Income-tax Act, 1961. The Bill reduces the total number of sections from 819 to 536 and chapters from 47 to 23, aiming for a simpler, clearer tax code. It is slated to take effect from 1 April 2026. The Bill was subsequently referred to a Select Committee chaired by Baijayant Panda, MP.
Why it matters: This is the most significant direct tax legislative reform since 1961. Tax practitioners, chartered accountants, and corporate tax departments must begin preparing for a fundamentally restructured code. The transition period until April 2026 is narrow given the scope of changes.
Read more: Veritect analysis
Court judgments
NCLAT: Uninvoked Corporate Guarantees Cannot Constitute Financial Debt
Court: NCLAT | Date: 12 February 2025
The National Company Law Appellate Tribunal held that corporate guarantees which have not been invoked by the creditor cannot form the basis of a claim as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The guarantee must first be invoked and the guarantor must have incurred a financial obligation before insolvency proceedings can be initiated.
Key point: Creditors holding uninvoked corporate guarantees must first invoke the guarantee and establish a crystallised debt before approaching the NCLT for insolvency proceedings.
Legislative and policy developments
Budget Session Progress
Parliament continued active debate on the Union Budget 2025-26 during the second week of February. With the Income-Tax Bill now also introduced, the current session has two major legislative items under consideration — the Finance Bill and the Income-Tax Bill. The latter's referral to a Select Committee indicates detailed clause-by-clause scrutiny is expected.
Also this week
- Select Committee constituted — The Income-Tax Bill Select Committee under Baijayant Panda will review the Bill's provisions and submit its report before the session concludes.
- SEBI enforcement continues — SEBI continued enforcement actions under the algo trading and finfluencer frameworks introduced earlier in 2025.
By the numbers
- 819 → 536 — Reduction in sections from old Income-tax Act to new Bill
- 47 → 23 — Reduction in chapters
- 1 April 2026 — Proposed effective date of the new Income Tax Act
Looking ahead
- February: Select Committee to begin clause-by-clause review of Income-Tax Bill
- Mid-February: SC to hear AGR review petitions (telecom dues)
- Late February: SC expected to deliver judgment on MLC expulsion proportionality
This is the Veritect Weekly Legal Roundup for Week 7 of 2025. For daily updates, visit our legal news page. Subscribe to receive this roundup every Monday morning.
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