New Income Tax Bill 2025: Introduction of ‘Tax Year’ to Simplify Tax Filing

By: Admin
February 12, 2025
Categories: New Income Tax Act
4 Min Read

The Income Tax Bill 2025 introduces a major change by replacing the assessment year and previous year with a unified “Tax Year.” This update aims to simplify tax compliance and eliminate confusion caused by multiple terms for the same time period.

What is the ‘Tax Year’ Concept?

Under the new system, the tax year will cover a 12-month period from April 1 to March 31, just like the current financial year. However, the key difference is the elimination of the assessment year.

For newly established businesses or professions, the tax year will begin on the date of establishment or when a new income source arises. It will still end on March 31 of the same financial year, ensuring consistency.

How Will This Simplify Tax Filing?

Currently, taxpayers struggle with self-assessment tax and advance tax payments due to confusion about assessment years. This often leads to delays in refunds and incorrect deposits.

With a single tax year, taxpayers will clearly understand which period their taxes apply to, making filing and compliance more straightforward.

Understanding the Current System

At present, the Income Tax Act, 1961, requires taxpayers to differentiate between:

• Assessment Year – The year in which taxes are assessed on the previous year’s income.
• Previous Year – The year in which the income was earned.

Many taxpayers find this distinction confusing, particularly when filing returns or depositing taxes. The new tax bill replaces these terms with “Tax Year” to align with international standards and make tax laws more user-friendly.

Expert Opinions on This Change

Tax experts view this update as a positive step in simplifying income tax compliance. One expert noted that while this change won’t impact tax policies, it will make the law easier to understand, reducing errors, litigation, and compliance issues.

Conclusion

The Income Tax Bill 2025 aims to make tax filing clearer and more efficient by introducing a single tax year and removing outdated terminology. This change will help taxpayers avoid confusion, file taxes accurately, and comply with tax laws more easily.

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