The government is expected to introduce a new income tax bill during the Budget session of Parliament, aiming to replace the six-decade-old Income Tax Act, 1961. The new legislation seeks to simplify tax laws, reduce their length by about 60%, and enhance clarity for taxpayers. Finance Minister Nirmala Sitharaman had announced a comprehensive review of the existing law in her July 2024 Budget speech, emphasizing the need for a concise and understandable tax framework. The draft bill is currently being reviewed by the law ministry and is likely to be presented in the second half of the Budget session, scheduled from January 31 to April 4.
As part of the review, the Central Board of Direct Taxes (CBDT) established an internal committee and 22 specialized sub-committees to examine various aspects of the existing Act. Public input was sought in areas such as simplifying language, reducing compliance burdens, minimizing litigation, and eliminating outdated provisions. The Income Tax Department received 6,500 suggestions from stakeholders, which were incorporated into the draft. The revised law is expected to streamline chapters, significantly reduce provisions, and remove obsolete sections to ensure greater tax certainty and fewer disputes.
The existing Income Tax Act, 1961, currently comprises 298 sections across 23 chapters, dealing with various direct taxes, including personal and corporate income taxes, securities transaction tax, and wealth tax. The new law aims to reduce this volume significantly while maintaining essential provisions. Sitharaman had highlighted in her July speech that the revised framework would make tax laws easier to understand, thereby reducing litigation and offering greater clarity to taxpayers. The government is committed to completing this comprehensive overhaul within six months.
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