What Is The New Income Tax Bill & How Can It Transform The Taxation Landscape?

Finance Minister Nirmala Sitharaman is set to table the New Income Tax Bill in Parliament this week, following its clearance by the Union Cabinet on 7 February 2025. Once introduced, the Bill is likely to be referred to the Standing Committee on Finance for detailed review.

The legislation seeks to replace the Income Tax Act, 1961, a law in effect for over six decades. It aims to modernise and simplify direct tax regulations for individuals and businesses, reflecting evolving economic realities and societal changes.

Why a New Bill?

The New Income Tax Bill addresses the complexity of the current tax laws, which have grown cumbersome due to numerous amendments over the years. Finance Minister Sitharaman highlighted the need to reduce legal disputes and ensure greater tax certainty during the Budget 2025 presentation.

According to Finance Secretary Tuhin Kanta Pandey, "The forthcoming Bill will feature concise language without lengthy provisos or explanations, while maintaining tax neutrality."

Efforts to simplify tax obligations include:

Stakeholder Involvement

The Central Board of Direct Taxes (CBDT) actively sought input from stakeholders, including taxpayers and financial experts, through a dedicated webpage launched on the income tax e-filing portal in October 2024. Over 6,500 suggestions were submitted, focusing on language simplification, litigation reduction, compliance streamlining, and the removal of outdated provisions.

To facilitate this comprehensive review, an internal CBDT committee and 22 specialised sub-committees were established.

Key Expectations and Simplification Measures

The current Income Tax Act contains 298 sections spanning 23 chapters. The Bill proposes a significant reduction in these provisions while excluding irrelevant amendments. It aims to feature straightforward language that citizens can easily understand without relying heavily on tax consultants.

The New Income Tax Bill will also align with international best practices by incorporating modern provisions and simplifying existing rules.

Impact on Taxpayers

Contrary to concerns about potential tax hikes, the Finance Secretary has assured that the Bill will be revenue-neutral, with no immediate changes to tax rates or slabs. Its primary goal is to reduce litigation and compliance burdens while maintaining a stable tax framework.

The introduction of this Bill signifies a step towards a more transparent and efficient tax system in India, promoting better tax compliance and reducing legal disputes.

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