Union Cabinet Approves New Income Tax Bill to Simplify Tax System

The Union Cabinet approved the new Income Tax Bill on Friday. The bill, which will replace the existing Income Tax Act of 1961, is designed to simplify and modernize India’s tax system. It aims to improve the clarity of legal language, making the provisions more accessible and comprehensible for taxpayers.

The legislation will be introduced in Parliament next week, reports said. It is likely to be referred to the Standing Committee for further discussion and refinement of its provisions.

The bill will not introduce new taxes but will focus on streamlining tax laws, reducing legal complexities, and enhancing compliance ease for taxpayers, as confirmed by the Finance Secretary. It will feature shorter sentences, provisos, and explanations, with the new law expected to be 50% shorter than the current one. A key objective of the bill is to reduce litigation.

Additionally, the bill may introduce lower penalties for certain offenses, making the tax system more taxpayer-friendly.

Finance Minister Nirmala Sitharaman had announced the new tax framework during her budget speech on February 1. The revised tax system will come into effect from the financial year 2025-26 and will be applicable to taxpayers from the assessment year 2026-27.