New Income Tax Bill Likely To Be Tabled On Thursday; Major Changes Revealed — Profit Exclusive

The new Income Tax Bill is expected to be tabled in the Parliament on Thursday, with sources indicating that it may come into force by April 2026.

This much-anticipated legislation seeks to replace the existing Income Tax Act of 1961 and, once passed, will be called the Income-Tax Act of 2025. A memorandum may also be issued alongside the bill upon its introduction.

One of the key changes that the new bill could propose is the introduction of "Tax Year", which could potentially replace concepts like "Assessment Year" and "Previous Year", and cover the 12-month period from April to March.

Another proposal is with respect to restructuring the sub-sections into full sections for better clarity. The bill is expected to propose 536 clauses and 16 schedules, spanning across 622 pages. This makes it significantly shorter than the existing Act, which runs into 823-plus pages.

"The previous law had numerous cross-references between sections and rules, which often led to confusion and misinterpretation for taxpayers. However, the revised bill reduces these references, cuts down on provisos and explanations, and simplifies the language, making it more straightforward for taxpayers to understand each section independently without needing to cross-reference other parts of the law," said Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm.

Besides, the new bill will also feature a special chapter dedicated to the new tax regime, addressing recent tax changes. This chapter will have all the changes brought in tax slabs and rates in the recently presented Union Budget for financial year 2025-26.

Another significant addition is Section 275(6), which requires the Dispute Resolution Panel to provide detailed directions, including clear points of determination, decisions, and explanations.

This change replaces the previous Section 144C, which lacked clarity on how DRP directions should be issued. This new approach is expected to improve transparency and reduce the reliance on past rulings, helping to foster greater taxpayer confidence.

In addition to this, the amendments seek to eliminate redundancy. Over the past 60 years, the Income Tax Act had been amended several times, leading to outdated references to previous sections, dates, and years. These unnecessary references have now been removed, and the language has been streamlined. For example, the term "notwithstanding" has been replaced with "irrespective of anything" in many sections.

For added clarity, several provisions are now presented in tabular formats. These include details on TDS provisions, presumptive taxation rates, and assessment time limits.

While the new bill retains the fundamental provisions of the Income Tax Act, 1961, it removes outdated sections and exemptions.

For instance, Section 54E (which provided capital gains exemptions on the transfer of assets before April 1, 1992) has been eliminated. Additionally, Chapter VI-A deductions have been streamlined to remove unnecessary complexities. However, the bill reaffirms the continuation of certain provisions, such as those related to startups under Section 80IAC, confirming that the old law is not entirely repealed.

Contrary to the speculation that the old tax regime could be phased out, the new bill shows that old and new tax regimes will continue to coexist, providing taxpayers with the flexibility to choose the tax system that suits their needs.

Furthermore, provisions related to wealth tax and other relevant laws have been incorporated more clearly into the new bill, making it easier for taxpayers to interpret and comply with the code.

Since the bill is expected to come to effect on April 1, 2026, it certainly give taxpayers ample time to familiarise themselves with the provisions.

Once the law is enacted, the necessary rules and guidelines will be notified, ensuring that taxpayers can understand and adapt to the changes effectively.

Read more about the changes which will be part of the new bill in the latest edition of NDTV Profit's 'In this Economy...' newsletter here.

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