I-T Bill introduced in Parliament: When will it become Act?
What's the story
In a bid to simplify and modernize India's tax system, Finance Minister Nirmala Sitharaman has introduced a new Income Tax Bill in the Lok Sabha.
The proposed legislation intends to replace the current Income Tax Act of 1961.
It aims to minimize legal complexities, ease taxpayer compliance, and cut the current law's length by nearly half.
But when will it become an Act and come into effect?
Simplification focus
First, let's go through the highlights of 2025 I-T Bill
The new Income Tax Bill isn't aimed at introducing new taxes but simplifying existing tax laws.
The finance secretary confirmed that the focus will be on reducing legal complexities and making compliance easier for taxpayers.
The proposed legislation will employ simpler language, shorter sentences, and fewer provisos and explanations.
This is expected to make the law more accessible to taxpayers and reduce litigation.
Penalty reduction
New bill may introduce lower penalties for certain offenses
The new Income Tax Bill could also bring lower penalties for some offenses, making the tax system more taxpayer-friendly.
The existing Act, which runs into 298 sections across 23 chapters and deals with various taxes including personal income tax and corporate taxes, will be replaced by this simplified version.
The proposed legislation is likely to eliminate irrelevant amendments and sections and use clear language taxpayers can understand without professional tax consultation.
Bill to Act
When will it become an Act?
After today's presentation, the Bill has been sent to the Standing Committee on Finance for review. The committee is expected to submit its report soon.
Following that, the Bill will be debated in Parliament, where amendments may be proposed and voted on. If both the Lok Sabha and Rajya Sabha approve it, the Bill moves forward.
It then requires the President's assent to become law. Once approved, it will be published in the official gazette and become an Act.
Implementation timeline
New tax system to take effect from FY2025-26
Even after becoming an Act, it may not be implemented immediately. According to reports, the new income tax reforms will come into effect on April 1, 2026 (FY2025-2026).
The bill also proposes to replace technical terms like "assessment year" and "previous year" with "tax year" for easier understanding.
Sitharaman told the House that the new bill will reduce income tax sections to 536, stressing this isn't a mechanical change but a substantial one aimed at simplifying compliance.