Income Tax Bill, 2025, withdrawn by Centre; new version coming on August 11

On Tuesday, Parliament passed the new income tax bill, replacing the six-decade-old Income Tax Act, 1961. The legislation aims to make the direct tax law easier to read, understand, and implement.The Rajya Sabha returned the bill to the Lok Sabha with a voice vote as part of the parliamentary procedure.Introduction of ‘Tax Year’ and Expanded Digital Asset Definition The new bill introduces the concept of a ‘tax year’, replacing the financial year and assessment year to reduce confusion for taxpayers. It also broadens the definition of virtual digital assets to include crypto-assets, non-fungible tokens (NFTs), and other digital assets as specified by the government.The legislation makes it mandatory for taxpayers to provide access to virtual spaces, including social media accounts, email servers, and cloud storage, during search operations.Finance Minister Nirmala Sitharaman stated that the Central Board of Direct Taxes (CBDT) will issue standard operating procedures for handling digital data during searches, ensuring taxpayer privacy. She emphasised that the income tax department must ‘reboot’ its computer systems for the new law by April 1, 2026.Finance Minister Highlights Simplified Approach “These changes are not superficial; they reflect a new, simplified approach to tax administration. The leaner and more focused law is designed to make it easy to read, understand, and implement,” Sitharaman said while addressing the Rajya Sabha discussion.Sitharaman criticised opposition parties for staging a walkout in the Rajya Sabha on Tuesday, after they had done the same in the Lok Sabha the previous day. She expressed disappointment over their absence, especially after both houses had agreed to 16 hours of debate on the bill in the Business Advisory Committee.The Finance Minister stressed the importance of passing the bill on time, citing the need to upgrade the income tax department’s computer systems to implement the new law from April 1, 2026.Taxation Laws (Amendment) Bill, 2025 Passed In addition, Sitharaman introduced the Taxation Laws (Amendment) Bill, 2025, which was also passed by the Rajya Sabha. The amendment provides tax exemptions for public investment funds of the Kingdom of Saudi Arabia and its subsidiaries, allows partial withdrawal for subscribers of the Unified Pension Scheme, and modifies the definition of income in block assessments during search and seizure cases.Sitharaman highlighted the urgency of these measures and noted that, due to the economy, the government wants to implement these changes quickly instead of waiting for the finance bill.