The Income-Tax (No 2) Bill and the Taxation Laws (Amendment) Bill are two significant tax-related laws that were approved by the Lok Sabha on Monday. The goal of the Income Tax (No.2) Bill 2025 is to update and combine the laws pertaining to the Income Tax Act of 1961. After being approved by the Rajya Sabha, the Bill would be transmitted to the President for his or her assent. As soon as the president gives his approval, it will become law.
The Income Tax Act of 1961 will be superseded by the Income Tax (No.2) Bill 2025. The Finance Ministry stated earlier in February that the new measure demonstrates the government's intention to improve business ease by offering a straightforward and understandable tax structure.
The abbreviation SIMPLE, which is intended to communicate that the regulations would be simpler to follow and that there are certain guiding principles behind it, appears to be the foundation of the new tax system that the Income Tax Bill 2025 is establishing.
Although the bill will formally define the precise meaning of each letter in SIMPLE, an acronym such as this typically decomposes into fundamental objectives like:
S – Streamlined structure and language→ The new bill will be a single, streamlined act that merges all related provisions, reducing volume while preserving the core intent.
I – Integrated and Concise→ No more misunderstandings should exist. All relevant provisions will be consolidated into a single, well-structured act in the new law. The spirit is preserved when the volume is lowered.
M – Minimized Litigation→ There will be fewer tax conflicts and greater transparency thanks to the new income tax bill. Multiple interpretations will be further avoided by the explanations, advisory notes, and frequently asked questions.
P – Practical and Transparent→The new law simplifies taxation by removing redundancies, reducing cross-references, and using clear tables and formats..
L – Learn and Adapt → The new Income Tax Bill adopts international best practices while upholding fundamental tax concepts, providing well-rounded, future-ready improvements..
E – Efficient Tax Reforms→ Ensure fairness by taxing higher incomes more while protecting lower earners.
The "SIMPLE" concept is essentially a rebranding of India's direct tax system that aims to reduce red tape and make it simpler, more equitable, and tech-enabled.
Concerning the Income Tax (No 2) Bill
The Income Tax (No. 2) TDS, exclusions, and other compliance-heavy features are streamlined under the bill. Additionally, it enables people to request refunds for late filings without incurring penalties. According to PTI, it offers "nil" TCS on remittances made for educational purposes through the Liberalized Remittance Scheme (LRS) that are funded by any financial institution.
Retained Provisions (Identical to the 1961 Income-tax Act):
Flexibility with regard to TDS refunds: Those who are not otherwise obligated to file an ITR may nevertheless request TDS refunds without being constrained by the deadline.
Anonymous contributions to religious and charitable trusts are exempt from taxes: Restored to conform to the 1961 Act, which permits benevolent and religious trusts to be exempt.
The taxation basis for non-profit organizations was changed from taxing "receipts" to solely taxing "income."
Mixed-object NPOs now have the same immunity from anonymous donations as they did under the 1961 Act.
The term "profession" has been added to Clause 187, allowing professionals with receipts above Rs 50 crore to use the designated electronic payment methods.
For greater clarity, the regulations on carryover and set-off of losses were revised.
TDS correction statement time limit reduced from 6 years to 2 years.
Key changes in Income Tax (No. 2) Bill:
Exemption for anonymous donations restored for wholly religious and mixed-object trusts.
UPS (Unified Pension Scheme) made tax-exempt.
Changes to block assessments in search cases.
Direct tax benefits extended to Saudi Arabia’s public investment funds.
Reversed earlier proposals: mandatory timely ITR for TDS refunds, taxing NPO “receipts” instead of “income.”