There is a big update revealed regarding the Income Tax Bill. Union Finance Minister Nirmala Sitharaman recently dropped a major update while presenting the Budget for 2025-26 on February 1. She announced that a new Income Tax Bill will be introduced in Parliament next week, set to replace the Income Tax Act of 1961. The goal? To simplify and clarify the income tax process. This is a significant shift, as the current law has been in place for nearly six decades. So, what can we expect from this new bill? Let’s dive into the details.
What might the new tax bill include?
Finance Minister Nirmala Sitharaman is gearing up to unveil a new Income Tax Bill next week. Here are some potential changes we could see:
1. Clearer language and fewer rules: This should make it easier for taxpayers to grasp.
2. Emphasis on digital processes: Tax filing could go fully online.
3. Less litigation: Steps will be taken to minimize legal conflicts.
4. A unified ‘tax year’: The assessment year and financial year might merge into one.
5. Fewer deductions and exemptions: The tax system could be streamlined for simplicity.
6. 15% tax on dividend income: This could help level the playing field across income brackets.
7. 35% standard tax for high earners: This might come from eliminating the current surcharge.
8. Easier capital gains tax: There could be a consistent tax rate for various assets.
9. The government states that this new law will replace the 63-year-old Income Tax Act of 1961, with amendments possible based on taxpayer feedback. It’s worth noting that the new tax regime was introduced under the 1961 Act back in 2020.
A change after 63 years
The existing Income Tax Act took effect on April 1, 1962. If the new Income Tax Bill becomes law, it will mark a significant transformation in the country’s tax framework after 63 years. However, discussions about the new Income Tax Bill have been ongoing.