India is all set to have a new Income Tax Act. Here is what is new.

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Ziraat Times
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Ziraat Times Team Report

Srinagar: Following its introduction in the Budget Session, the new Income Tax Bill is all set to become a law after its likely passage in the Monsoon session of the Parliament. The Bill is currently being examined by the Select Committee of Parliament.

The Bill is expected to be taken up for consideration during the Monsoon Session, with the new Income Tax Act likely to be passed soon thereafter. The government has stated that the new Bill aims to simplify language, eliminate redundancy, and streamline procedures and processes to enhance the taxpayer experience.

The new Bill, once enacted, will replace the Income Tax Act, 1961. The current Income-tax Act was enacted in 1961 and came into existence with effect from April 1, 1962. It has been amended nearly 65 times with more than 4,000 amendments,” she said, justifying the need for a new Bill.

What is new in the bill?

After the Bill was introduced in February, in a detailed frequently asked questions (FAQ), the Finance Ministry said that it proposes to eliminate redundant provisions, reducing its length by nearly half. The drafting style is straightforward and clear, making the provisions easier to understand. This minimises cross-references and conflict by aggregating all applicable provisions related to a single scenario in one place.

While the 1961 Act contains numerous cross-references to sections, sub-sections, clauses, sub-clauses, items and sub-items, making the provisions challenging to interpret, the new Bill adopts a simplified reference system, allowing provisions to be cited by simply mentioning the section. For instance, section 133 (1)(b)(ii) in the new Bill would indicate sub-clause (ii) of clause (b) of sub-section (1) of section 133 in the existing Act.

A significant aspect of the Bill is the elimination of the concepts of ‘previous year’ and ‘assessment year’ and the use of just ‘tax year’. Prior to 1989, the concept of ‘previous year’ and ‘assessment year’ was introduced because taxpayers could have different twelve-month previous years for each source of income. From April 1, 1989, the previous year was aligned to a financial year in all cases.

Meanwhile, he Central Board of Direct Taxes (CBDT) has set in motion a detailed implementation program. According to the action plan for fiscal year 2025-26, the board aims to train at least half of its workforce by the end of March.

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