Finance Minister Nirmala Sitharaman introduced the New Income Tax Bill in Parliament on Thursday, aiming to modernize and simplify the country’s outdated Income Tax Act of 1961. The move is expected to streamline tax laws, reduce litigation, and enhance clarity for taxpayers by eliminating redundancies and restructuring the legal framework for better comprehension.
The existing Income Tax Act, which has been in force for over six decades, has become increasingly complex due to frequent amendments. It currently consists of 47 chapters, 819 sections, 18 tables, and six formulae, totaling 512,535 words—making it difficult for taxpayers, businesses, and professionals to navigate. Dinesh Kanabar, CEO of Dhruva Advisors, highlighted that the Act had evolved into an intricate web of amendments, making compliance cumbersome. He emphasized that the new bill is a much-needed reform that removes redundant provisions and improves clarity, paving the way for a more efficient and litigation-free tax system.
The primary goal of the New Income Tax Bill is to remove convoluted language and make tax regulations more accessible. By simplifying terminology and restructuring provisions, the bill ensures better readability and understanding for both taxpayers and tax administrators. Chartered Accountant (Dr.) Suresh Surana noted that the reform was long overdue, as the complexity of the existing tax framework had contributed to a backlog of litigations at various appellate authorities. He also pointed out that the bill aligns with the government’s broader commitment to simplifying business regulations and promoting a “trust first, scrutinize later” approach in tax administration.
While presenting the Union Budget 2025, Sitharaman stated that the new bill significantly reduces the size of the current tax law—both in terms of chapters and word count—making it more direct and accessible. She added that this will enhance tax certainty and reduce legal disputes, ultimately benefiting both individual and corporate taxpayers.
One of the key changes introduced by the bill is the removal of repetitive provisions and unnecessary legal jargon. It also incorporates tables and formulae for enhanced readability, making the tax law more structured and user-friendly. Additionally, the bill replaces the terms ‘assessment year’ and ‘previous year’ with a new concept called ‘tax year,’ aimed at improving clarity for both domestic and foreign taxpayers. Dr. Surana noted that this change was expected and will provide greater certainty in understanding tax provisions and their applicability to specific financial years.
Beyond simplification, the bill seeks to minimize litigation and improve compliance. With clearer guidelines and reduced ambiguity, it is expected to lower the number of tax disputes and create a more predictable taxation environment. Kanabar emphasized that the bill is a crucial step toward making India’s tax framework globally competitive. As the government seeks input from various stakeholders, further refinements could be introduced to enhance efficiency and ease of compliance.
The introduction of the New Income Tax Bill marks a significant shift in India’s tax policy, prioritizing transparency, ease of understanding, and reduced bureaucratic hurdles. By modernizing the tax system, the government aims to foster a more taxpayer-friendly environment while ensuring efficient revenue collection and economic growth.
