The New Income Tax Act 2025: A Paradigm Shift from the 1961 Regime – An Analytical Study on Simplification, Compliance, and Economic Equity
Authors/Creators
- 1. Pdea's Baburaoji Gholap College, Sangvi, 27
Description
The Income Tax Act, 1961, has endured over six decades of patchwork amendments, resulting in complexity, litigation, and high compliance costs. The prop osed New Income Tax Act 2025 (based on the draft Direct Tax Code and expert committee recommendations) aims to replace this legacy statute with a simplified, faceless, and economically neutral framework. This paper undertakes a comparative doctrinal analysis of the 1961 Act and the 2025 Act across six parameters: structure, residence, heads of income, deductions, TDS, and dispute resolution. Using a purposive interpretation methodology, the study finds that the new Act reduces sections by 50%, eliminates over 100 exemptions, and introduces AI-driven assessments. However, it also identifies transitional risks, due process concerns in algorithmic decisions, and potential hardship for small businesses. The paper concludes with seven actionable suggestions, including grandfathering of pre-2025 capital assets, a two-year transition period, and a statutory 5-year review mechanism.
Files
12. The New Income Tax Act 2025 A Paradigm Shift from the 1961 Regime – An Analytical Study on Simplification, Compliance, and Economic Equity.pdf
Additional details
References
- Primary Sources 1. Income Tax Act, 1961 (No. 43 of 1961), as amended up to Finance Act 2025. 2. Draft New Income Tax Act 2025 (based on Direct Tax Code 2022, revised by CBDT discussion paper, 2025). 3. Central Board of Direct Taxes (CBDT) Circular No. 1/2025 – Guidelines for AI-based faceless assessment. 4. Ministry of Law and Justice (2025). The Tax Simplification Bill 2025 (Discussion Draft). Secondary Sources 5. Akhilesh Ranjan Committee (2022). Report on Direct Tax Code. Ministry of Finance, Government of India. 6. Kelkar, V. (2002). Report of the Task Force on Direct Taxes. Ministry of Finance. 7. Shome, P. (2012). Report on GAAR and Tax Treaty Abuse. Ministry of Finance. 8. National Institute of Public Finance and Policy (NIPFP). (2024). Compliance Cost of Direct Taxes in India. Working Paper No. 384. 9. OECD (2025). Tax Policy Reforms: India Country Note. OECD Publishing, Paris. 10. Sridhar, G., & Menon, S. (2023). "Faceless Assessment and Natural Justice." Indian Tax Law Review, 45(2), 112-145. 11. ITAT Rulings (2023–2025): Selected 50 cases from Mumbai, Delhi, Bangalore benches (available on ITAT online portal). Comparative Statutes 12. Internal Revenue Code (US), 1986 (as amended). 13. Income Tax (Earnings and Pensions) Act 2003 (UK). 14. Income Tax Assessment Act 1997 (Australia). Interviews (Primary Validation) 15. Interview with Mr. R. Balakrishnan, Retired Chief Commissioner of Income Tax (Jan 2026). 16. Interview with Ms. Neha Shah, Partner at Tax Legal LLP (Feb 2026). 17. Interview with Dr. Arvind Subramanian, Economist (Feb 2026).