New Income Tax Bill Likely to be Introduced in Parliament Next Week
The revised tax structure is expected to come into effect from the financial year 2025-26, impacting taxpayers in the assessment year 2026-27.
Finance Minister Nirmala Sitharaman announced on Saturday that the new Income Tax Bill, set to replace the six-decade-old Income Tax Act, is likely to be presented in the Lok Sabha next week.
Following its introduction in the Lower House, the bill will be referred to a parliamentary standing committee for review. The Union Cabinet, approved the bill on Friday.
"During a media briefing after her post-Budget meeting with the RBI’s central board of directors, Sitharaman stated, 'The Cabinet approved the New Income Tax proposal yesterday. I hope to present it in the Lok Sabha next week. Following that, it will be sent to a committee for further review.'"
After the committee presents its recommendations, the bill will be sent back to the Cabinet for final approval before being reintroduced in Parliament.
It is worth noting that the Finance Minister initially announced a comprehensive review of the Income Tax Act, 1961, during the July 2024 Budget. In her Budget 2025 speech on February 1, she reiterated that the new Income Tax Bill would be tabled in Parliament ‘next week.’ The bill aims to simplify tax provisions, ensuring clarity for taxpayers and tax authorities while enhancing tax certainty and reducing litigation.
Emphasizing taxation reforms as a key component of India’s developmental agenda (Viksit Bharat), Sitharaman highlighted that the new bill aligns with the principle of ‘Nyaya’ (justice). “The new tax system will be easier to understand for both taxpayers and administrators, fostering tax certainty and reducing disputes,” she explained.
Key Features
The New Income Tax Bill may include the following key provisions:
No Additional Taxes: The bill will not introduce any new taxes but will focus on simplifying existing tax laws.
Streamlined Legislation: The new law is expected to be 50% shorter than the current one, eliminating redundant provisions and reducing complexity.
Simplified Language: Legal terminology will be made more accessible, enabling taxpayers to understand the provisions easily.
Reduced Litigation: By clarifying exceptions in anti-abuse provisions and removing obsolete clauses, the new bill aims to minimize tax disputes.
Lower Penalties: Certain offences may attract lower penalties, making the tax system more taxpayer-friendly.
Expected Changes in the New Tax Bill
Unified Tax Regime: Currently, different tax structures apply to individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and companies. The new bill aims to consolidate these into a single framework, reducing compliance burdens and ensuring greater tax clarity.
Enhanced Ease of Doing Business: The bill is likely to introduce specific exceptions to anti-abuse provisions, preventing undue scrutiny of genuine transactions.
Rationalization of Withholding Tax: A simplified withholding tax structure may be introduced to streamline compliance for businesses and individuals.
Elimination of Redundant Provisions: Outdated and inapplicable clauses will be removed to ensure a more precise and effective tax law.
The revised tax system is scheduled for implementation from the financial year 2025-26, impacting taxpayers in the assessment year 2026-27. Through these reforms, the government aims to establish a more transparent and efficient tax framework, minimizing disputes and improving compliance for businesses and individuals alike.
Source :financialexpress.com