Finance Minister Nirmala Sitharaman recently announced the impending presentation of the New Income Tax bill in the Parliament, slated for review by a parliamentary committee. Collaborating closely with the Reserve Bank of India (RBI) on economic matters such as inflation and growth, the government aims to streamline compliance and unify tax rates. Joining Sitharaman were RBI Governor Sanjay Malhotra and MoS Finance Pankaj Chaudhary, following the RBI MPC’s recent repo rate cut.
The Union Cabinet’s approval of the New Income Tax Bill signifies a significant shift from the current Income Tax Act of 1961. Prompted by the Union Budget 2024 in July, the review aims to simplify tax laws, enhancing clarity and accessibility for taxpayers. In her Budget 2025 speech on February 1, Sitharaman emphasized the bill’s essence of Nyaya, mirroring the Bharatiya Nyaya Sanhita’s simplicity in criminal law.
Anticipated to contain fewer provisions than the existing law, the New Income Tax Bill seeks to provide immediate tax reliefs without the need for frequent budget amendments. Tax expert Shefali Mundra of ClearTax highlights the bill’s potential to reduce litigation and offer greater tax certainty through simplified language and streamlined provisions.
Expected Changes in the New Income Tax Bill:
Simplified Residence Rule:
The rules for determining residential status are anticipated to be simplified under the new bill.
Simplified Tax Structure:
With nearly half the provisions of the current law, the new bill aims for a more straightforward tax structure.
Ease of Compliance:
Enhancing compliance for both taxpayers and tax authorities, the New Income Tax Bill seeks to streamline tax-related processes.
Benefits of the New Income Tax Bill:
Acknowledging the current Income Tax Act’s complexity, the Central Board of Direct Taxes (CBDT) has initiated a review committee to assess potential changes. By soliciting feedback from citizens via the income tax e-filing portal, the government aims to simplify tax laws, reducing errors and improving taxpayer understanding.
Mundra underscores the goal of making tax laws more accessible and understandable for taxpayers through the introduction of the New Income Tax Bill. By minimizing deductions and exemptions, streamlining tax laws, and aligning tax rates with global standards, the bill is projected to enhance compliance, reduce disputes, and attract domestic and foreign businesses to India.
