Context:
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The Income-Tax Bill, 2025 has been introduced to replace the Income-Tax Act, 1961.
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The stated aim is to make tax laws simpler, predictable, and transparent, while reducing tax-related litigation.
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However, critics argue that the Bill brings only cosmetic changes, without meaningful reform.
Key Highlights:
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Government Initiative / Policy Details
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Proposed replacement of the six-decade-old Income-Tax Act, 1961.
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Intended objectives:
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Simplification of legal provisions
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Reduction in disputes and litigation
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Improved taxpayer confidence through transparency
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Concerns Over Complexity & Ambiguity
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Despite claims, the Bill retains convoluted legal language.
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Many provisions remain difficult for the common taxpayer.
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Example of superficial change:
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“notwithstanding anything contained to the contrary” replaced with
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“irrespective of anything to the contrary”
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Such changes are viewed as cosmetic, not substantive.
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Limited Structural Reforms
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The Bill does not introduce new taxation philosophy or policy.
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Mostly involves rearrangement and rephrasing of existing sections.
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While some redundant clauses are removed, major areas of ambiguity remain, continuing the risk of litigation.
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Expanded Powers of Tax Authorities
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Search and seizure powers extended to digital spaces, including:
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Emails
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Cloud storage
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Social media accounts
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Officials may override access codes, raising fears of misuse.
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Absence of strong judicial oversight increases concerns of executive overreach.
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Privacy & Constitutional Concerns
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Digital intrusions may conflict with the Right to Privacy upheld in the Puttaswamy Judgment (2017).
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Raises questions about proportionality and safeguards against arbitrary action.
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Relevant Prelims Points:
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Issue: Reform of India’s income-tax framework through the Income-Tax Bill, 2025.
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Causes:
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Need to update the old 1961 Act
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Demand for reduced litigation and clearer provisions
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Government Initiatives:
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Attempted simplification and restructuring of tax law
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Focus on transparency for taxpayers and administrators
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Benefits:
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Potential for better predictability in taxation
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Removal of some redundant provisions
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Challenges:
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Continued complexity in drafting
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Risk of persistent ambiguity leading to disputes
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Expansion of intrusive powers without safeguards
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Impact:
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Could increase state surveillance in taxation
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May weaken taxpayer trust if privacy is compromised
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Relevant Mains Points:
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Key Facts & Provisions:
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Bill seeks replacement of the Income-Tax Act, 1961
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Enhances search and seizure authority in the digital domain
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Conceptual Linkages:
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Governance: Transparency vs. administrative overreach
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Economy: Predictable tax regime essential for investment and compliance
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Polity: Balance between state power and individual rights
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Constitutional Dimension:
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Post Puttaswamy (2017), privacy is a fundamental right under Article 21.
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Any intrusion must satisfy necessity, proportionality, and safeguards.
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Way Forward:
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Instead of cosmetic rewriting, focus on targeted amendments removing draconian clauses.
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Parliamentary review must ensure:
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Strong privacy safeguards
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Judicial oversight in digital searches
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Genuine simplification for taxpayers
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UPSC Relevance (GS-wise):
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GS 2 (Governance & Polity): Transparency, taxpayer rights, privacy concerns, constitutional safeguards
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GS 3 (Economy): Tax reforms, compliance, impact on economic governance and investment climate