Following significant relief for the Indian middle class in the Union Budget 2025-26, the government is poised to present a new Income Tax Bill this week, aiming to simplify the entire tax system with sweeping reforms. The current Income Tax Act, enforced since 1961, will be replaced by a new law tailored to the needs of the 21st century, according to sources close to the development.
While presenting the Budget in Parliament, Finance Minister Nirmala Sitharaman emphasized the need for a new Income Tax regime, announcing that a bill would be introduced in this session, likely on February 6. A review committee was formed to draft the new Income Tax law, replacing the earlier cumbersome legislation. The new Income Tax Bill has been prepared based on the committee’s recommendations.
In an era of technology and massive digitalization, taxpayers can perform several tasks online independently. The new I-T Bill aims to make the system simple and convenient for the common man, enabling seamless online understanding. The bill is expected to be tabled in Parliament on February 6. The simplification is evident as the old Income Tax Act, comprising about 600,000 words, will be drastically reduced to approximately 300,000 words in the new bill, making it easier for taxpayers to comprehend.
The government is working on simplifying the language of the new Income Tax Bill to eliminate confusion caused by varying interpretations of current rules. The earlier Income Tax law has undergone numerous changes and additions, making it increasingly incomprehensible for the common man.
The Income Tax Act, passed by Parliament, came into force on April 1, 1962. Since then, several amendments have been made, complicating the law further. As part of the simplification process, the government recognized the need for a new I-T Bill to ensure easy understanding for the public.
Contrary to fears that the new Income Tax rules would abolish the old tax regime, sources indicate that the government has no such plans. Approximately 78% of taxpayers have already shifted to the new tax regime, and the government is not inclined to make major changes to the old regime.
Additionally, the government aims to reduce people’s dependence on government schemes for investment, encouraging investments in other assets such as mutual funds, SIPs, and the stock market, which can be beneficial for individuals. The government’s intention behind providing significant relief to taxpayers is to boost private consumption, directly benefiting the economy’s health.
