The New Income Tax Bill, a significant reform initiative announced by Union Finance Minister Nirmala Sitharaman during her budget speech, has generated widespread anticipation. According to NDTV sources, the draft bill is expected to be released on February 6, 2025, marking a pivotal step toward simplifying and modernizing India’s tax system.

Simpler and Shorter Tax Act

The new bill aims to overhaul the current Income Tax Act, which currently spans over 6 lakh words, by reducing it by nearly 3 lakh words. This significant reduction indicates a move toward a clearer, more concise, and user-friendly tax law.

Key Objectives of the New Tax Bill

1. Expanding the Tax Base:

   • After raising the exemption limit from Rs 7 lakh to Rs 12 lakh, the tax base has narrowed, resulting in fewer taxpayers.
   • The new bill may include measures to bring more people under the formal tax system and increase overall tax revenue.

2. Simplifying Compliance:

   • By removing outdated provisions and redundant sections, the government aims to make tax laws easier for both taxpayers and professionals.

3. Encouraging Ease of Doing Business:

   • Proposals like rationalizing TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rates aim to reduce the compliance burden.

Proposed Changes in the New Income Tax Bill

The draft is expected to incorporate reforms introduced in the Union Budget 2025 and additional measures to streamline tax administration:

1. TDS and TCS Reforms:

   • The TCS limit for remittances under the Liberalized Remittance Scheme (LRS) will increase from Rs 7 lakh to Rs 10 lakh.
   • TCS exemptions for educational expenses may be introduced.

2. Updated Tax Returns:

   • Taxpayers may be allowed to file updated returns to correct omissions or errors, providing greater flexibility.

3. Senior Citizens' Benefits:

   • The TDS limit on interest income for senior citizens will increase from Rs 50,000 to Rs 1 lakh, offering additional relief.

4. Litigation Management:

   • The bill will focus on reducing tax-related disputes, improving litigation efficiency, and ensuring quicker resolution of pending cases.

Impact on Tax Assessments

Officials have clarified that:

• Provisions related to income from past investments will not be affected by the new bill.
• Pending tax assessments, especially those for earlier years like 2012-13, will continue as per the existing rules.
• However, provisions for assessment years 2014-15 or later may be reviewed or removed as part of the overhaul.

Stakeholder Involvement and Public Feedback

To ensure inclusivity, the draft bill will likely be shared with the public and stakeholders for feedback. According to officials, “All suggestions will be considered before finalizing the bill,” underscoring the government’s commitment to transparency. The final implementation may take some time, as the bill will undergo scrutiny by the standing committee before being presented to Parliament.

Broader Implications

The new Income Tax Bill is a step toward:

• Reducing complexity in tax compliance.
• Encouraging voluntary tax compliance by simplifying rules.
• Enhancing revenue collection through a wider tax base.

This reform aligns with the government’s vision of transforming India’s tax administration into a more modern, efficient, and taxpayer-friendly system.

With February 6 around the corner, the draft bill is expected to shed light on India’s future tax policy, offering clarity to both individuals and businesses. Stay tuned for updates on the New Income Tax Bill and its potential impact on taxpayers.