Finance Minister Nirmala Sitharaman tabled the new Income Tax Bill in Parliament on Thursday. The bill, which she had mentioned in her Budget speech on February 1, is expected to reduce the jargon in the Income-Tax Act of 1961, making it easier to understand and implement.
As Sitharaman rose to present the bill, some members of the opposition staged a walkout while others raised concerns.
Congress MP Manish Tewari and RSP MP NK Premchandran suggested that the new tax bill is more complicated than the existing law. Sitharaman rejected the claim, stating that the present law contained over 800 sections, whereas the proposed legislation had only 536.
Trinamool Congress MP Saugata Roy criticised the bill as being “mechanical”, to which Sitharaman responded, “… substantial changes are being made. The number of words have come down by half… sections and chapters have been cut. It is in simple English…”
Opposition members who remained in the House opposed the bill at this stage, but the motion to table the proposed new law was passed via a voice vote. Sitharaman then referred the bill to a joint parliamentary committee, which will examine the tax proposals and suggest changes if needed before it is reintroduced for passing.
The joint parliamentary committee is expected to submit its report on March 10, the first day of the second half of the Budget Session. The committee will be constituted by Lok Sabha Speaker Om Birla.
Shortly after tabling the bill, Sitharaman’s office tweeted, “The new Income Tax Bill (2025) has been tabled in Parliament. The bill aims to simplify the language of the existing law as amended to date. (A copy of) the bill is available at our website… Our FAQs address common queries regarding objectives and the outcome of the simplification exercise…”
The new law is set to take effect from April 1, 2026, and will not alter existing tax slabs.
Among the proposed changes is the introduction of a ‘tax year’ to replace the concurrent use of ‘financial year’ (FY) and ‘assessment year’ (AY). Under current income tax laws, tax for income earned in 2023/24 is paid in 2024/25.
The proposed change will mean tax on income earned in a particular year will be paid in the same year. Redundant sections, such as those related to ‘fringe benefit tax’, have been omitted. Tables have been included for provisions on tax deducted at source (TDS), presumptive taxation, salaries, and deductions for bad debt.
Sitharaman stated, “The Income Tax Act was originally enacted in 1961 and came into effect in 1962. At that time, it had 298 sections. But, as time went by, more sections were added. And, as it stands today, there are 819… from that, we’re bringing it down to five.”
The tax proposals in the Union Budget 2025 included three major announcements concerning personal income tax. The most significant was an increase in the tax rebate limit. Starting from FY2025/26, individuals earning up to Rs 12 lakh (Rs 12.75 lakh including the standard deduction) will not pay tax.
Sitharaman also introduced a 25 per cent tax bracket for incomes between Rs 20 lakh and Rs 24 lakh.
The tax proposals were welcomed by Prime Minister Narendra Modi and members of the ruling BJP. Political analysts believe these announcements contributed to the BJP’s strong performance in last week’s Delhi Assembly election, where the party won 48 out of 70 seats, preventing the Aam Aadmi Party (AAP) from securing a third consecutive term. In the previous two elections combined, the BJP had won just 11 seats.
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