In a bold move to overhaul India's six-decade-old tax framework, the Lok Sabha has passed the Income Tax (No. 2) Bill, 2025. This landmark legislation aims to make the Income Tax system S.I.M.P.L.E, better aligned with modern needs and taxpayer convenience.

What Does SIMPLE Stand For?

Finance Minister Nirmala Sitharaman explained the acronym, which captures the Bill’s core principles:

• Streamlined structure and language

• Integrated and concise

• Minimized litigation

• Practical and transparent

• Learn and adapt

• Efficient tax reforms 

This approach signals a complete shift from the dense, confusing format of the 1961 Act.

Key Highlights of the New Law:

The revised law brings several game-changing updates:

• Simplified Structure: Sections reduced from ~819 to 536; chapters consolidated from 40+ to 23; leaner and faster to navigate 

• Clarity in Targets: Income tax slabs, forms, and provisions are now stated in plain language, with handy tables and fewer legal footnotes 

• Tax Year Framework: Replaces “assessment year” and “financial year” with a single “tax year” aligned to the current fiscal year 

• Home Loan Reliefs: Reinforces 30% standard deduction on house property and allows pre-construction interest deduction for rented properties 

• Digital-First Compliance: Introduces faceless tax assessments, prior notice required for enforcement, and smoother refund processing—including refundability even after ITR deadlines without penalty 

• Clarity in Definitions: Modernizes terms like “capital asset”, “MSME”, “beneficial owner”, and tidies up dividend tax claims (Section 80M) 

• Weakening Litigation: Time-bound tax dispute resolution added; many select committee suggestions aimed at quick, fair compliance incorporated 

• Persisting Incentives: ₹12 lakh annual exemption stays; no major slab changes, ensuring relief continuity 

Why It Matters?

This isn’t just legal reform—it’s taxpayer empowerment:

• Clearer laws, fewer disputes—A simplified framework builds trust.

• Fairer, modern compliance—Minimum human interference, more transparency.

• Improved user experience—Fewer forms, clearer terms, digital simplicity.

• Boost to taxpayers & MSMEs—Better deductions, streamlined compliance, fewer grey areas.

• Momentum for economic revival—A simpler code helps boost voluntary compliance and ease of doing business

What’s Next?

The Bill is now heading to the Rajya Sabha for approval. Once passed and signed off, it will become law—expectedly operational from April 1, 2026.

The Income Tax (No. 2) Bill, 2025 marks a significant shift in simplifying India’s tax structure, aiming to make compliance easier and fairer for individuals and businesses alike. As the Bill progresses towards implementation, it’s crucial for taxpayers to stay informed and adapt to the upcoming changes.

Whether you’re a salaried professional, self-employed, or a business owner, understanding these reforms can help you make better financial decisions and ensure smooth compliance with the new law.

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