The Union Budget for 2025 was presented by Finance Minister, Nirmala Sitharaman in the Parliament on February 1. Sitharaman mentioned in her address that a ‘New Income Tax Bill’ will be presented soon.
The New Income Tax Bill is likely to be tabled in the Parliament this week. The New Bill is expected to replace the sixty-year-old Income Tax Act. Once the bill is tabled in the Parliament, it will likely be sent to the Standing Committee on Finance.
Sitharaman mentioned in her Budget speech that the new bill is aimed at simplifying the laws of taxation in India. The bill is also likely to reduce litigation and remove vague and ambiguous parts of the Income Tax Act, 1961. With the introduction of the new bill, taxpayers may have an easier tax-filing process which in turn can increase compliance with tax laws.
Sameer Gogia, Executive Director-Tax at Deloitte told Outlook Money that with the introduction of the new bill, the number of pages and the number of sections in the Income Tax Act may be reduced to half. He added that presently the Income Tax bill has over 470 sections. He also added that the new bill will have easier language.
“I think it'll be half the sections and the pages will be reduced. We have more than 470 sections which will be reduced to half and the bill may have easy language for people to understand,” Gogia said.
Earlier on February 7, the Union Cabinet approved the new income tax bill. Apart from simplifying tax-norms, it is also anticipated that the new bill will not have provisos and explanations or long sentences. However, at present the exact time at which the bill will be tabled and the date from which it will come into effect are not known.
Gogia said that the larger aim of the bill is to remove sections of the Income Tax bill which have become defunct in the past six decades since it was passed. He added that presently the bill is extremely complicated because of the high number of provisos present for every law which make understanding law a tedious task for common people and people who reside outside India.
“I think the larger aim is that there are so many sections which have become defunct. It has become so complicated that in one section you have 15, 20, 50, around 50 provisos and explanations so for a layman to understand or anybody from sitting outside India also it is very difficult to understand the law. They want to simplify the law,” Gogia said.
Notably the first leg of the ongoing budget session ends on February 13, 2025. After the end of the current session, a new session will reconvene on March 10.
As a part of her Budget 2024 address, Sitharaman announced that a review of the Income Tax Act, 1961 would be conducted. The Central Board of Direct Taxes urged active participation in the formulation of the bill from various stakeholders. The CBDT also formed an internal committee to address this issue.
Diverse stakeholders such as taxpayers, financial experts and common citizens were asked to share their suggestions on the existing Income Tax Act. The suggestions were to be made in four categories: simplification of language, litigation reduction, compliance reduction, and deletion of redundant and obsolete provisions. Additionally, a webpage was also created on the income tax e-filing website on October 6, 2024, for submitting the suggestions.
Gogia said that while the government is undertaking several measures to increase tax compliance, the bill may also have some provisions aimed at increasing reporting and compliance for taxpayers.
“I think for compliance there are other mechanisms also available which the government is activating, but let's see if there are certain provisions in the act which may ask people to do more compliances or reporting which in turn may increase the compliance,” Gogia said.
Gogia added that it was unlikely that the government would remove any significant exemptions or deductions. However, he added that it is expected that tax evasion will become harder once the bill is passed but tax planning avenues for professionals will remain.
“They may lose out on tax evasion, but tax planning or avenues for professionals will still remain,” Gogia noted.
