Here’s a clear comparison between the Income-tax Act, 1961 and the Income-tax (No. 2) Bill, 2025 (the proposed law intended to replace it):
Key Differences
| Feature | Income-tax Act, 1961 | Income-tax (No. 2) Bill, 2025 |
|---|---|---|
| Structure & Language | Over 800 sections, complex cross-references, outdated language. Nearly 500,000+ words. (Wikipedia, Reuters, Indiatimes) | Simplified structure: Sections reduced to 536; chapters condensed to 23. Plain-language, concise, with tables and reduced litigation potential. (Indiatimes, Wikipedia, www.ndtv.com) |
| Terminology | Uses “Previous Year” and “Assessment Year”. (Wikipedia) | Replaces both with a unified concept: “Tax Year”. (The Tribune, Wikipedia) |
| Tax Exemption & Slabs | Varies via successive amendments and budgets. (Wikipedia) | Retains ₹12 lakh basic exemption under new regime; provides revised, clearer slabs and higher standard deduction (₹75,000). (Indiatimes, Wikipedia) |
| Compliance & Digital Features | Traditional assessment processes with human interface. | Introduces faceless, digital-first assessments, prior notices before enforcement, and allows refunds even after late filing, without penalty. (Indiatimes, www.ndtv.com, The Tribune, Wikipedia) |
| Property-related Deductions | Standard deduction and pre-construction interest rules under Sections 23 & 24. (Wikipedia, The Economic Times) | Clarifies that the 30% standard deduction applies after municipal tax and extends pre-construction interest deduction to let-out properties. (The Economic Times, The Economic Times) |
| Capital Loss Treatment | Only long-term capital losses could be offset against long-term capital gains. | Allows a one-time set-off of long-term capital losses against short-term capital gains starting tax year 2026–27. (The Times of India) |
| Simplification Goals | Amended over 4,000 times, leading to complexity and litigation. | Built around the acronym SIMPLE – Streamlined, Integrated, Minimized litigation, Practical, Learn & adapt, Efficient reforms. Aims to halve complexity. (www.ndtv.com, The Indian Express, Indiatimes) |
| Vacant Property Taxation | Existing provisions under the Act. | Clarifies and retains status quo—no higher tax on vacant properties after select committee’s corrections. (The Economic Times) |
In Summary:
The Income-tax (No. 2) Bill, 2025 is a sweeping reform aimed at simplifying tax law, reducing litigation, modernizing administration, and enhancing clarity and fairness—from property taxation to handling capital losses, from digital assessments to leniency in late filings.