The select committee constituted to examine the Income-Tax Bill, 2025, submitted its report to Parliament on 21 July 2025, the opening day of the Monsoon Session. The committee recommended significant modifications to the bill, which was originally introduced in the Lok Sabha on 13 February 2025 as a comprehensive replacement for the Income Tax Act, 1961. The revised bill contains 536 sections across 23 chapters, with a proposed effective date of 1 April 2026.
Background
The Income Tax Act, 1961, has been India's primary direct tax legislation for over six decades. Over the years, it has been amended extensively — with thousands of insertions, deletions, and modifications — resulting in a statute that practitioners and courts have long regarded as unwieldy. The Act's complexity has been cited as a factor contributing to litigation, interpretive disputes, and compliance costs.
The government introduced the Income-Tax Bill, 2025, during the Budget Session with the stated objective of simplifying and rationalising the direct tax code. Rather than amending the existing Act, the bill proposed an entirely new statute. Given the significance and scale of the proposed legislation, Parliament referred the bill to a select committee for detailed examination.
The select committee, comprising members of both Houses, undertook extensive consultations with tax professionals, industry bodies, chartered accountant associations, and revenue authorities before finalising its recommendations.
Key Developments
The select committee's report addressed the following areas:
Structural reorganisation: The bill is organised into 23 chapters spanning 536 sections, compared to the Income Tax Act, 1961, which had grown to approximately 298 sections with numerous sub-sections and provisos. The committee recommended further structural improvements to enhance readability and reduce interpretive ambiguity.
Significant modifications recommended: The committee proposed modifications to the bill as introduced, based on stakeholder feedback and technical examination. While the full text of the modifications is subject to parliamentary consideration, reports indicate that changes were recommended in areas including capital gains taxation, presumptive taxation, dispute resolution mechanisms, and transition provisions.
Transition framework: The committee addressed the transition from the old Act to the new legislation, recommending provisions to deal with pending assessments, ongoing litigation, and vested rights under the existing statute. The transition provisions are critical given that millions of tax proceedings are pending under the current Act.
Effective date: The proposed effective date of 1 April 2026 has been retained, giving the revenue administration and taxpayers approximately eight months from the expected date of enactment to prepare for the new regime.
Parliamentary timeline: The bill is expected to be taken up for consideration and passage during the current Monsoon Session, following which it would require presidential assent.
Implications for Practitioners
The submission of the select committee report sets the stage for the most significant overhaul of India's direct tax framework in over sixty years. Tax practitioners must begin preparing for the transition by studying the new bill's structure and provisions, particularly where they depart from the established jurisprudence under the 1961 Act.
Corporate tax departments and advisory firms should initiate impact assessments, especially in areas where the committee has recommended modifications — capital gains, presumptive taxation, and dispute resolution are likely focal points. The eight-month window between expected enactment and the 1 April 2026 effective date is tight for implementation across compliance systems and advisory practices.
Litigation lawyers should pay particular attention to the transition provisions, as these will determine the fate of pending assessments and appeals under the existing statute. The treatment of vested rights and ongoing proceedings will be a critical area of practice.