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Union Cabinet poised to approve new Income Tax Bill

The much-anticipated Income Tax Bill is on the verge of receiving approval from the Union Cabinet, with the government aiming to introduce it in the Lok Sabha as early as next week.

News Arena Network - New Delhi - UPDATED: February 6, 2025, 06:58 PM - 2 min read

New Income Tax Bill set for introduction in Parliament next week.


The much-anticipated Income Tax Bill is on the verge of receiving approval from the Union Cabinet, with the government aiming to introduce it in the Lok Sabha as early as next week.

 

This bill is part of an ongoing effort to overhaul and simplify India's tax system, making it more transparent and easier for taxpayers to navigate.

 

Finance Minister Nirmala Sitharaman, in her post-Budget announcement, confirmed that the Cabinet’s approval is expected on Friday, February 7, 2025. The bill, once approved, is likely to be introduced in Parliament shortly after.

 

The primary objective behind the new Income Tax Bill is to streamline the existing structure, reducing complexity while ensuring fairness.

 

Simplicity is a key focus of the new tax framework. The government has promised that the new bill will be 50% shorter in text and clearer than the previous one, which had become difficult for many to understand due to the numerous revisions it had undergone since its inception in 1961.

 

The new law aims to benefit taxpayers by providing a simpler tax process, with fewer complications and more transparency.

 

According to the announcements made in the Union Budget 2025, individuals earning up to ₹12 lakh per year under the new tax regime will be able to enjoy more tax relief.

 

Salaried individuals can expect up to ₹12.75 lakh of their income to be exempt from taxes, thanks to a standard deduction benefit of ₹75,000. 

 

This adjustment is expected to provide significant relief to a wide range of taxpayers.

 

The new tax regime will come into effect in the financial year 2025-26, with assessments starting in the subsequent year, 2026-27. This gives both the government and taxpayers ample time to adjust to the upcoming changes and prepare for a more efficient taxation process.

 

According to Ravi Agarwal, Chairman of the Central Board of Direct Taxes (CBDT), the new tax system will attract a large majority of taxpayers. He stated in a recent interview that around 95-97 pc of taxpayers are expected to opt for the new regime.

 

As of now, approximately 74 pc of taxpayers have already switched to the revised tax regime, and with the introduction of the new changes, this number is expected to rise dramatically.

 

The simplified approach, with reduced tax rates and straightforward income tax computations, is expected to encourage more people to transition to the new system.

 

For businesses, the government is also reporting positive tax collection trends. Corporate tax collections have risen by nearly 17% year-on-year as of January 2025, with collections standing at ₹9.71 lakh crore compared to ₹8.33 lakh crore in the previous year.

 

In the non-corporate tax segment, collections have increased by around 28%, amounting to ₹10.45 lakh crore, up from ₹8.58 lakh crore in January 2024.

 

The decision to overhaul the existing Income Tax Act comes after decades of revisions. The current Act, which has been in place since 1961, has grown increasingly complex due to numerous amendments and additions over the years.

 

This has made it difficult for taxpayers, particularly individuals and small businesses, to understand their obligations. The Modi 3.0 government, through the Budget 2025 announcement, has now decided to introduce a more user-friendly and efficient tax structure to replace the outdated Act.

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