New income tax bill, 2025: Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025 on February 1, announced that she will table the new income tax bill in Parliament next week

New income tax bill: What it could mean for taxpayers and how it can impact them Many taxpayers and common citizens anticipate the new income tax bill to know how it could impact them

Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025, announced that she will table the new income tax Bill in Parliament. "Over the past 10 years, our government has implemented several reforms for the convenience of taxpayers, such as (1) faceless assessment, (2) taxpayers charter, (3) faster returns, (4) almost 99 per cent returns being on self-assessment, and (5) the Vivad se Vishwas scheme. Continuing these efforts, I reaffirm the commitment of the tax department to 'trust first, scrutinise later.' I also propose to introduce the new income tax Bill next week," she stated during her Budget speech on February 1, 2025.

Budget with ET

Tax calculator
This has come after Union Budget 2024 in July announced the review of the Income Tax Act. The review was announced to make the income tax laws concise, lucid, and easy to read and understand. This is expected to reduce disputes and litigation, thereby providing tax certainty to the taxpayers.

"In respect of criminal law, our government had earlier ushered in Bharatiya Nyaya Sanhita, replacing Bharatiya Danda Sanhita. 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 text with close to half of the present law, both in terms of chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation," said Sitharaman during her Budget 2025 speech.

This has created a buzz among tax experts that the new income tax Bill might reduce the current 298 tax laws by half.

Riaz Thingna, Partner-Tax, Grant Thornton Bharat, a tax consulting firm, says, "The aim and direction of the proposed income tax Bill is ambitious, but at the same time it is a humungous exercise. The Act as it stands today is more than six decades old. Over these years there have been multiple additions, deletions, and amendments, resulting in many challenges, some of which are:

Artificial Intelligence(AI)
Java Programming with ChatGPT: Learn using Generative AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Basics of Generative AI: Unveiling Tomorrows Innovations
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Generative AI for Dynamic Java Web Applications with ChatGPT
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Mastering C++ Fundamentals with Generative AI: A Hands-On
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Master in Python Language Quickly Using the ChatGPT Open AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Office Productivity
Zero to Hero in Microsoft Excel: Complete Excel guide 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Performance Marketing for eCommerce Brands
By - Zafer Mukeri, Founder- Inara Marketers
Finance
A2Z Of Money
By - elearnmarkets, Financial Education by StockEdge
Astrology
Vastu Shastra Course
By - Sachenkumar Rai, Vastu Shashtri
Marketing
Modern Marketing Masterclass by Seth Godin
By - Seth Godin, Former dot com Business Executive and Best Selling Author
Data Science
SQL for Data Science along with Data Analytics and Data Visualization
By - Metla Sudha Sekhar, IT Specialist and Developer
Strategy
Succession Planning Masterclass
By - Nigel Penny, Global Strategy Advisor: NSP Strategy Facilitation Ltd.
Web Development
A Comprehensive ASP.NET Core MVC 6 Project Guide for 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
AI and Analytics based Business Strategy
By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI
Marketing
Digital Marketing Masterclass by Pam Moore
By - Pam Moore, Digital Transformation and Social Media Expert
Office Productivity
Mastering Microsoft Office: Word, Excel, PowerPoint, and 365
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Digital marketing - Wordpress Website Development
By - Shraddha Somani, Digital Marketing Trainer, Consultant, Strategiest and Subject Matter expert
Web Development
Mastering Full Stack Development: From Frontend to Backend Excellence
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
Financial Literacy i.e Lets Crack the Billionaire Code
By - CA Rahul Gupta, CA with 10+ years of experience and Accounting Educator
Artificial Intelligence(AI)
AI-Powered Python Mastery with Tabnine: Boost Your Coding Skills
By - Metla Sudha Sekhar, IT Specialist and Developer

a. Complicated language and long sentences, leading to ambiguity in interpretation
b. Cross referencing of sections, making it difficult to refer and read
c. Multiple provisos and explanations to sections, which increases the scope of different interpretations
d. Redundant sections remaining in the statute
e. Complicated and multiple sections for similar or identical purposes like tax withholding.
f. Notifications and circulars that are not explicitly included in the Act but must be considered with the operative sections of the statute.

What new income tax Bill could mean for you?

The existing Income Tax Act is considered very wide and confusing for taxpayers. A common taxpayer frequently requires assistance from a tax expert or a chartered accountant to comprehend and comply with the current income tax law to avoid any legal pitfalls.

The Central Board of Direct Taxes (CBDT) has formed a committee to review the Income Tax Act. Even common citizens can give suggestions via the income tax e-filing portal for changes to the Income Tax Act.

The simplification of the Income Tax Act, by replacing it with the new income tax Bill, is aimed at helping taxpayers easily understand the income tax laws. The simplification of the income tax laws is expected to reduce errors and foster better understanding among taxpayers.

Is Direct Tax Code making a comeback?

This is not the first attempt to simplify the income tax laws. The government had, earlier, proposed the Direct Tax Code in 2009. The Direct Tax Code was expected to replace the Income Tax Act due to reduce it's complexity. . The Direct Tax Code was expected to bring in global best practices and reduce compliance costs. The recommendations made in the Direct Tax Code were based on the three pillars:

A) Rationalise tax rates by removing or minimising tax exemptions
B) Remove ambiguity in the income tax rules to avoid litigation and reduce the cost of compliance
C) Check erosion of the tax base through tax evasion.

Many of the recommendations made in the Direct Tax Code have already found their way into the current income tax laws. The government has introduced a new tax regime that offers limited deductions but lower tax rates as compared to the old tax regime.

However, there are still other aspects of income tax laws that need to be simplified as well. The Direct Tax Code, in its final draft published in 2013, has recommended simplifying residential laws.

There is a need to simplify the laws that determine the 'residential' status of an individual for income tax purposes. Currently, income tax laws categorise taxpayers into three categories of residential status:
a) Resident
b) Resident but not ordinarily resident
c) Non-resident

According to tax experts, there is a need to reduce the number of residential status to two from the current three. This is expected to help taxpayers easily identify their residential status in a financial year without having to check the impact of the situation in previous years.

There is a need to simplify the determination of the tax year as well. One of the common issues faced by a layperson is the difference between a financial year and an assessment year. Not understanding the difference between the two creates issues in making tax payments, filing income tax returns and other income tax compliances as well.

This story originally appeared on: India Times - Author:Faqs of Insurances