Finance Minister Nirmala Sitharaman’s recent tabling of the Income Tax Bill, 2025, marks a significant shift in India’s tax landscape. The government claims the bill simplifies compliance, reduces ambiguity, and modernizes the tax system. However, while the effort to de-clutter tax laws is commendable, the bill fails to address key concerns that directly impact consumers, particularly regarding tax predictability, dispute resolution, and incentives for economic growth.

The government promoted the new bill as a victory for simplification, fewer words, forty per cent reduced redundancy of provisions and a streamlined structure overall. The replacement of “assessment year” with “tax year” aligns the Indian system with global norms, promising much-needed clarity for taxpayers and businesses. But below this new coat of paint lies the same rust. The bill does not truly significantly overhaul the tax structure. Plenty of provisions from the 1961 act remain intact under new labels, forcing taxpayers to navigate through a maze of cross-references. Words don’t cut complexity, especially if the system remains convoluted.

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Tax Litigation remains the biggest headache for Indian taxpayers, with unresolved disputes piling up to 13.4 trillion rupees as of March 2024. Yet, the new bill makes no major attempts to introduce a fast-track dispute resolution model to address the pressing issue. For instance the UK’s Alternative Dispute Resolution (ADR) System provides taxpayers and authorities room to negotiate, removing expensive legal proceedings and clearing backlogs. A similar model can be implemented in India to reduce judicial backlog and boost the confidence of taxpayers.

Foreign investors remain wary of India’s tax system due to its unpredictability. The bill does little to change that; it fails to introduce effective mechanisms to address complicated cases, such as the Rs 1.4 billion tax demand against Volkswagen, which exemplifies the perils of prolonged tax disputes. If India wants to stay relevant and maintain its competitive edge, it must offer a framework that is not just simplified on paper but also predictable, stable, and fair enough to attract investors. For a nation aspiring to be a global tech hub, the new Income Tax Bill fails to support start-ups and innovation driven sectors.

The USA, for example, promotes investment through R&D tax credits, encouraging growth in emerging industries. Singapore goes a step further with generous tax exemptions to start-ups allowing them to reinvest in job creation and expansion. Yet, India’s new bill keeps a rigid framework, providing no meaningful incentives or financial push for budding start-ups. If innovation is the goal, the tax system needs to fuel it, not stifle it. The bill also misses a crucial opportunity to promote green energy. Tax incentives could have encouraged investment in renewables, making India a leader in clean technology. Instead, it remains silent on how taxation can drive sustainable consumer choices, another lost chance to align policy with progress.

The Income Tax Bill 2025 is definitely a step towards tax simplification, but it should not come at the cost of overlooking key economic drivers, innovation incentives, investor confidence, and dispute resolution. The system remains a roadblock rather than a catalyst for growth. If the government wants to empower businesses and consumers, it must ensure tax laws are enablers of economic growth rather than an administrative burden. India has the opportunity to create a transparent, efficient, and globally competitive tax system. However, in its current form, the new tax bill risks being more of a cosmetic update rather than the structural reform India truly needs. If policymakers aim to make India an attractive destination for investment and economic prosperity, they must go beyond word count reductions and focus on real, substantive change.

(The writer is Indian Policy Associate, Consumer Choice Center.)