When will new income tax bill likely to come into effect?
Feb 12, 2025
Synopsis
Income Tax Act, 2025: Once the new income tax bill is passed by Parliament, many taxpayers and common citizens will wonder when it will come into effect. Will the government provide ample time for taxpayers, tax experts and other stakeholders to understand the new law and its impact on them?
Finance Minister Nirmala Sitharaman will likely table the draft of the new income tax bill in the Parliament tomorrow i.e., on February 13, 2025. Many taxpayers want to know the expected date from which the new income tax law will take effect.
According to government sources, the new Income Tax Act, 2025 will likely come into force from April 1, 2026, i.e., from the next year.
The new income tax bill, once tabled in Parliament, is likely to be sent to the Standing Committee of Finance for review. Once the Standing Committee submits its final report, then Parliament will take it up for passing of the bill. The government is trying to bring the new Income Tax Act from the financial year 2026-27. The government is likely to provide ample time to all stakeholders such as taxpayers, tax experts and common citizens to understand the new tax bill and be well prepared for the new income tax laws.
Impact of new income tax bill on taxpayers
The government is bringing the new income tax bill to simplify the language of the direct taxation of laws and reduce litigation. The new income tax bill is being brought after Budget 2024, in July, when the announcement of a review of the Income Tax Act 1961 was made. The review was announced as the current Income Tax Act is six decades old and has become mammoth due to amendments made via 60+ Budgets. The new income tax bill aims to consolidate and amend the income tax laws to provide ease to the taxpayers and tax certainty about the laws and regulations, as well as to reduce litigations due to redundant and obsolete provisions.
The review of the Income Tax Act 1961 was divided into four categories:
Simplification of Language
Litigation Reduction
Compliance Reduction, and
Redundant/Obsolete Provisions
Union Finance Secretary, in the post-Budget 2025 media interaction, said that there will be no change in the tax rates as announced in the new tax regime. The new income tax bill aims to simplify the law and provide tax certainty to reduce future litigations. However, many tax experts are expecting changes in the penalty and prosecution laws of the Income Tax Act. Tax experts are anticipating decriminalisation of the many prosecution laws as specified under the current Income Tax Act.
[The Economic Times]
