The Minister of Finance, Nirmala Sitharaman, presented the new income tax invoice on Lok Sabha on Thursday, aimed at simplifying and in depth reorganizing the 1961 income tax law.
The existing law has been criticized for its complexity and difficulty so that ordinary taxpayers can navigate. The new bill proposed should have 23 chapters, 16 hours and approximately 536 clauses, a significant reduction compared to the previous law, which included 823 pages, 23 chapters, 14 hours and 298 sections.
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The bill will be referred to the parliamentary committee on the permanence of finance, which will begin its consultation process.
While presenting the bill, FM Sitharaman said: “The income tax law was initially promulgated in 1961 and entered into force in 1962. At that time, they only had 298 sections … But over time … Many more sections have been added. In the current state of things today, there are 819 sections. »»
She added: “We reduce income tax sections to 536. Substantial changes are made to the income tax bill, the chapters are being reduced.”
The deputy for the Manish Tiwari congress criticized the recently proposed income tax bill, declaring that it is more complex than the current law.
FM Sitharaman, in turn, defended the bill by stressing that the modifications are substantial and not only superficial and that the total number of words has been reduced in particular.
Tejasvi Surya, a member of the BJP, praised the income tax bill recently presented for its potential to completely revise the direct tax system of India, ultimately providing a more user -friendly, simplified and easily compliant framework.
The center said that the simplification exercise was guided by three basic principles:
> Textual and structural simplification for better clarity and consistency.
> No major change on tax policy to ensure continuity and certainty.
> No modification of tax rates, preserving predictability for taxpayers.
A three -stea approach has been adopted:
> Eliminate complex language to improve readability.
> Deletion of redundant and repetitive arrangements for better navigation.
> Reorganization of sections logically to facilitate reference ease.
Consultative approach and research
The government has ensured the general commitment of stakeholders, the taxpayers’ council, companies, industry associations and professional organizations. Out of 20,976 online suggestions received, the relevant suggestions were examined and incorporated, if possible. Consultations have taken place with industry experts and tax professionals and Simplification models in Australia and the United Kingdom have been studied for best practices.
Qualitative improvements
Simplified language, making the law more accessible.
Consolidation of modifications, reducing fragmentation.
Deletion of obsolete and redundant provisions for greater clarity.
Structural rationalization through tables and formulas for improving readability.
Preservation of existing tax principles, ensuring continuity while improving conviviality.
Here are the main strengths (based on the bill)
Among many changes, the bill can present the concept of “the taxation year” in clause 3 to replace the confusion between the “evaluation year” and “the previous year”, “the exercise »aimed at rationalizing the understanding of taxpayers.
Efforts have been made to simplify TDS compliance by consolidating all sections linked to TDS in a single clause with tables that are easy to read. The deductions of wages, including the standard deduction, the gratuity and collection of leave, are now conveniently tabulent in a single place in the new bill, eliminating the need to navigate in several sections and rules.
The new bill is devoid of explanations or useless clauses, which makes it more accessible and understandable. In addition, the overputization of the word “notwithstanding” in the 1961 income tax law was eliminated in the new bill and replaced by “irrespective” in most cases. The invoice offers concise sentences and incorporates tables and formulas to improve readability to readers.
If the bill is approved, the tax system updated should be implemented from financial year 2025-2026, which concerns taxpayers from the 2026-27 evaluation year.
The new income tax bill has also proposed virtual digital assets in the context of capital assets of the person evaluated, and includes various provisions such as taxes deducted at source (TDS), alleged tax rates and the evaluation times presented in a tabular format.
The income tax bill will soon be available to consult on the official Lok Sabha website. To access this bill, as well as others discussed in Lok Sabha, please visit Sansad.in/ls/legislation/bills.
The next income tax bill should be shorter 201 pages than the current income tax law, which results in a more concise and easily understandable document for taxpayers. Unlike the 1961 law on income tax of 823 pages bulky from 2024, the new rationalized bill will include 622 pages, offering a more user -friendly guide for individuals sailing on tax laws.
To mitigate confusion, the evaluation year will now be called the tax year. In addition, for newly established companies, the tax year will start from the date of their establishment, simplifying financial information processes.
The new bill also addresses long -standing controversies surrounding articles 44AD, 44AE and 44AA, which have been a discord among the professionals. To improve the clarity of the calculation of profits, the bill presents the concept of “alleged profit to have been really won”, providing a more precise framework to determine the taxable income.
The proposed bill includes updates to the structure, extends deadlines and provides incentives to digital transactions, while retaining familiar tax regulations. It also includes provisions aimed at providing reduction in tax audit for companies with a turnover of up to 10 crore which mainly uses digital payments. This change could have been easily integrated into the current act.
The upcoming bill will retain current deadlines to produce intact declarations and will not change income taxes or capital gains. This will offer taxpayers stability and insurance.
In addition, the bill does not suggest any adjustment in the categorization of income between different sources.
However, it aims to eliminate more than 300 obsolete provisions which are no longer relevant.
The new legislation should be implemented on April 1, 2026. Consequently, taxpayers will have to join the existing income tax law for financial year 2025-26 and documents until March 2026.
Budget session
The Lok Sabha was postponed until March 10, 2025. The Parliament should be recalled for the second phase of the budget session from March 10 to April 4, 2025.
