Budget 2025:The Indian government is set to introduce a new Income Tax Bill in the Parliament during the Budget Session 2025, with the aim of simplifying the existing tax laws. This move marks a significant step in overhauling the decades-old Income Tax Act, 1961, making it more concise and user-friendly. Here’s everything we know so far about this important development.
Budget Session Timeline and Key Highlights
The Budget Session 2025 will be held from January 31 to April 4, split into two parts:
- First Part (January 31 – February 13):
- The session will commence with President Droupadi Murmu addressing the joint sitting of Lok Sabha and Rajya Sabha.
- The Economic Survey for 2024-25 will be presented.
- The Union Budget for 2025-26 will be tabled on February 1.
- Second Part (March 10 – April 4):
- The second phase will focus on detailed discussions and legislative business, including the potential introduction of the new Income Tax Bill.
A Complete Revamp, Not an Amendment
Unlike amendments to the existing Income Tax Act, the government plans to introduce an entirely new law. Sources indicate that the draft of the new Income Tax Bill is currently under review by the Law Ministry. The bill is expected to be tabled in the second part of the Budget Session.
The primary goal is to:
- Simplify the language of the Income Tax laws.
- Reduce the number of provisions and chapters by approximately 60%.
- Eliminate outdated and redundant provisions.
Steps Taken for Review and Drafting
In July 2024, Finance Minister Nirmala Sitharaman announced the need for a comprehensive review of the Income Tax Act, 1961. Following this:
- The Central Board of Direct Taxes (CBDT) formed an internal committee to oversee the review process.
- A total of 22 specialized sub-committees were created to examine different aspects of the law.
- Public suggestions were invited across four key categories:
- Simplification of language.
- Reduction in litigation.
- Simplification of compliance.
- Removal of obsolete provisions.
Over 6,500 suggestions were received from stakeholders, reflecting a high level of public interest in reforming the tax system.
Expected Features of the New Income Tax Law
The revised Income Tax law will focus on:
- Simplification: Making provisions easier to read and understand for taxpayers.
- Conciseness: Reducing the number of sections from the current 298 sections across 23 chapters by nearly 60%.
- Tax Certainty: Addressing issues to reduce litigation and provide clarity for taxpayers.
- Modernization: Removing provisions that are no longer relevant in today’s context.
Significance for Taxpayers
This revamp aims to streamline the tax compliance process for individuals and businesses. Key expected benefits include:
- Reduced ambiguity in tax provisions.
- Lower compliance burden.
- Faster resolution of disputes.
- Enhanced ease of doing business in India.
The move is also anticipated to improve tax certainty, thereby encouraging voluntary compliance and boosting revenue collections.
Finance Minister’s Statement on the Initiative
In her Budget 2024 speech, Finance Minister Nirmala Sitharaman emphasized that the objective of the review is to make the Income Tax Act:
- Brief and clear.
- Easier to interpret for taxpayers.
- Efficient in resolving disputes.
The proposal for the revamped law is expected to reduce pending litigations and disputes, offering much-needed relief to taxpayers.
Why Is the Overhaul Necessary?
The Income Tax Act, 1961, formulated over six decades ago, has undergone numerous amendments over the years, resulting in complex and voluminous legislation. Experts believe a new law is essential to:
- Address inconsistencies in the current law.
- Adapt to modern economic and digital realities.
- Enhance India’s tax administration system.
Conclusion
The introduction of the new Income Tax Bill during Budget Session 2025 could be a game-changer for India’s tax system. By simplifying compliance and reducing litigation, the government aims to create a more taxpayer-friendly environment, ultimately boosting economic growth.
Stay tuned for further updates on the Budget Session and the unveiling of this landmark legislation!
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