Union Cabinet on Friday, Feb 7, approved the new Income Tax Bill to replace the Income Tax Act, 1961, the aim being to modernise the tax system and simplify the legal jargon so that taxpayers can easily understand its provisions.
The Bill was announced on February 1 by Finance Minister Nirmala Sitharaman during her Budget speech and is likely to be brought to Parliament next week.
The Bill won’t introduce new taxes and rather focus on simplifying tax laws, reducing legal complexities and making compliance easier for taxpayers, said sources. It would have shorter sentences, provisos and explanations, they said.
The government has also said that the new law would be 50 per cent shorter than the current one, with the major goal being to reduce litigation. The Bill may introduce lower penalties for certain offences, making the tax system more taxpayer-friendly. The new tax system will take effect from the 2025-26 financial year and apply to taxpayers from the assessment year 2026-27.