The government is likely to introduce a new Income Tax Bill in the upcoming budget session of Parliament, which aims to simplify the existing Income Tax law, make it understandable and reduce the number of pages by about 60 per cent. Finance Minister Nirmala Sitharaman had announced a comprehensive review of the six-decade-old Income Tax Act, 1961 within six months in her budget in July.
A source said, “The new income tax law will be introduced in the budget session of Parliament. This will be a new law, not an amendment to the existing Act. Currently, the draft of the law is being considered by the Law Ministry and is likely to be introduced in Parliament in the second half of the budget session.” The budget session will run from January 31 to April 4. The first part (January 31-February 13) will begin with President Draupadi Murmu addressing the joint sitting of the Lok Sabha and the Rajya Sabha, followed by the presentation of the Economic Survey for 2024-25. The Union Budget for 2025-26 will be presented on February 1. Parliament will resume on March 10 and run until April 4.
Pursuant to the Budget announcement by Sitharaman for a comprehensive review of the Income Tax Act, 1961, CBDT had constituted an internal committee to oversee the review and make the Act concise, clear and easy to understand, thereby reducing disputes, litigation. And taxpayers will get more tax certainty. Also, 22 special sub-committees were set up to review various aspects of the Act.
Suggestions and inputs were sought from the public in four categories – simplification of language, reduction in litigation, lack of compliance and unnecessary/obsolete provisions. The Income Tax Department has received 6,500 suggestions from stakeholders on the review of the Act.
Sources said the provisions and chapters will be significantly reduced and obsolete provisions will be removed. The Income Tax Act, 1961, which deals with the imposition of direct taxes – other than personal income tax, corporate tax, securities transaction tax, gift and wealth tax – currently has about 298 sections and 23 chapters.
“The effort is to reduce the quantity by about 60 percent,” the source said. Sitharaman had said in her July 2024 budget speech that the objective of the review is to make the Act concise, clear, easy to read and understand. This will reduce disputes and litigation, thereby providing tax certainty to taxpayers. This will also reduce the demand entangled in litigation. He had said that it is proposed to complete it in six months.
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