Every statute begins by establishing its legal identity and reach. Before any law can levy tax, prescribe obligations, or confer rights, it must first clarify what the law is called, where it applies, and from when it operates. Clause 1 of the Income-tax Bill, 2025 performs this foundational role.
As the proposed replacement of the Income-tax Act, 1961, the Income-tax Bill, 2025 introduces a reorganised and modernised statutory framework. Clause 1 formally introduces the new law and defines its territorial scope and commencement. All subsequent clauses—whether dealing with charge, computation, exemptions, or procedure—derive their authority from this provision.
This article explains Clause 1 of the Income-tax Bill, 2025, focusing on its legislative scope and commencement, when the new law will come into force, and how it differs structurally from the corresponding provision of the Income-tax Act, 1961.
Legislative Scope of the Income-tax Bill, 2025
Clause 1 provides that the Act may be called the Income-tax Act, 2025 and that it shall extend to the whole of India.
This declaration establishes the territorial scope of the new income-tax law. By extending the Act to the whole of India, the legislature confirms that income tax continues to be a central levy with nationwide applicability, operating uniformly across all States and Union Territories.
In legislative terms, such scope provisions are not merely descriptive. They define the outer boundary within which the law can operate. Every charging provision, exemption, procedural rule, and enforcement mechanism under the Income-tax Act, 2025 is effective only because it falls within the scope declared in Clause 1.
Notably, Clause 1 does not alter the territorial reach that existed under section 1 of the Income-tax Act, 1961. The scope remains exactly the same. The change lies in the clarity of presentation—the provision is placed upfront as part of a clearly structured preliminary framework, reinforcing its foundational importance.
Commencement of the Income-tax Act, 2025
Clause 1 further provides that the Income-tax Act, 2025 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
This is a notification-based commencement clause, a standard legislative device used for major fiscal statutes. Until the notified date is issued, the Act—though enacted—does not have operative legal effect.
The use of a notification-based commencement is particularly significant in the context of the Income-tax Bill, 2025. Replacing a long-standing statute like the Income-tax Act, 1961 requires extensive administrative preparation, including alignment of systems, procedures, forms, and guidance. Clause 1 allows the Government to bring the new law into force only when such readiness is ensured.
From a legal perspective, the commencement provision is critical in determining which law applies to a given income, transaction, or proceeding. Courts and tax authorities rely on commencement clauses to decide whether a matter is governed by the repealed law or by the new enactment.
How Legislative Scope and Commencement Operate Together
Clause 1 must be read as a single, integrated provision. The declaration that the Act extends to the whole of India defines where and to whom the law applies, while the commencement clause defines from when it applies.
Even though the Income-tax Act, 2025 is intended to apply nationwide, it can do so only from the date on which it is formally brought into force. Until that date, the territorial scope remains declaratory but inoperative. Once the commencement notification is issued, the nationwide scope becomes legally effective.
This combined reading is essential for resolving transitional questions. For any income, transaction, or proceeding, it must be examined whether it falls within the territorial scope of the Act and whether it arises after the commencement of the new law. Only when both conditions are satisfied can the provisions of the Income-tax Act, 2025 be applied.
Clause 1 therefore functions as a gatekeeping provision, controlling the applicability of every subsequent clause in the statute.
Comparison with the Income-tax Act, 1961
Clause 1 of the Income-tax Bill, 2025 broadly corresponds to section 1 of the Income-tax Act, 1961. The changes introduced are structural and drafting-related, rather than substantive.
Under the 1961 Act, provisions relating to short title, extent, and commencement existed in a similar form, but were embedded within a statute that expanded incrementally over several decades. The 2025 Bill reorganises these foundational elements in a clearer and more prominent manner, reflecting a deliberate effort to improve readability and interpretation.
The drafting style has also been modernised. Clause 1 uses concise and direct language, reducing interpretational clutter without altering legislative intent. The territorial scope remains unchanged, and the mechanism of commencement by notification continues as before.
These changes clarify the difference between the Income-tax Act, 1961 and the Income-tax Bill 2025 at the preliminary level, while preserving continuity in the core framework of income taxation.
What Has Not Changed
Despite the comprehensive rewrite of the statute, Clause 1 makes it clear that the fundamental structure of income-tax law remains intact.
There is no change in the nationwide applicability of income tax, no alteration in its character as a central levy, and no modification to the method by which the law is brought into force. Clause 1 does not deal with tax rates, slabs, or charging principles, which continue to be governed by substantive provisions and annual Finance Acts.
This continuity ensures that the transition to the Income-tax Act, 2025 does not create uncertainty regarding the basic operation of income tax law in India.
Conclusion
Clause 1 of the Income-tax Bill, 2025 establishes the legal identity, territorial scope, and commencement of the new income-tax law. Though brief, it forms the foundation upon which the entire statute is built.
By clearly defining where the law applies and when it begins to operate, Clause 1 ensures certainty and continuity during the transition from the Income-tax Act, 1961 to the Income-tax Act 2025. For anyone seeking to understand the new income-tax framework, Clause 1 is the natural starting point.
Also Read
Sources & References
- Income-tax Bill, 2025 (as introduced in Parliament)
Government of India – Ministry of Finance
👉 https://www.indiabudget.gov.in - Explanatory Memorandum to the Income-tax Bill, 2025
(Official notes explaining structure and intent of the Bill)
👉 https://www.indiabudget.gov.in - Income-tax Act, 1961 (Bare Act)
For comparison with corresponding provisions
👉 https://www.incometaxindia.gov.in - Gazette of India – Notifications & Legislative Commencement
(For understanding commencement through Official Gazette)
👉 https://egazette.nic.in
