New Income Tax Bill expected to be approved by Cabinet today; key details on what all it may cover

Income Tax Bill 2025: The upcoming Union Cabinet meeting on Friday is expected to focus on the discussion of the New Income Tax Bill 2025. Finance Minister Nirmala Sitharaman is anticipated to present the bill in Parliament next Monday, aiming to replace the old Income Tax Act, 1961. It is likely that the bill will undergo further review by the standing committee. 

The proposed legislation, as highlighted by Finance Secretary Tuhin Kanta Pandey, will prioritise simplified language to steer clear of lengthy sentences, provisos, and complicated explanations.

According to a report from Moneycontrol, the New Income Tax Bill 2025 is poised to bring about a significant change that will allow for timely income tax reliefs without having to wait for the budget or to amend the Income Tax Act. The inclusion of provisions that empower the government to adjust deduction and rebate limits through executive orders exclusively is also under consideration, as per government sources cited in the report.

Key features expected in the Income Tax Bill

> The bill aims to streamline tax legislation and enhance taxpayer compliance without implementing additional taxes. 

> It will prioritise simplifying tax laws, minimizing legal intricacies, and improving ease of compliance for taxpayers. 

> The government has pledged that the new law will be 50% shorter than the existing one, with a primary objective of reducing litigation. 

> Additionally, the bill may include reduced penalties for specific violations, fostering a more taxpayer-friendly tax system.

In her Budget speech, Finance Minister Nirmala Sitharaman had said, “I am happy to inform this August House and the country that the new Income Tax Bill will carry forward the same spirit of ‘Nyaya’. The new bill will be clear and direct in its text, reducing the length of the existing law by nearly half in terms of chapters and words. It will be simple to understand for taxpayers and tax administrators, ensuring tax certainty and reducing litigation.”

> The current Income Tax Act specifies that any modifications to standard deduction, other deductions, or rebates must be made through an amendment to the Act itself, as these amounts are explicitly outlined in the legislation. 

> However, the proposed Income Tax Bill 2025 may allow for adjustments to these provisions, giving the government greater flexibility in altering tax benefits.

> In addition to potential changes to tax relief measures, the bill may also introduce various structural and linguistic reforms. This could include updates such as replacing the term "Assessment Year" with "Tax Year", removing outdated British era references like "notwithstanding", simplifying legal language by eliminating separate explanations and provisos, and making tax clauses more self-explanatory.

> Finance Secretary Tuhin Kanta Pandey announced on February 6 that the upcoming Income Tax Bill will focus on simplifying language and promoting citizen engagement without increasing tax obligations. The bill, set to be presented in Parliament the following week, will also integrate recent adjustments to income tax rates, slabs, and TDS provisions.