Taxpayers, take note: New income tax bill heads to Parliament next week

New Delhi: The Union Cabinet has given the green light to the new Income Tax Bill 2025, poised to overhaul India's direct tax system by replacing the existing Income Tax Act of 1961. The new bill promises simplified language, reduced legal complexities, and aims to provide tax relief without imposing any new taxes. Income Tax Bill 2025, Union Cabinet, Nirmala Sitharaman, Income Tax Act 1961, tax simplification, reduced litigation, tax compliance, budget 2025, tax relief, direct tax, financial year 2025-26, assessment year 2026-27, tax slabs, income tax slabs, nil tax, tax exemption, financial legislation, tax reforms, economic policy.

Key Objectives and Features

The primary objective of the Income Tax Bill 2025 is to streamline and modernize India's tax system by simplifying legal language. The new bill will incorporate concise sentences, provisions, and explanations, striving to be 50% shorter than the existing law to decrease litigation. Finance Secretary Tuhin Kanta Pandey confirmed that the new legislation would feature concise sentences without provisos and explanations while maintaining tax neutrality. The bill aims to simplify tax laws, minimize legal intricacies, and improve ease of compliance for taxpayers.

Tax Relief Measures and Implementation

The proposed New Income Tax Bill 2025 is expected to introduce a notable change by enabling prompt income tax reliefs, eliminating the need to wait for budget updates or amendments to the Income Tax Act. There are also discussions around including provisions that would authorize the government to adjust deduction and rebate limits through executive orders. During her Budget 2025 speech, Finance Minister Nirmala Sitharaman announced that those with salaries up to ₹12 lakh per annum will pay nil income tax6. If passed, the new tax system will take effect from the financial year 2025-26 and will apply to taxpayers from the assessment year 2026-27.

Simplified Tax Structure

The new legislation, also known as the Direct Tax Code, simplifies the provisions of the existing income tax structure. The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation