Union Cabinet Set to Approve New Income Tax Bill on February 7
The Union Cabinet is gearing up to give the green light to the new Income Tax Bill on Friday, February 7, paving the way for its potential introduction in the Lok Sabha early next week. According to sources within the government who spoke with Business Today, the primary goal of this new legislation is to simplify and streamline the tax process, effectively replacing the current Income Tax Act of 1961.
Budget Presentation Sets the Stage for Change
During her Budget presentation on February 1, 2025, Union Finance Minister Nirmala Sitharaman made a significant announcement regarding the upcoming Income Tax Bill. This presentation marked the kickoff of the process to replace a law that has been in place for nearly six decades.
The Income Tax Bill is Slated for the Fiscal Year 2025-26
Scheduled to come into effect for the fiscal year 2025-26 and applicable from the assessment Year 2026-27, the new Income Tax Bill is poised to usher in a modern era of taxation. As per the budget announcement on February 1, 2025, this legislation is set to revamp the existing system, which has remained largely unchanged for over sixty years.
A Look Back at the Current Tax Framework
The Income Tax Act of 1961 has withstood the test of time, composed of 298 sections and 23 chapters that have seen numerous amendments and revisions over the years. Each Union Budget has brought about new changes, shaping the tax landscape into a complex web of regulations.
Expert Insights and Taxpayer Feedback
Finance Minister Sitharaman emphasized the government’s commitment to taxpayer convenience, highlighting reforms such as faceless assessment, taxpayers charter, faster returns, and the Vivad se Vishwas scheme. She reiterated the tax department’s dedication to “trust first, scrutinize later” and announced the imminent introduction of the new income tax bill.
Transition to a New Tax Regime
The government’s decision to replace the decades-old Income Tax Act with a new law stems from feedback from taxpayers. With the new regime set to take effect, CBDT Chairman Ravi Agarwal expressed confidence in the transition process. With the majority of taxpayers already onboard, the government aims to simplify tax compliance and reduce litigation through this new legislation.
Looking Ahead: A Simplified Tax Landscape
Chairman Agarwal encouraged industry stakeholders to provide valuable input on the new Bill, which was crafted in just six months with a focus on clarity and simplicity. The goal is to ensure that the new legislation is easy to understand for both taxpayers and tax administrators, fostering tax certainty and minimizing disputes.
Closing Thoughts and Increased Revenue
Over the past three years, the updated I-T returns have witnessed a surge, resulting in a substantial increase in revenue. With approximately 90 lakh updated I-T returns filed, the government has seen an uptick of around Rs 8,500 crore in revenue, underscoring the positive impact of tax reforms.
As the nation prepares for this significant shift in taxation, the impending approval of the new Income Tax Bill signals a new chapter in India’s tax landscape. With a focus on simplicity, clarity, and efficiency, this legislation is poised to transform the way taxes are paid and administered, setting the stage for a more transparent and taxpayer-friendly system.
