Income Tax Bill Gets Cabinet Nod, Parliament To Debate It Next Week

The Union Cabinet approved a new income tax bill that will replace the six-decade-old Income Tax Act, as reported by PTI. This legislation is set to be introduced in Parliament next week and will subsequently be sent to the Standing Committee on Finance.

The new bill aims to simplify direct tax laws, making them easier to understand while imposing no new tax burdens. It will feature concise provisions without lengthy explanations or complicated sentences.

Finance Minister Nirmala Sitharaman announced in the Budget for 2025-26 that the new tax bill would be introduced in the current session of Parliament. She had previously announced a comprehensive review of the Income Tax Act of 1961 during her Budget speech in July 2024.

To facilitate this review, the Central Board of Direct Taxes (CBDT) established an internal committee tasked with making the Act clearer and more concise, thereby reducing disputes and litigation while providing taxpayers with greater certainty. Additionally, 22 specialized sub-committees were created to address various aspects of the Income Tax Act.

Public input was sought in four key areas: simplification of language, reducing litigation, minimizing compliance burdens, and eliminating redundant or obsolete provisions. The income tax department has received 6,500 suggestions from stakeholders regarding the review of the Act.

In her Budget speech, Nirmala Sitharaman also announced significant tax relief for middle-class individuals, stating that those with annual salaries of up to ₹12 lakh will pay no income tax. "The middle class strengthens our economy, and in recognition of their contributions, we have periodically reduced their tax burdens. I am pleased to announce that there will be no income tax on incomes up to ₹12 lakh," she said.

Furthermore, individuals earning up to ₹12.75 lakh annually will be exempt from taxes, thanks to the raised exemption threshold from ₹7 lakh. The finance minister also revised tax slabs for those earning above this limit, potentially allowing taxpayers with incomes up to ₹25 lakh to save up to ₹1.1 lakh in taxes.