Taxpayers in India are set to experience a significant shift as the Union Cabinet, led by Prime Minister Narendra Modi, approved the new Income Tax Bill on February 7, 2025. This bill aims to replace the existing six-decade-old Income Tax Act, introducing a modernized tax framework.
A Simpler, More Transparent Tax System
The newly approved bill will remove outdated amendments and complex legal jargon, making tax laws easier to understand—even for those without expert guidance. The focus is on reducing litigation and eliminating unnecessary legal disputes, ensuring smoother compliance for taxpayers.
Next Steps: Parliamentary Approval
The bill will now be presented in Parliament next week and subsequently reviewed by the Standing Committee on Finance. The first phase of the ongoing budget session ends on February 13, with the second phase resuming from March 10 to April 4, 2025.
Why Is a New Tax Bill Needed?
India’s current Income Tax Act dates back to 1961, an era vastly different from today’s economic landscape. Over time, numerous amendments have been made to accommodate changes in technology, business practices, and income generation. However, instead of patching up an outdated system, the government has opted for a complete overhaul to align tax laws with modern socio-economic realities.
Will Tax Slabs Change?
The new bill primarily focuses on simplifying tax compliance and legal language rather than altering tax slabs. Tax rate adjustments typically happen through the Finance Act, meaning existing income tax slabs are likely to remain unchanged for now.
A Look Back: Previous Attempts at Tax Reform
This isn’t the first time India has tried to revamp its tax structure. In 2010, the government introduced the Direct Tax Code Bill, which was referred to the Standing Committee for review. However, after the 2014 change in government, the bill was scrapped.
Now, with the Modi government’s fresh push, India could be on the brink of its most significant tax reform in decades.
