Summary: The New Income Tax Bill 2025 brings significant structural and policy changes aimed at simplifying tax laws while eliminating redundant provisions. Key revisions include the removal of intricate language, logical reorganization of sections, and a formula-based approach to calculations. Exempt income has been moved to a separate schedule, and assessment years have been replaced by the concept of a “Tax Year.” Changes in legal phrasing, such as replacing “notwithstanding” with “irrespective” and “in accordance with” to “as per,” may lead to interpretational challenges. Favorable policy updates include tax rebates under Section 87A now covering capital gains (contradicting the Finance Minister’s speech), modifications to salary perks for employer-provided vehicles, and continued transfer pricing benefits. However, certain unfavorable changes, such as expanded definitions of unexplained money, restrictions on concessional tax regimes, and no prior inquiry before tax reopening, raise concerns. Conceptual shifts include transitioning from an accrual-based to a receipt-based system and introducing new classifications like Registered NPOs and Regular Income. Drafting errors, such as incorrect references to the source of income for non-residents, also need clarification. Understanding these changes is crucial for accurate tax compliance and planning.
This article is nothing but an outcome of noting from the lecture attended at chartered accountant members meet held on 13th March, 2025. Lecture was conducted by CA Mr. Gautam Doshi sir. After attending the lecture, what I learned is how one should read and interpret a law. And that is one of the reasons, I am sharing these notes in a Article form.
♦ Policy Assurance in FAQ / press release
- No major tax policy changes
- Removed redundant and repetitive provisions
- Reorganized sections logically
- Eliminated intricate language
- Textual and structural simplification
♦ Structural changes
- All redundant provisions are not carried forward – primary contributor to reduction of provisions
- Explanation and proviso formulate to subsection
- Formula based approach
- Exempt income moved from section 6 to different schedule
♦ Issues created due to change of phrase
Previous year change to Tax Year – concept of Assessment Year deleted
- Change in phrase from “notwithstanding” to “irrespective”. “Notwithstanding” refers to overriding the other section. Whereas “irrespective” refers to ignoring i. e. both sections continue to exist. Dictionary meanings of both the words are the same.
- “In accordance” with to “as per”. “In accordance” refers to the condition/ requirement in a section. Whereas “as per” refers to a section and not merely a condition.
- “As may be prescribed” to “as prescribed”. Does this mean that before prescription the sections will not be operable? For e.g. Dividend definition as per section 2(40)(E)(II) – can it be prescribed subsequently?
- Will all the rules be re-drafted?
♦ Policy change – favourable
- Salary – prerequisite on use of vehicle by employer
- Transfer pricing – range of +/- 3% available even in case of one comparable.
- TDS
- Tax Rebate 87A / 156(3) – as per IT bill rebate available on capital gain income.
However, as per the Finance Minister’s speech no rebate on capital gain.
♦ Policy change – unfavourable
- Definition of Associated Enterprise
- Unexplained money – expansion of scope
- Concessional tax regime – 80M not available to 22% new regime companies (115BAA / 200)
- No inquiry before reopening (148A / 281(4))
- Reopening at any time
- Test for change in shareholding 51% done every year
- Search cases – presumption – expanded
♦ Few Conceptual changes
- Shift from Accrual to receipt basis
- New concepts of Registered NPOs, Regular Income, Taxable Regular Income
♦ Drafting errors
- Income deemed to accrue or arise in India – Non-Resident to Non-Resident. Instead of “any source in India” it says “any source outside India”.
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