New Income Tax Bill may be tabled in Parliament next week: Sitharaman

The new Income Tax Bill, which will replace the six-decade-old I-T Act, is likely to be introduced in the Lok Sabha in the coming week, Finance Minister Nirmala Sitharaman said on Saturday.

After introduction in the Upper House, the bill will be sent to a parliamentary standing committee for scrutiny. The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the bill on Friday.

“Yesterday, the Cabinet cleared the New Income Tax proposal, I hope to have it introduced in the Lok Sabha in the coming week. Post that it will go to a committee,” Sitharaman said in a media briefing after addressing the post-Budget customary meeting with the central board of directors of the RBI.

The bill will again go to the Cabinet after the parliamentary committee gives its recommendations on it. After Cabinet approval, it will again be introduced in Parliament.

It may be noted that the FM had first announced a comprehensive review of the Income-Tax Act, 1961 in the July 2024 Budget. In her Budget 2025 speech on February 1, she indicated that a new Income Tax Bill will be presented in Parliament ‘next week’. The new Income-Tax Bill will be clear and direct in text so as to make it simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

While underlining taxation reforms as one of key reforms to realize the vision of Viksit Bharat, the FM had stated that the new income tax bill will carry forward the spirit of ‘Nyaya’. “The new regime will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation,” she informed.

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Key Features

According to CA Club India, the New Income Tax Bill may have the following features:

No New Taxes: The New Income Tax Bill will not introduce any new taxes and focus on simplifying the existing tax laws.

Concise Legislation: The new law is expected to be 50% shorter than the existing one by eliminating redundant provisions and reducing ambiguity.

Simplified Language: Legal language will be made more accessible, ensuring that taxpayers can understand provisions without complexity.

Litigation Reduction: By clarifying exceptions to anti-abuse provisions and removing outdated clauses, the new bill aims to reduce tax disputes.

Lower Penalties: There may be provisions to introduce lower penalties for certain offences, making the tax system more taxpayer-friendly.

Expected Changes in the New Tax Bill

Consolidated Tax Regime: Currently, different tax regimes apply to individuals, HUFs, AOPs, BOIs, and companies. The new bill is expected to streamline these into a single tax framework, reducing compliance burdens and ensuring tax certainty.

Ease of Doing Business: The new law may specify exceptions to anti-abuse provisions to prevent unnecessary scrutiny of genuine transactions.

Withholding Tax Rationalization: A simplified withholding tax structure could be introduced to ease compliance for businesses and individuals.

Elimination of Redundant Provisions: Outdated and inapplicable clauses will be removed to make the tax law more precise and objective.

The revised tax system is set to be implemented starting from the fiscal year 2025-26, affecting taxpayers in the assessment year 2026-27. Through these modifications, the government seeks to establish a more transparent and efficient tax framework, minimizing disputes and enhancing compliance for both businesses and individuals.