Nirmala Sitharaman tables new Income Tax Bill in Lok Sabha
Finance Minister Nirmala Sitharaman on Thursday introduced the new Income Tax Bill in the Lok Sabha, following cabinet approval. The proposed legislation is set to replace the Income Tax Act, 1961, while the Union government says it aims to modernize and simplify India’s tax structure.
While moving the Bill for introduction, Sitharaman urged Speaker Om Birla to refer the draft law to a select committee of the House, which will submit its report by the first day of the next session. She urged the Speaker to take a call on the proposed panel’s composition and rules. Despite opposition members challenging the Bill at the introduction stage, the House passed a motion by voice vote for its introduction.
The new Bill does not propose any additional taxes but seeks to streamline tax laws, reduce legal complexities, and ease compliance for taxpayers, said the finance minister. Earlier, the finance secretary confirmed that the revised framework would introduce shorter sentences, provisos, and explanations while ensuring that the law is 50% shorter than the current Act. A significant objective of the legislation is to reduce litigation.
Key aspects of the Bill include the introduction of a unified “tax year” concept, eliminating confusion between the assessment year and the financial year, although the financial year itself will remain unchanged, running from April 1 to March 31, the Bill states. The new legislation will also revise section numbers, making tax provisions more structured. For instance, Section 139, which currently deals with income tax return filing, is expected to be restructured, according to the document.
Despite recommendations from experts, residency laws will remain unchanged under the new Act, continuing to classify individuals as “ordinarily resident,” “non-ordinarily resident,” and “non-resident.” The revised Bill will expand to 23 chapters, 536 sections, and 16 schedules, offering a more structured approach to tax administration and compliance mechanisms.
The new legislation aims to simplify tax language by removing complex explanations and provisos, replacing them with clearer terms, says the document. Deductions, such as standard deductions and gratuity, will be consolidated under one section, and depreciation calculations for businesses will be made more straightforward, it claims.
TDS compliance will also be simplified, with all TDS-related sections consolidated under a single clause for easier understanding, says the new Bill. However, this may necessitate changes to forms and utilities once the law is implemented.
The existing deadlines for tax filing will remain unchanged, and there will be no alterations to the current income tax slabs or capital gains taxes, ensuring stability for taxpayers. Income categories will also be retained, but over 300 outdated provisions will be removed to streamline the framework.
If passed, the new tax system will come into effect from the financial year 2025-26, applying to taxpayers from the assessment year 2026-27. Experts anticipate that the new law will be implemented from April 1, 2026, with taxpayers continuing to follow the current Income Tax Act for FY 2025-26 and filings in March 2026.
