Union Finance Minister Nirmala Sitharaman announced the arrival of the new Income Tax Act during the budget speech, and since then, the release of this bill has been eagerly awaited. According to NDTV sources, the draft of the new Income Tax Bill may be released on February 6.

The new bill aims to bring extensive reforms to the Income Tax Act. The current act contains around 6 lakh words, of which 3 lakh words may be reduced. This indicates that the new bill will be simpler and more concise.

According to experts, the draft bill may include provisions to expand the tax base. This is because, after increasing the exemption limit from Rs 7 lakh to Rs 12 lakh in the budget, the tax base has shrunk.

A source familiar with the matter said, “Since there are more taxpayers at the bottom of the tax pyramid than at the top, this adjustment (change in slabs and structure under the new tax regime) may reduce revenue.”

This source also stated that the bill may include measures to bring more taxpayers into the formal system and increase overall tax revenue.

Simple, Concise, and Clear

The draft bill aims to simplify the existing Income Tax Act by cutting about 3 lakh words. The government hopes this will make the law clearer and more concise, ensuring better compliance. The draft bill will be sent to the standing committee for review and recommendations.

It may also be made public to invite suggestions from stakeholders. Another source mentioned, “The aim is to consider all the suggestions before finalizing the bill and making it a law.” Implementation of the bill may take additional time.

Changes Proposed in the Bill

CBDT Chairman Ravi Agarwal told NDTV Profit that the bill will include all the changes made in direct taxes proposed in the budget.

Ease of Doing Business

Several measures have been proposed in the Union Budget to make compliance easier, such as rationalizing TDS and TCS rates.

  • The TCS limit for sending money abroad under the Liberalized Remittance Scheme (LRS) has been increased from Rs 7 lakh to Rs 10 lakh.
  • TCS may not apply to money sent for educational expenses.
  • Taxpayers may be given the option to file an updated return to correct any omissions or mistakes.
  • The TDS limit on interest income for senior citizens has been increased from Rs 50,000 to Rs 1 lakh.

Outline of the New Bill

The new bill is expected to eliminate unnecessary sections of the existing Act that have become outdated or irrelevant. The focus will also be on improving litigation management, reducing pending tax-related disputes, and promoting quicker resolution.

In July 2024, the Finance Minister promised a comprehensive review of direct tax. The internal committee tasked with this review completed the work in 6 months.

Sources say the simplified version of the tax laws will not affect the assessment of total income from past investments. However, there could be broad exceptions regarding income from past investments in the current or subsequent years. Other exceptions will relate to suits, notices, and searches.

Impact on Pending Tax Assessments

Officials have clarified that no provision affecting the determination of total income in pending tax assessment proceedings will be struck down. It is expected that proceedings related to assessment year 2012-13 will continue as usual.

Provisions affecting proceedings in assessment years 2014-15 or later will be excluded from the review.

In conclusion, we can say that the new income tax bill aims to simplify the language of the tax code, making it easier for taxpayers and professionals to understand.