New income tax bill to be introduced next week: Sitharaman
What's the story
Finance Minister Nirmala Sitharaman has announced the introduction of a new income tax bill, which will be presented in Parliament next week.
The upcoming legislation, part of the Union Budget 2025, is aimed at simplifying compliance for individual taxpayers.
Sitharaman said this new law will be "simple to understand" and aims at reducing tax litigation.
Relief
Tax relief for India's working class
Apart from the new tax bill, Sitharaman has also announced a major tax relief for India's major population.
Under the new regime, no income tax will be charged on earnings up to ₹12 lakh.
This limit can be extended to ₹12.75 lakh when standard deductions are considered, giving a major financial relief to millions of Indians.
Reform
Overhaul of the Income Tax Act
The new direct tax code is likely to simplify existing income tax laws and cut down the length of the I-T Act of 1961 by a whopping 60%.
The current act, which includes personal and corporate taxes, as well as those on securities transactions, gifts, and wealth, has 23 chapters and 298 sections.
The Central Board of Direct Taxes (CBDT) has formed an internal committee to review this.
Changes
Public participation and potential changes
The government has sought public feedback on the new tax code, receiving around 7,000 suggestions till January.
The proposed Direct Tax Code (DTC) could do away with the concepts of financial year (FY) and accounting year (AY) to avoid confusion.
It may also impose a 5% tax on income from LIC policies, which were exempted under the 1961 law.
Other changes could include standardizing taxes on dividend income at 15%, and a fixed tax rate of 35% for high earners.
Audits and gains
Tax audits and capital gains
The DTC could also allow company secretaries and cost management accountants to carry out tax audits, a job that was previously limited to Chartered Accountants.
For capital gains, the new code could bring uniformity in taxation across asset classes.
The choice of opting between two tax regimes could be removed under the DTC, possibly making it easier for taxpayers.
Convenience
Sitharaman's commitment to taxpayer convenience
In her eighth budget presentation, Sitharaman reiterated the tax department's commitment to 'Trust First and Scrutinise Later.'
She highlighted several reforms implemented for taxpayer convenience, including faceless assessment and a taxpayer charter.
The Finance Minister said, "The government will introduce new Income Tax Bill next week in Parliament to take forward 'trust first, scrutinize later' concept."