New Delhi: Finance Minister Nirmala Sitharaman introduced the new Income Tax Bill in Parliament on Thursday, aiming to simplify the 1961 Income Tax Act and make it more user-friendly.
However, as she presented the bill, several opposition members staged a walk-out, while others, including Congress’ Manish Tewari and RSP’s NK Premchandran, raised pointed questions, claiming the new bill was more complicated than the existing one.
Trinamool MP Saugata Roy also criticized the bill, calling it “mechanical.”
In response, Sitharaman refuted the claims, pointing out that the current law has over 800 sections, while the proposed one only has 536. The Finance Ministry, in a post on X (formerly Twitter), emphasized that the new tax system is built on five core principles designed to make it ‘S.I.M.P.L.E’ for citizens to follow and enforce.
The five principles were outlined as follows:
- Streamlined structure and language
- Integrated and concise
- Minimized litigation
- Practical and transparent
- Learn and adapt
- Efficient tax reforms
She also highlighted that “substantial changes” had been made to the existing law.
“The number of words has been reduced by half… sections and chapters have been cut,” she explained.
The new bill was then put to a voice vote, with opposition members who remained in the chamber opposing its introduction at this stage. However, the new income tax proposals were, as expected, passed.
Sitharaman then referred the bill to a joint parliamentary committee (JPC) to review the proposals and suggest changes, if necessary, before it is re-tabled in the House for final approval.
The JPC is expected to submit its report on March 10, the first day of the second half of the Budget Session. The committee will be established by Lok Sabha Speaker Om Birla.
After tabling the bill, Sitharaman’s office tweeted, “The new Income Tax Bill has been tabled. The bill aims to simplify the language of the existing law as amended to date. A copy of the bill is available on our website… Our FAQs address common queries regarding objectives and outcomes.”
What Is The New Income Tax Bill?
The new law is set to take effect from April 1, 2026, but it will not alter the existing tax slabs.
Among the proposed changes is the introduction of a ‘tax year’, replacing the current dual use of ‘financial year’ (FY) and ‘accounting year’ (AY). Currently, tax for income earned in one year (e.g., 2023/24) is paid in the following year (2024/25). Under the new proposal, tax on income will be paid in the same year it is earned.
Additionally, redundant sections, such as those related to ‘fringe benefit tax’, have been removed.
Tables have been included to outline provisions related to TDS (Tax Deducted at Source), presumptive taxation, salaries, and deductions for bad debt.
Overall, the new bill aims to replace the 1961 Income Tax Act, which critics say had become overly complex due to numerous amendments over the past 60 years. Sitharaman explained, “The Income Tax Act was originally enacted in 1961 and came into effect in 1962.”
“At that time, it had 298 sections. But over the years, more sections were added. Today, it stands at 819… and we’re reducing it to just five,” she added.
Tax Proposals in Union Budget 2025
In her February 1 budget, Sitharaman made three major announcements related to personal income tax. The most significant of these was the increase in the tax rebate limit.
Starting from FY2025/26, individuals with a salary of up to Rs 12 lakh (Rs 12.75 lakh including standard deduction) will be exempt from paying tax. Additionally, she adjusted the tax slabs for the new regime, introducing a 25% tax bracket for salaries in the Rs 20 lakh to Rs 24 lakh range.
The tax proposals were warmly welcomed by Prime Minister Narendra Modi and members of the ruling BJP. Many political analysts believe the move played a key role in securing a major victory for the party in last week’s Delhi Assembly election. The BJP clinched 48 out of 70 seats, ending the AAP’s bid for a third consecutive term. In contrast, the BJP had only won 11 seats in the previous two elections combined.
