FM Sitharaman likely to table new Income Tax Bill this week: What proposed law holds for taxpayers

Finance Minister Nirmala Sitharaman is likely to introduce the new Income Tax Bill, which will replace the six-decade-old Income Tax Act, 1961, in the Lok Sabha this week.

The new legislation aims to simplify the existing tax framework, reduce ambiguities, and minimise litigation. The government intends to make the law more concise, clear, and easier for taxpayers to understand.

The Bill follows Sitharaman's announcement in the July 2024 Budget regarding a comprehensive review of the Income Tax Act, 1961.

The Central Board of Direct Taxes (CBDT) had set up an internal committee, along with 22 specialised sub-committees, to review the Act and suggest changes. The focus has been on reducing legal complexities, eliminating outdated provisions, and enhancing tax certainty.

Finance Secretary Tuhin Kanta Pandey indicated that the new Bill would avoid complex legal jargon, such as provisos and lengthy explanations, making it tax-neutral and user-friendly.

Why the new law is needed

The Income Tax Act, 1961, was enacted over six decades ago when India faced different socio-economic challenges. Over time, it has undergone numerous amendments to keep pace with changing economic conditions, technological advancements, and evolving business models. The current Act contains around 298 sections and 23 chapters, with many provisions either obsolete or redundant.

With the advent of digital tax filing, pre-filled income tax returns, and data integration from multiple sources such as TDS filings and property transactions, the existing law has become cumbersome. The new Bill aims to streamline these processes, making compliance easier for individuals and businesses.

Key features of the proposed Bill:

The proposed law will also consolidate changes introduced in recent years, including those related to the new tax regime implemented in 2022.