Finance Minister Nirmala Sitharaman is set to table the draft of the new Income Tax Bill in Parliament on Thursday, February 13, 2025. This landmark legislation aims to replace the existing Income Tax Act of 1961 with a more modern, simplified, and efficient tax framework. The proposed bill is expected to bring much-needed clarity to tax laws, making them more comprehensible for taxpayers and reducing the scope for litigation.
One of the primary objectives of the new tax bill is to simplify the existing provisions, which have often been criticized as complex and difficult for the average taxpayer to navigate. The new bill aims to condense the current tax law, reducing the number of chapters and sections while retaining all necessary provisions in a more concise and accessible manner. By eliminating redundant and obsolete clauses, the government hopes to streamline tax compliance and improve ease of doing business.
A significant change introduced in the new bill is the replacement of the terms ‘Previous Year’ and ‘Assessment Year’ with ‘Tax Year.’ The ‘Tax Year’ will be defined as a 12-month period running from April 1 to March 31, aligning with India’s financial year. This change is expected to remove unnecessary confusion and make tax filing more straightforward for individuals and businesses alike.
The bill also proposes a new income tax structure with revised slabs aimed at benefiting the middle class. Under the revised system, individuals earning up to ₹4 lakh annually will not be required to pay any income tax. The new tax brackets are structured as follows:
- Income up to ₹4 lakh: No tax
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
Additionally, the standard deduction for salaried individuals has been increased from ₹50,000 to ₹75,000, which will further reduce taxable income. As a result of these changes, individuals earning up to ₹12.75 lakh annually may not be required to pay income tax, depending on applicable deductions and exemptions.
The government has also placed emphasis on improving tax administration and ensuring a smoother refund process. The new bill is expected to include measures to reduce delays in tax refunds and enhance transparency in tax assessments. By leveraging technology and automation, the government aims to make tax compliance easier and reduce the need for physical intervention in tax matters.
Another key aspect of the bill is the expected extension of the deadline for filing income tax returns. This will provide taxpayers with more time to ensure accurate filings and reduce last-minute rushes. The bill is also likely to include provisions to curb tax evasion through stricter regulations and better monitoring mechanisms.
If enacted, the new Income Tax Act is expected to come into effect from April 1, 2026. This transition period will allow taxpayers, businesses, and tax administrators ample time to understand the new provisions and adapt accordingly.
The new Income Tax Bill represents a major step towards making India’s tax system more efficient, taxpayer-friendly, and aligned with global best practices. By simplifying language, reducing litigation, and making compliance easier, the government hopes to create a tax environment that fosters growth while ensuring fairness and transparency.
