NEW DELHI: The government is preparing to propose a revamped direct tax law during the upcoming budget session, with Finance Minister Nirmala Sitharaman expected to introduce a new Income Tax Bill.
The initiative aims to simplify existing rules, eliminate outdated provisions, and make the language more accessible to the average taxpayer.
According to sources, the new legislation, intended to replace the 63-year-old Income Tax Act, may be divided into two or three parts. The focus is on removing redundancies and addressing criticism about the complexity of India’s tax laws.
Although the draft law was initially slated for public consultation, the government has decided to introduce the bill directly. This move, reportedly coordinated by the finance ministry and the Prime Minister’s Office, seeks to signal intent while allowing room for feedback and revisions after its introduction.
The groundwork for the proposed bill has been underway for months, with officials working closely with the expert panel tasked with drafting the changes. Sitharaman is expected to reference the new tax framework during her budget speech on February 1, although it remains unclear whether the bill will be introduced in the first or second half of the session.
Third major attempt
This marks at least the third major attempt to overhaul the Income Tax Act, following the tabling of the Direct Tax Code in 2010. An earlier panel formed under the Modi government had submitted reports that were not made public, with most recommendations left unimplemented.
Key highlights of the proposed legislation include the removal of hundreds of “provisos” that complicate existing laws, as well as the omission of redundant sections. The committee has been instructed to draft the new framework in simpler terms to make it more user-friendly.
However, some officials caution that changing the language of the law may inadvertently trigger litigation, as taxpayers might seek fresh interpretations of revised provisions. Despite these concerns, the government is proceeding cautiously, avoiding the inclusion of new issues in the initial draft of the legislation.
If successful, the new Income Tax Bill could mark a significant milestone in India’s journey toward a more streamlined and transparent tax regime.
