Finance Minister Nirmala Sitharaman on Thursday dismissed claims that the new Income Tax Bill is merely a mechanical revision of the existing law. Introducing the Bill in the Lok Sabha, she urged Speaker Om Birla to constitute a Select Committee to examine it, with a report expected by the Monsoon Session. Despite opposition from the TMC and Congress, the Bill, once enacted, will replace the Income Tax Act of 1961.
Why a New Bill?
The 1961 Income Tax Act, effective from April 1, 1962, has undergone nearly 65 amendments, incorporating over 4,000 changes. Justifying the need for a fresh legislative framework, Sitharaman highlighted that the new Bill simplifies tax provisions by eliminating redundancies and reducing the document's length by almost half.
Key Reforms
The Bill replaces complex cross-referencing with a more structured approach, consolidating related provisions in one place.
- The number of provisos (1,200) and explanations (900) has been eliminated, making the law more comprehensible.
- The previous system of cross-referencing multiple sections, sub-sections, clauses, and items has been streamlined for ease of interpretation.
Major Overhaul: Removal of 'Assessment Year'
One of the most significant changes is the elimination of the concepts of 'previous year' and 'assessment year.' Previously, taxpayers had to track both periods separately, leading to compliance challenges. The new Bill aligns the reporting period with the financial year, reducing confusion for taxpayers.
Enhanced Readability and Accessibility
The Bill prioritizes user-friendly language, moving away from traditional legal jargon. It also employs more tables - 57 in total, compared to just 18 in the existing Act - to enhance clarity. For instance, TDS provisions and exemptions under Section 10 have been restructured in tabular formats for easy reference.
Finance Ministry officials emphasized that this transformation is a step toward a modern, transparent, and simplified tax regime. The comprehensive restructuring aims to make tax laws more accessible while maintaining clarity in compliance requirements.
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