The Income-Tax Bill, 2025, set to replace the six-decade-old Income Tax Act, 1961, brings significant refinements to India’s tax framework.
However, unlike the Direct Taxes Code (DTC) proposals of 2009 and 2010, which sought a complete tax overhaul, the new bill largely preserves the existing structure while introducing key updates.
The idea of a DTC was first introduced in 2009 to replace the Income Tax Act, 1961, with a more simplified and uniform tax framework.
The DTC Bill, 2010, proposed major changes, including uniform tax slabs, a lower corporate tax rate, and a streamlined approach to capital gains taxation. However, concerns over revenue loss, investor resistance to capital gains reforms, and opposition to stricter anti-avoidance measures led to repeated delays.
With the change in government in 2014, the focus shifted to incremental reforms rather than a complete overhaul, and the DTC was never implemented. Instead, successive budgets introduced tax changes within the framework of the existing law, leading up to the Income Tax Bill, 2025.
The DTC aimed to simplify tax laws by proposing uniform tax slabs, a 25% corporate tax rate, and a broad-based tax structure. The Income-Tax Bill, 2025, while modernising tax legislation, retains a progressive tax system with revised slabs and deductions. Corporate taxation remains largely unchanged, though incentives for specific industries are introduced.Â
A crucial shift is in administration — while the DTC proposed electronic filing, the new bill prioritises faceless assessments and digital compliance to curb corruption.
Similarly, taxation of foreign entities sees refinements rather than the introduction of Controlled Foreign Corporation (CFC) rules, which were part of the DTC.
Capital gains taxation remains a key difference. The DTC sought uniformity across asset classes, whereas the new bill continues to distinguish between different investment types, maintaining indexation benefits.
The General Anti-Avoidance Rule (GAAR) is retained but with refinements for effective implementation. Residency rules also see updates, particularly for Non-Resident Indians (NRIs).
Digital economy taxation is another major update — while the DTC lacked specific provisions, the new bill introduces taxation for crypto-assets and digital transactions.
In fact, the new bill defines “Virtual Digital Asset (VDA) as any digital representation of value, excluding traditional currencies, that can be transferred, stored, or traded electronically. This includes cryptocurrencies, non-fungible tokens (NFTs), and other digital assets specified by the government. VDAs function as a store of value, a unit of account, or an investment tool, relying on cryptographic or similar technologies for security and validation.”
The government is set to soon introduce the Income-Tax Bill, 2025, replacing the Income-Tax Act, 1961. The new legislation, scheduled to come into effect from April 1, 2026, aims to simplify tax structures, enhance compliance, and curb tax evasion.