Finally the Union Budget 2025 is going to start soon. The government is gearing up to introduce a new income tax bill in the 2025 Budget. This could mean changes to the country’s 64-year-old income tax law. The goal of the new bill is to simplify the current tax regulations, making them easier to understand and cutting down the document size by about 60%. 

 

Finance Minister Nirmala Sitharaman had previously mentioned a thorough review of the Income Tax Act from 1961 within six months during the July budget. Here’s what we know so far.

 

A new income tax bill is on the way. According to sources, the new Income Tax Act will be presented during the budget session of Parliament. This will be a completely new law rather than just an amendment to the existing one. Right now, the Law Ministry is reviewing the draft, and it’s expected to be introduced in the second half of the budget session.

 

The session will take place from January 31 to April 4. It kicks off with President Draupadi Murmu addressing both houses of Parliament, followed by the presentation of the Economic Survey for 2024-25. The Union Budget for the financial year 2025-26 is set to be unveiled on February 1. Parliament will reconvene on March 10 and continue until April 4.

 

A committee has been established

After Sitharaman’s budget announcement for a thorough review of the Income Tax Act, 1961, the CBDT set up an internal committee to streamline the Act, making it more concise and user-friendly. This move aims to cut down on disputes and litigation while providing taxpayers with clearer tax guidelines. Additionally, 22 specialized sub-committees have been created to examine different elements of the Act.

 

They’ve opened the floor for public input in four key areas: simplifying the language, minimizing litigation, addressing compliance issues, and eliminating outdated provisions. So far, the Income Tax Department has gathered 6,500 suggestions from various stakeholders for this review.

 

Tax rates are set to drop

According to sources, there will be a notable reduction in the number of provisions and chapters, with outdated sections being eliminated. The Income Tax Act, 1961 currently includes around 298 sections and 23 chapters covering direct taxes like personal income tax, corporate tax, security transaction tax, and gift and property tax.

 

The goal is to slash the tax burden by about 60 percent. In her budget speech in July 2024, Sitharaman emphasized that the review aims to make the Act more concise, clear, and easy to navigate. This should help reduce disputes and litigation, providing taxpayers with more certainty. The plan is to wrap this up in six months.