New Income Tax Bill 2025
New Income Tax Bill: The government plans to replace the decades-old income tax laws with a new income tax bill, which was announced in the Budget 2025. The new income tax bill aims to simplify the laws so that even a common man can understand them. The new income tax bill is expected to be clear and direct in text with close to half of the present law, in terms of both chapters and words. Currently, the Income Tax Act has 298 laws which is expected to be cut to half.
The Union Cabinet gave clearance to the new income tax bill on February 7, 2025. It is expected that the new income tax bill will be tabled in the Parliament during the Budget 2025 session.
Details on New Income Tax Bill
The new income tax bill has come after Budget 2024 July announced the review of The Income Tax Act, 1961. The review of the Income Tax Act was announced as the existing income tax laws are old, complicated and confusing for layman taxpayers. The aim of the review of the Income Tax Act is to make the Act concise, lucid and easy to read and understand. Further, the review of the Income Tax Act is to reduce disputes and litigation and also to provide certainty to the taxpayers. The review is also aimed at bringing down the tax demand embroiled in litigation.
The few expectations of the new income tax bill are:
a) It is expected that the new income tax bill will announce the single tax system to reduce the complications in ascertaining the tax liability, reducing the overall compliance burden and providing tax certainty. Currently, there are multiple tax regimes for various taxpayers.
b) The new income tax bill is expected to further simplify and rationalise the TDS rules. While the Budget 2024 and Budget 2025 have rationalised certain TDS provisions, there is a need to further rationalise the TDS provisions.
c) The new income tax bill is expected to clearly state the anti-abuse provisions. This is because the current Income Tax Act has several anti-abuse provisions that impact genuine transactions.
d) One of the features of the new income tax bill is to reduce litigation. It is expected that the new income tax bill will introduce new safe harbour rules, tax settlement schemes, introduction of newer dispute resolution mechanisms with shorter time-frames, etc.
e) To make the current Income Tax Act shorter, the new income tax bill will make the new tax rules more precise and objective to reduce the scope of multiple interpretations.
The new income tax bill, which will soon be tabled in the Parliament, will replace the existing Income Tax Act of 1961. According to media reports, Finance Minister Nirmala Sitharaman indicated that the new income tax bill will be presented in the Parliament during the Budget session and subsequently reviewed by the Standing Committee on Finance.
Further, Union Finance Secretary Tuhin Kanta Pandey has confirmed that the new legislation will feature concise sentences without proviso and explanations, whilst maintaining tax neutrality. He further added that the new income tax bill will not add any new tax or compliance burden to taxpayers.
The new income tax bill will incorporate all the tax-related changes announced in the Budget 2025, including income tax rates, slabs and tax deducted at source (TDS) provisions.
As announced in Budget 2025, the codification of the new income tax bill is from the lens of Nyaya rather than Danda, which is aimed at building the trust of the taxpayers. The new income tax bill will be built on the following foundations:
a) Simplification of language
b) Litigation reduction
c) Redundant/Obsolete provision
d) Complication reductions
It is important to note that the new income tax bill has come after Budget 2024 in July announced the review of the Income Tax Act, 1961. The review of the decades old Income Tax Act was announced to make the act simplified and easy to read for the common man.
On October 7, 2024, the Central Board of Direct Taxes (CBDT) announced the formation of an internal committee to review the Income Tax Act. The committee invited public input and suggestions on the four parameters:
a) Simplification of language, b) Litigation reduction, c) Compliance reduction and d) Redundant and obsolete provisions.
A webpage was enabled on the income tax e-filing portal to invite suggestions from the general public and tax experts. The link can be accessed here: https://eportal.incometax.gov.in/iec/foservices/#/pre-login/ita-comprehensive-review.
The link went live on October 6, 2024. The webpage can be accessed by entering their name and mobile number, followed up by a validation via OTP. According to the CBDT press release, “Suggestions by stakeholders/experts/public should specify the relevant provision of the Income-tax Act, 1961 or Income-tax Rules, 1962 (mentioning the specific section, sub-section, clause, rule, sub-rule, or form number), as the case may be, to which the suggestion relates under the aforementioned four categories.”
