Finance Minister Nirmala Sitharaman will present a draft of the new income tax bill in Parliament today. The bill will be introduced at any time between 11 a.m. and 3:30 p.m., per the updated business list that is available on the Lok Sabha website. Parliament will consider the new income tax bill as Legislative Business. On the Lok Sabha's updated agenda for February 13, 2025, it is ranked as the 27th item. When will the new income tax law go into effect? This is a question that many taxpayers have.
According to the new Income Tax Bill draft that we obtained, the new Income Tax Act of 2025 will take effect on April 1, 2026, or the following year.
Once introduced in Parliament, the new income tax bill will most likely be referred to the Standing Committee of Finance for review. Once the Standing Committee has submitted its final report, Parliament will consider passing the bill. The government intends to implement the new Income Tax Act in the fiscal year 2026-27. The government will provide ample time for all stakeholders, including taxpayers, tax experts, and ordinary citizens, to understand the new tax bill and prepare for the new income tax laws.
Impact of New Income Tax Bill on Taxpayers
The government is introducing a new income tax bill to simplify the language of direct taxation legislation and reduce litigation. The new income tax bill follows Budget 2024, which announced a review of the Income Tax Act 1961 in July. The review was announced because the current Income Tax Act is six decades old and has grown in size as a result of amendments made in more than 60 budgets. The new income tax bill seeks to consolidate and amend income tax laws in order to provide taxpayers with greater ease and tax certainty about laws and regulations, as well as to reduce litigation caused by redundant and obsolete provisions.
The Income Tax Act 1961 was reviewed in four categories: Language simplification, litigation reduction, reduce compliance and eliminate redundant or obsolete provisions.
In a post-Budget 2025 media interaction, Union Finance Secretary said there will be no changes to the tax rates announced in the new regime. The new income tax bill aims to simplify the law and provide tax certainty, thereby reducing future litigation. However, many tax experts expect changes to the Income Tax Act's penalty and prosecution laws. Tax experts anticipate the decriminalization of the numerous prosecution laws outlined in the current Income Tax Act.
