The new Income Tax Bill is expected to be approved in the Cabinet meeting on Friday, February 7, 2025, and could be presented in Parliament next week. Finance Minister Nirmala Sitharaman had announced the introduction of this new bill during the budget presentation on February 1, 2025.

While presenting the budget, Finance Minister Sitharaman said that the government had already introduced the Indian Justice Code to replace the Indian Penal Code. She mentioned that the new Income Tax Bill would continue this spirit of justice. The new bill will be clearer and more straightforward compared to the current tax laws, making it easier for taxpayers and tax administrators to understand. This will increase certainty around taxes and reduce litigation.

Sitharaman also highlighted the steps taken by the government over the past decade to make tax processes more convenient, including faceless assessments, the taxpayers’ charter, faster income tax return processing, self-assessment, and the “Dispute Resolution” scheme. She assured that the tax department would continue its commitment to “trust first, investigate later.”

The new Income Tax Bill, once approved by the Cabinet, will replace the Income Tax Law of 1961. The aim of the new law is to simplify the tax process and make it more user-friendly. This will be the first major update to the income tax law since 1961. The Central Board of Direct Taxes (CBDT) committee has been working on the new law. Although the Income Tax Law has been revised multiple times over the past six decades, this overhaul will be significant.

What Might Be Included in the New Tax Bill?

The new Income Tax Bill is expected to be much simpler and easier to understand for taxpayers. Filing income tax returns could become much more straightforward in the coming years. The government is working to simplify the income tax return filing process, as it is concerned about the increasing number of tax disputes, with an estimated $120 billion worth of tax disputes.

The new law will also eliminate the practice of referring to financial year and assessment year, instead defining it simply as “tax year.” The number of forms required for tax return filing will be reduced, making the process even easier. Finance Minister Sitharaman has also emphasized that the language used in tax notices will be simplified, so taxpayers can understand them without the need to hire a lawyer.