New Delhi:
Finance Minister Nirmala Sitharaman tabled the new income tax bill – which she had mentioned in her Budget speech on February 1, and which is expected to reduce the jargon in the Income-Tax Act of 1961, making it easier to understand and implement – in Parliament on Thursday.
However, as she rose to present the bill, some members of the opposition staged a walk-out and others lobbed fierce questions at her. The Congress’ Manish Tewari and the RSP’s NK Premchandran suggested the new tax bill is, in fact, more complicated than the old. Ms Sitharaman said the MPs were incorrect; she said the present law had over 800 sections whereas the proposed law had only 536.
Trinamool MP Saugata Roy then criticised the new bill as being “mechanical”, to which Ms Sitharaman shot back, “… substantial changes are being made. The number of words have come down by half… sections and chapters have been cut. It is in simple English…”
Those opposition members who remained then opposed the Bill – even at this stage – but the House passed the motion, via a voice vote, to table the proposed new law.
Ms Sitharaman then referred the bill to a joint parliamentary committee – which will examine the new tax proposals and make changes, if needed – before it is re-tabled in the House for passing.
The JPC is expected to submit its report on March 10, the first day of the second half of the Budget Session. This committee will be set up by Lok Sabha Speaker Om Birla.
Shortly after tabling the bill, Ms Sitharaman’s office tweeted, ” The new Income Tax Bill (2025) has been tabled in Parliament. The bill aims to simplify the language of the existing law as amended to date. (A copy of) the bill is available at our website… Our FAQs address common queries regarding objectives and the outcome of the simplification exercise…”
What Is New Income Tax Bill?
The new law will take effect from April 1, 2026. It will not, however, change existing tax slabs.
Among the proposed changes and amendments is the concept of a ‘tax year’, which will replace the simultaneous use of ‘financial year’, or FY, and ‘accounting year’, or AY. In other words, under current income tax laws, tax for income earned in 2023/24, for example, is paid in 2024/25.
The proposed change will see the introduction of a ‘tax year’, so tax on income earned in a year will be paid that year. It has also omitted redundant sections, like those about ‘fringe benefit tax’.
READ | Reader Friendly, Handy Tables For Calculation In New Income Tax Bill
Tables have been included for provisions relating to TDS, or tax deducted at source, ‘presumptive taxation’, salaries, and deductions for bad debt.
Overall, it tries to replace the 1961 Act, which critics had become voluminous due to amendments made over the past 60 years. Speaking this afternoon, Ms Sitharaman said, “The Income Tax Act was originally enacted in 1961 and came into effect in 1962.”
“At that time they had 298 sections. But, as time went by, more sections were added. And, as it stands today, there are 819… from that, we’re bringing it down to five,” she explained.\
Tax Proposals In Union Budget 2025
There were three major announcements linked to personal income tax in Ms Sitharaman’s February 1 budget. The first, and possibly the biggest, was increasing the tax rebate limit.
Starting from FY2025/26, individuals whose salary is up to Rs 12 lakh (Rs 12.75 lakh including standard deduction) will not pay tax. Ms Sitharaman also tweaked the tax slabs for the new regime, adding a 25 per cent bracket for salary within the Rs 20 lakh – to Rs 24 lakh category.
READ | Big Budget Boost For Middle Class: No Income Tax Up To Rs 12 Lakh
The tax proposals were cheered by Prime Minister Narendra Modi and members of the ruling BJP, and many political analysts believe, helped the saffron party script a big win in last week’s Delhi Assembly election; the BJP swept 48 of Delhi’s 70 seats to stop the AAP from winning a third successive term. The BJP, in two earlier elections combined, had won just 11 seats.
