New Income Tax Bill: The Union Cabinet has approved a new Income Tax Bill, aiming to simplify tax laws and provide greater clarity for taxpayers. This move is expected to modernise the tax system, reduce litigation, and encourage compliance. The bill, which replaces the Income Tax Act of 1961, will be presented in Parliament during the ongoing Budget 2025 session, most probably on Monday. Here’s everything you need to know about the new Income Tax Bill and its impact.
Why a New Income Tax Bill?
The existing Income Tax Act, 1961, has undergone numerous amendments over the decades, making it complex and difficult for taxpayers to navigate. The new Income Tax Bill intends to:
– Simplify tax provisions with clearer language
– Reduce legal disputes by removing ambiguities
– Make compliance easier for individuals and businesses
– Promote a trust-based tax system, where scrutiny comes later
Expectations From the New Income Tax Bill
1. Simplified Tax Structure
The new bill is expected to cut the length of the existing law by nearly half, making it easier to understand. The language will be more direct and unambiguous, reducing the chances of misinterpretation.
2. No Need For Budget For Tax Relief
A major highlight of the new tax bill is that it is likely to have a unique feature that will eliminate the need to wait for the budget for some kind of income tax reliefs or amend the Income Tax Act.
According to reports, some provisions of the new income tax bill have been proposed that will allow the government to modify the limits or amounts of deductions/rebates through executive orders only.
3. Focus on Digital and Paperless Taxation
The bill is expected to emphasise digital tax filing and a paperless assessment system to minimise human intervention. This aligns with the government’s faceless assessment initiative to reduce corruption and promote transparency.
4. Strengthening Taxpayer Rights
The new tax bill is likely to focus on a ‘trust-first’ approach, meaning taxpayers will not be subjected to scrutiny unless there is a clear case of non-compliance. This is aimed at reducing harassment and litigation.
How Will This Impact You?
– Salaried Individuals: A simplified structure means easier tax filing and likely lower taxes for the middle class.
– Businesses: Fewer legal hurdles and a **clearer tax code** make compliance easier.
Why Is Govt Bringing In New Income Tax Bill?
The new legislation, also known as the Direct Tax Code, is aimed at revamp the existing income tax structure to simplify the provisions. It will replace the existing Income Tax Act, 1961.
During her Budget Speech 2025, Finance Minister Nirmala Sitharaman said the bill would embody the same philosophy of Nyaya that was at the heart of Bharatiya Nyaya Sanhita. The law had repealed the Indian Penal Code of 1860 from July 2024.
In the Budget Speech, she said, “I am happy to inform this August House and the country that the new income-tax bill will carry forward the same spirit of “Nyaya". The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation."
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